<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT JUNE 18, 1999
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Securities Act Registration No. 333-75851
Investment Company Act Registration No. 811-09281
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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. 1 /X/
Post-Effective Amendment No. __ / /
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 1 /X/
(Check appropriate box or boxes)
HILLIARD LYONS RESEARCH TRUST
(Exact Name of Registrant as Specified in Charter)
501 SOUTH 4TH STREET
LOUISVILLE, KENTUCKY 40202
(Address of Principal Executive Offices, including Zip Code)
Registrant's Telephone Number, Including Area Code: (800) 444-1854
JOSEPH C. CURRY, JR.
J.J.B. HILLIARD, W.L. LYONS, INC.
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>
PROSPECTUS DATED JULY 1, 1999
[SENBANC_FUND_LOGO]
HILLIARD LYONS RESEARCH 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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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............................................. 9
Trustees and Advisor............................................. 9
Portfolio Manager................................................ 9
SHAREHOLDER INFORMATION............................................ 10
Net Asset Value.................................................. 10
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 at
least fifty percent (50%) 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 at least fifty percent (50%) 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 Research Advisors, a division of J.J.B.
Hilliard, W.L. Lyons, Inc. and the investment advisor to the
Fund (the "Advisor"), uses a VALUE investment style for the
Fund. The Advisor 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 Advisor 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 invested primarily in
Invested Primarily In the equity securities of Banks for a period
Banks: of time (as long as ten months or more)
following its commencement of operations;
therefore, your returns may be lower than
they otherwise would have been if the Fund
had been so invested and if the Fund's
portfolio securities had increased in value.
</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 account. Annual Fund operating
expenses are paid out of the Fund's assets and
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2
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SENBANC FUND
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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
ANNUAL FUND OPERATING EXPENSES (expenses that are paid
out of the Fund's assets)
Management Fee....................................... 0.60%(1)
Distribution (12b-1) Fees............................ 0.60%
Other Expenses....................................... 0.63%(2)
------------
Total Annual Fund Operating Expenses................. 1.83%(2)
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</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.
(1) The Advisor intends to waive all management fees until
the Fund reaches $20 million in net assets.
(2) "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 Advisor
intends to voluntarily cap the Fund's total annual
operating expenses at 1.75% of the Fund's average daily
net 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>
$ 407 $ 788
</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 Research 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 at least fifty percent
(50%) 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
at least fifty percent (50%) 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
nonbanking 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 Advisor uses a VALUE investment style for the Fund. The
Advisor seeks to identify the most undervalued Banks on a
monthly basis by using an investment model that generates
information which allows the Advisor 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 Advisor 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 Advisor 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 a Bank is no
longer evaluated by the investment model for any reason, the
Bank'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 Advisor 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
Advisor 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 addition, 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 Advisor 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 INVESTED PRIMARILY IN BANKS. The Fund
may not be invested primarily in the equity securities of
Banks for a period of time (as long as ten months or more)
following its commencement of operations; therefore, your
returns may be lower than they otherwise would have been if
the Fund
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7
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SENBANC FUND
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had been so invested and if the Fund's portfolio securities
had increased in value. The Advisor 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
CASH MANAGEMENT AND TEMPORARY DEFENSIVE INVESTMENTS. For
cash management purposes or when the Advisor 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. Except during the
initial period of time following commencement of operations
and when pursuing such temporary defensive positions in
response to adverse market conditions, the Fund's investment
in debt, including money market instruments, will not exceed
35% of its total assets. 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").
Investments in debt and money market instruments are subject
to interest rate risk and credit risk. In general, the
market value of debt instruments 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 instruments, there is the risk that an
issuer will be unable to make principal and interest
payments when due. The risks of these types of investments
and strategies are described further 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 Advisor 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 Advisor, 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
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8
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SENBANC FUND
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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 THE FUND
TRUSTEES AND ADVISOR
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 Advisor,
which is located at Hilliard Lyons Center, Louisville,
Kentucky 40202, is responsible for providing investment
advisory and management services to the Fund, subject to the
direction of the Board of Trustees. The Advisor is a
division of J.J.B. Hilliard, W.L. Lyons, Inc. ("Hilliard
Lyons"), a registered investment advisor, 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 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 advisor since 1973.
Hilliard Lyons also serves as investment advisor 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, Hilliard Lyons 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 Advisor is paid a management fee at an
annual rate of 0.60% of the Fund's average daily net assets;
however, the Advisor intends to waive its management fee
until the Fund reaches $20 million in net 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
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9
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SENBANC FUND
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analyst since 1976. Neither Hilliard Lyons nor the Advisor
currently has a written employment agreement with Mr. Morel.
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SHAREHOLDER INFORMATION
NET ASSET VALUE
The net asset value is determined as of the close of regular
trading on the floor of the NYSE (4:00 p.m., Eastern time)
on each day the NYSE is open for trading (referred to herein
as a "business day"). 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
Advisor 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 you make your initial
investment and your account is established, you may make
additional purchases 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
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10
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SENBANC FUND
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price determined that day. The public offering price is the
Fund's net asset value per share plus the applicable
front-end sales charge. 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 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. "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.
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SENBANC FUND
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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
maintaining retirement plans. You should consult your tax
advisor 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 with 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 will not be 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
- --------------------------------------------------------------------------------
12
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
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.
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 advisor regarding the tax consequences of
participating in the Withdrawal Plan.
- --------------------------------------------------------------------------------
13
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
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 advisor 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. The Fund generally distributes dividends from net
investment income semi-annually and any net realized capital
gains at least annually. 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 gains, 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 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
- --------------------------------------------------------------------------------
14
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
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 ARRANGEMENTS
DISTRIBUTION AGREEMENT
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 at the rate of
1% 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
- --------------------------------------------------------------------------------
16
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
completing and returning a Letter of Intent (the "Letter"),
which can be provided to you by your Hilliard Lyons
investment broker or Authorized Dealer. 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 Advisor 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 advisor 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.
- --------------------------------------------------------------------------------
17
<PAGE>
SENBANC FUND
- --------------------------------------------------------------------------------
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 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
Investment Company Act of 1940 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
Advisor 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.
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 ADVISOR
Hilliard Lyons Research Advisors
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 AUDITORS
Ernst & Young LLP
Two Commerce Square
2001 Market Street
Philadelphia, Pennsylvania 19103
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 will include a discussion
of the Fund's holdings and recent market conditions and the Fund's investment
strategies that affected performance.
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 Research 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.: 811-09281
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DATED JULY 1, 1999
HILLIARD LYONS RESEARCH 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 July 1, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Investment Advisory Services . . . . . . . . . . . . . . . . . . . . . . . . 11
Distributor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Administrator and Fund Accountant. . . . . . . . . . . . . . . . . . . . . . 14
Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Portfolio Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Income Tax Considerations. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Investment Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Financial Statements. . . . . .. . . . . . . . . . . . . . . . . . . . . . . 21
Appendix A -- Description of Securities Ratings. . . . . . . . . . . . . . .A-1
<PAGE>
GENERAL INFORMATION
Senbanc Fund (the "Fund") is a series of the Hilliard Lyons Research Trust
(the "Trust"), an open-end management investment company. Hilliard Lyons
Research Advisors (the "Advisor") 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 July 8, 1999.
As a business trust, the Trust is not required to hold annual shareholder
meetings; however, such meetings may be called by a majority of the Trustees
and shall be called by any Trustee upon written request of shareholders
holding, in the aggregate, not less than 10% of the outstanding shares of the
Trust. The request must specify the purpose or purposes for which the
shareholder meeting is to be called. Shareholders have the power to vote
only with respect to the election of Trustees and for certain other matters
as designated in the Declaration of Trust. The Fund and all future series of
the Trust, if any, will vote as a single class on matters affecting all
series of the Trust (e.g., election of Trustees) and separately on matters
affecting each series of the Trust (e.g., approval of the advisory agreement)
or when required by the Investment Company Act of 1940 (the "1940 Act") or
other applicable law. Voting rights are not cumulative, so that shareholders
of more than fifty percent (50%) of the shares voting in any election of
Trustees can, if they so choose, elect all of the Trustees of the Trust.
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 Advisor uses a VALUE investment style for the Fund. The Advisor 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 at least fifty percent (50%) 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 at least fifty percent (50%) 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 nonbanking
entities, since bank holding companies may derive a portion of their
income from such entities.
1
<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 Advisor'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 Advisor 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 INVESTED PRIMARILY IN BANKS. The Fund may not be
invested primarily in the equity securities of Banks for a period of time (as
long as ten months or more) following its commencement of operations;
therefore, your returns may be lower than they otherwise would have been if
the Fund had been so invested and if the Fund's portfolio securities had
increased in value. The Advisor anticipates that the benefit of this strategy
is that the Fund will be more diversified within the banking industry over a
period of time.
2
<PAGE>
OTHER TYPES OF INVESTMENTS AND RELATED RISKS
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 Advisor 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 Advisor 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 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
Advisor'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 Advisor 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 a regulatory authority having jurisdiction from time to time;
2. Issue senior securities, except as permitted under the 1940 Act and as
interpreted by a 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 a regulatory authority
having jurisdiction, from time to time, except that the Fund will
concentrate its investments in the banking industry.
NONFUNDAMENTAL 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:
1. Invest for the purpose of exercising control over management of any
company;
2. 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; or
3. 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 Section 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 may redeem securities in-kind. In
general, however, the Fund anticipates redeeming in cash, and to the extent it
redeems in-kind, the Fund anticipates it would first redeem in cash 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. The market value of securities paid in-kind 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 accounts, 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 and 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.
DEALER REALLOWANCES
As shown in the table below, Provident Distributors, Inc. the distributor for
the shares of the Fund, may provide dealer reallowances up to the full sales
charge for purchases of the Fund's shares in which a front-end sales charge
is applicable.
MAXIMUM SALES CHARGE ALLOWED TO DEALERS
AMOUNT OF PURCHASE AS A PERCENTAGE OF OFFERING PRICE
- ------------------ ---------------------------------
Less than $500,000.........2.25%
At least $500,000
but less
than $1,000,000............1.75%
$1,000,000 or greater......0.00%
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 Advisor 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 Advisor 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.
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<PAGE>
MANAGEMENT
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:
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME; ADDRESS AGE WITH FUND DURING PAST FIVE YEARS
- ------------- --- ---------------- ----------------------------
<S> <C> <C> <C>
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, Jr.** 45 Trustee Private Investor. Formerly Vice
18 Indian Hills Trail President of Risk Management of
Louisville, KY 40207 NP Energy, Inc.
Robert L. Decker**,*** 51 Trustee Executive Vice President and
Churchill Downs Chief Financial Officer of
1748 Casselberry Road Churchill Downs since March 1997.
Louisville, Kentucky Formerly Vice President - Finance
40205 of the Hilton International Hotel
Company, a division of Ladbroke
Group PLC.
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
James M. Rogers 48 President Director, Executive Vice President
Hilliard Lyons and Chief and Chief Operating Officer of
501 South 4th Street Executive Hilliard Lyons.
Louisville, Kentucky 40202 Officer
Alan F. Morel 50 Vice President Vice President of Research Department
Hilliard Lyons of Hilliard Lyons.
501 South 4th Street
Louisville, Kentucky 40202
Joseph C. Curry, Jr. 54 Treasurer, Senior Vice President of Hilliard Lyons;
Hilliard Lyons Chief Financial Vice President of Hilliard Lyons Trust
501 South 4th Street Officer and Company; Secretary and Treasurer of
Louisville, Kentucky 40202 Chief Accounting Hilliard Lyons Growth Fund, Inc; and
Officer President of Hilliard Lyons Government
Fund, Inc.
Kathleen L. Huddleston 34 Secretary Manager of Mutual Fund Operations
Hilliard Lyons of Hilliard Lyons since January 1999.
501 South 4th Street Formerly Assistant Vice President of
Louisville, Kentucky 40202 Operations of Raymond James & Associates.
</TABLE>
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<PAGE>
* Trustee who is an "interested person" of the Fund and of the Advisor, as
defined in the 1940 Act.
** Trustee who is a member of the Audit Committee and Nominating Committee of
the Board of Trustees.
*** Churchill Downs Incorporated, of which Robert L. Decker is the Executive
Vice President and Chief Financial Officer, has a $250 million credit
facility on which PNC Bank is the lead agent.
Officers and Trustees affiliated with the Advisor 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 Advisor are paid $750 for
each meeting of the Board or Committee Meeting of the Board, and $1,250 as a
quarterly retainer, plus reimbursement 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, Jr. $9,500
Robert L. Decker $9,500
W. Patrick Mulloy $9,500
</TABLE>
As of July 1, 1999, none of the Fund's officers and Trustees owned shares of the
Fund.
As of July 1, 1999, Hilliard Lyons, the initial shareholder of the Fund,held
10,000 shares or 100% of the Fund.
PRINCIPAL SHAREHOLDERS
As of July 1, 1999, 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
10
<PAGE>
INVESTMENT ADVISORY SERVICES
Hilliard Lyons Research Advisors (the "Advisor"), a division of J.J.B.
Hilliard, W.L. Lyons, Inc. ("Hilliard Lyons"), acts as the Fund's investment
advisor and performs certain administrative services for the Fund.
The Advisor 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 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 advisor 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, Hilliard Lyons and its affiliates
managed individual, corporate, fiduciary and institutional accounts with
assets aggregating approximately $4.6 billion.
The Advisor's obligations pursuant to the Advisory Agreement with the Fund
include, subject to the general supervision of the Board, (a) acting as
investment advisor 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 Advisor a
monthly fee in arrears at an annual rate equal to 0.60% of the Fund's average
daily net assets. The Advisor has voluntarily agreed to waive the fees
payable to it under the Advisory Agreement until the Fund reaches $20 million
in net 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 daily net assets. The Advisory Agreement does not prohibit the
Advisor 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 Advisor 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 Advisor to be
equitable to such clients and the Fund. However, it cannot be expected that
all of the Advisor'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 May 4, 1999
and became effective on July 1, 1999. It
11
<PAGE>
will continue in effect until June 30, 2001 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
Advisor and by the Advisor 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
May 4, 1999 and became effective on July 1, 1999. It will continue in effect
until June 30, 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
12
<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 Advisor 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
13
<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 July 1,
1999 between the Trust and PFPC. The asset-based fee for administrative and
accounting services for the Fund is 0.11% of the first $250 million of
average daily net assets; 0.085% of the next $250 million of average daily
net assets; 0.06% of the next $250 million of average daily net assets; and
0.04% 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 July 1, 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 July 1, 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 or
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 AUDITORS
The independent auditors for Hilliard Lyons Research Trust are Ernst &
Young LLP. The independent auditors 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
Research 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 Advisor
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 Advisor'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 Advisor
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 Advisor 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 advisors 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 Advisor
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 Advisor considered by the Advisor 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. These research and other services may include, but are not
limited to, general economic and security market reviews, industry and
company reviews, evaluations of securities, recommendations as to the
purchase and sale of securities, and access to third party publications,
computer and electronic equipment and software. 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
Advisor 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
Advisor or its affiliate to the accounts over which they exercise investment
discretion. The Advisor 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 Advisor.
Research services furnished by brokers through which the Fund effects securities
transactions are used by the Advisor 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 Advisor
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 semi-annually of
its net investment income and annually 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,
18
<PAGE>
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, and must distribute at least 90% 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 advisors 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 (adjusting to deduct the
maximum sales charge) 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 July 8, 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.
FINANCIAL STATEMENTS
The following financial statement has been audited and is attached hereto:
1. Report of Independent Auditors.
2. Statement of Assets and Liabilities dated as of June 2, 1999.
3. Notes to Financial Statement.
21
<PAGE>
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 Advisor 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 a 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>
Report of Independent Auditors
To the Shareholder and Board of Trustees
Hilliard Lyons Research Trust - Senbanc Fund
We have audited the accompanying statement of assets and liabilities of Hilliard
Lyons Research Trust - Senbanc Fund (the "Fund") as of June 2, 1999. This
statement of assets and liabilities is the responsibility of the Fund's
management. Our responsibility is to express an opinion on this statement of
assets and liabilities based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of Hilliard
Lyons Research Trust - Senbanc Fund at June 2, 1999, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
June 2, 1999
<PAGE>
Senbanc Fund
Statement of Assets and Liabilities
June 2, 1999
<TABLE>
<S> <C>
Assets:
Cash $ 74,408
Prepaid Insurance 16,507
Prepaid Blue Sky 14,085
---------
Total Assets 105,000
---------
Liabilities:
Offering costs payable 5,000
---------
Nets Assets $100,000
---------
---------
Paid in capital (Applicable to 10,000
shares of beneficial interest issued
and outstanding) $100,000
---------
---------
Net Asset Value Per Share (based on net assets of $ 10.00
$100,000 and 10,000 shares outstanding)
---------
---------
MAXIMUM OFFERING PRICE PER SHARE:
Net asset value $ 10.00
Sales Charge (2.25% of offering price
or 2.30% of the amount invested per share) 0.23
---------
Offering price $ 10.23
---------
---------
</TABLE>
<PAGE>
SENBANC FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization
Senbanc Fund (the "Fund") is a series of the Hilliard Lyons Research Trust (the
"Trust"), an open-end management investment company. Hilliard Lyons Research
Advisors (the "Advisor") 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.
Costs incurred and to be incurred in connection with the organization of the
Fund will be borne by the Advisor. Costs incurred by the Fund in connection with
the initial offering of its shares have been deferred and will be amortized over
a one year period beginning on the date the Fund commences operations.
2. Agreements
Pursuant to an advisory agreement between the Fund and the Advisor, the Advisor
will manage the Fund's business and investment affairs. As compensation under
the Advisory Agreement, the Advisor will receive from the Fund an advisory fee,
which is computed daily and paid monthly, equal to .60% of the Fund's average
daily net assets.
The Advisor has voluntarily agreed to waive the fees payable to it under the
Advisory Agreement until the Fund reaches $20 million in net assets and, if
necessary, reimburse the Fund by the amount by which the Fund's total annual
operating expenses for any year exceed 1.75% of average daily net assets.
Pursuant to an Administration and Accounting Services Agreement, the Fund
retains PFPC, Inc. ("PFPC"), an indirect wholly-owned subsidiary of PFPC
Worldwide, Inc., as Administrator and Accounting Services Agent. In addition,
PFPC Trust Company serves as the Fund's custodian and PFPC serves as transfer
and dividend disbursing agent.
3. Service Plan
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. Pursuant to the Distribution Plan, the Fund reimburses the
Distributor at an annualized rate of up to .60% of the Fund's average daily net
assets.
<PAGE>
HILLIARD LYONS RESEARCH TRUST
FORM N-1A
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS
(a) (i) Declaration of Trust of Registrant.(1)
(ii) Amendment of Declaration of Trust dated May 4, 1999.*
(b) Bylaws of Registrant.(1)
(c) None.
(d) Investment Advisory Agreement between Registrant and Hilliard Lyons
Research 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.
* Filed herewith.
(1) Previously filed with the Registration Statement dated April 7, 1999
and incorporated herein by reference.
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 ADVISOR.
J.J.B. Hilliard, W.L. Lyons, Inc., through its division, Hilliard Lyons
Research Advisors, is the investment advisor 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 May 14, 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 ADVISOR 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
directors or officers, or both, of other subsidiaries of PNC Bank Corp.
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 advisor,
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 18th day of June, 1999.
HILLIARD LYONS RESEARCH TRUST
By: /s/ James M. Rogers
------------------------------
James M. Rogers
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ James W. Stuckert Trustee, June 18, 1999
- --------------------------- Chairman of the Board
James W. Stuckert*
/s/ William W. Crawford, Jr. Trustee June 18, 1999
- ---------------------------
William w. Crawford, Jr.*
/s/ Robert L. Decker Trustee June 18, 1999
- ---------------------------
Robert L. Decker*
/s/ W. Patrick Mulloy Trustee June 18, 1999
- ---------------------------
W. Patrick Mulloy*
/s/ James M. Rogers President June 18, 1999
- --------------------------- (Chief Executive Officer)
James M. Rogers
/s/ Joseph C. Curry Treasurer June 18, 1999
- --------------------------- (Chief Financial and
Joseph C. Curry Accounting Officer)
*By: /s/ James M. Rogers Attorney-in-Fact, pursuant to Power of Attorney.
-----------------------
James M. Rogers
<PAGE>
EXHIBIT INDEX
HILLIARD LYONS RESEARCH TRUST
FORM N-1A REGISTRATION STATEMENT
(a) (i) Declaration of Trust of Registrant.(1)
(ii) Amendment of Declaration of Trust dated May 4,
1999.*
(b) Bylaws of Registrant. (1)
(c) None.
(d) Investment Advisory Agreement between Registrant and
Hilliard Lyons Research 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.
* Filed herewith.
(1) Previously filed with the Registration Statement dated April 7, 1999
and incorporated herein by reference.
<PAGE>
HILLIARD LYONS INVESTMENT TRUST
WRITTEN INSTRUMENT AMENDING THE
NAME OF THE TRUST AND THE NAME OF
THE INITIAL SERIES OF THE TRUST
The undersigned, being the Trustees of Hilliard Lyons Investment Trust (the
"Trust"), a Delaware business trust organized pursuant to a Declaration of Trust
dated January 12, 1999, (the "Declaration of Trust"), pursuant to Section 1.1 of
Article I and Section 9.3(d) of Article IX of the Declaration of Trust, do
hereby amend the Declaration of Trust by deleting the first sentence of Section
1.1 of Article I in its entirety and replacing it with the following:
"The name of the Trust created hereby (the "Trust") shall be "Hilliard
Lyons Research 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."
Further, the undersigned, pursuant to Section 9.3(d) of Article IX of the
Declaration of Trust, do hereby amend the Declaration of Trust by deleting
Article VI, Section 6.2(a) in its entirety and replacing it with the following:
"(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:
Senbanc Fund
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).
IN WITNESS WHEREOF, the undersigned have this 4th day of May, 1999 signed
these presents.
- ----------------------------------- ----------------------------------------
James W. Stuckert William W. Crawford, Jr.
- ----------------------------------- ----------------------------------------
Robert L. Decker W. Patrick Mulloy
<PAGE>
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT (this "Agreement"), dated as of
_________ __, 1999, between HILLIARD LYONS RESEARCH TRUST, a Delaware
business trust (the "Trust"), on behalf of the Senbanc Fund, a series of the
Trust (the "Fund"), and HILLIARD LYONS RESEARCH ADVISORS (the "Advisor"), a
division of J.J.B. Hilliard, W.L. Lyons, Inc., a Kentucky corporation.
WHEREAS, the Advisor has agreed to furnish investment advisory services to
the Trust, an open-end investment company registered under the Investment
Company Act of 1940, as amended (the "Act"); and
WHEREAS, this Agreement has been approved in accordance with the provisions
of the Act, and the Advisor is willing to furnish such services upon the terms
and conditions herein set forth;
NOW THEREFORE, in consideration of the mutual premises and covenants herein
contained and other good and valuable consideration, the receipt of which is
hereby acknowledged, it is agreed by and between the parties hereto as follows:
1. IN GENERAL. The Advisor agrees, all as more fully set forth herein,
to act as investment advisor to the Fund with respect to the investment of the
Fund's assets and to supervise and arrange the purchase of securities for and
the sale of securities held in the investment portfolio of the Fund.
2. DUTIES AND OBLIGATIONS OF THE ADVISOR WITH RESPECT TO INVESTMENTS OF
ASSETS OF THE FUND.
(a) Subject to the succeeding provisions of this section and subject
to the direction and control of the Trust's Board of Trustees, the Advisor shall
(i) act as investment advisor for and supervise and manage the investment and
reinvestment of the Fund's assets and in connection therewith have complete
discretion in purchasing and selling securities and other assets for the Fund
and in voting, exercising consents and exercising all other rights appertaining
to such securities and other assets on behalf of the Fund; (ii) supervise
continuously the investment program of the Fund and the composition of its
investment portfolio; and (iii) arrange, subject to the provisions of paragraph
3 hereof, for the purchase and sale of securities and other assets held in the
investment portfolio of the Fund;
(b) The Advisor shall give the Fund the benefit of its best judgment
and effort in rendering services hereunder, but the Advisor shall not be liable
for any act or omission or for any loss sustained by the Fund in connection with
the matters to which this Agreement relates, except
<PAGE>
a loss resulting from willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement; and
(c) Nothing in this Agreement shall prevent the Advisor or any
officer, employee or other affiliate thereof from acting as investment advisor
for any other person, firm or corporation, or from engaging in any other lawful
activity, and shall not in any way limit or restrict the Advisor or any of its
officers, employees or agents from buying, selling or trading any securities for
its or their own accounts or for the accounts of others for whom it or they may
be acting; provided, however, that the Advisor will undertake no activities
which, in its judgment, will adversely affect the performance of its obligations
under this Agreement.
3. COVENANTS.
(a) In the performance of its duties under this Agreement, the
Advisor shall at all times conform to, and act in accordance with, any
requirements imposed by (i) the provisions of the Act and the Investment
Advisers Act of 1940, as amended, and all applicable Rules and Regulations of
the Securities and Exchange Commission (the "SEC"); (ii) any other applicable
provision of law; (iii) the provisions of the Declaration of Trust and By-Laws
of the Trust, as such documents are amended from time to time; (iv) the
investment objective and policies of the Fund as set forth in its Registration
Statement on Form N-1A; and (v) any policies and determinations of the Trust's
Board of Trustees;
(b) The Advisor will place orders either directly with the issuer or
with any broker or dealer. Subject to the other provisions of this paragraph, in
placing orders with brokers and dealers, the Advisor will attempt to obtain the
best price and the most favorable execution of its orders. In placing orders,
the Advisor will consider the experience and skill of the firm's securities
traders as well as the firm's financial responsibility and administrative
efficiency. Consistent with this obligation, the Advisor may, subject to the
approval of the Trust's Board of Trustees, select brokers on the basis of the
research services they provide to the Fund and other clients of the Advisor.
Information and research received from such brokers will be in addition to, and
not in lieu of, the services required to be performed by the Advisor hereunder.
A commission paid to such brokers may be higher than that which another
qualified broker would have charged for effecting the same transaction, provided
that the Advisor determines in good faith that such commission is reasonable in
terms either of the transaction or the overall responsibility of the Advisor to
the Fund and that the total commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long-term. In addition, subject
to the direction and control of the Trust's Board of Trustees, the Advisor is
authorized to take into account the sale of shares of the Fund in allocating
purchase and sale orders for portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the Advisor), provided
that the Advisor believes that the quality of the transaction and the commission
are comparable to what they would be with other qualified firms. In no
instance, however, will the Fund's securities be purchased from or sold to the
Advisor, or any affiliated person thereof, except to the extent permitted by the
SEC or by applicable law;
2
<PAGE>
(c) The Advisor will maintain books and records with respect to the
Fund's securities transactions and will render to the Trust's Board of Trustees
such periodic and special reports as they may request;
(d) The Advisor will maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial banking
operations of its affiliates. When the Advisor makes investment recommendations
for the Fund, its investment advisory personnel will not inquire or take into
consideration whether the issuer of securities proposed for purchase or sale for
the Fund's account are customers of the commercial department of its affiliates;
and
(e) The Advisor will treat confidentially and as proprietary
information of the Fund all records and other information relative to the Fund,
and the Fund's prior, current or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Fund, which approval shall not be unreasonably
withheld and may not be withheld where the Advisor may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Fund.
4. EXPENSES PAID BY THE ADVISOR. Subject to the provisions of
Section 4(c) hereof, the Advisor shall pay the following expenses relating to
the management and operation of the Fund:
(a) All reasonable fees, charges, costs and expenses (collectively,
"Costs") and all reasonable compensation of all officers and trustees of the
Fund relating to the performance of their duties to the Fund; provided, however,
that the Advisor shall not pay any such amounts to any Outside Trustees
(for-purposes of this Agreement, an "Outside Trustee" is any trustee of the Fund
who is not an "Interested Person," within the meaning of Section 2(a)(19) of the
Act);
(b) All Costs of office equipment and personnel necessary for the
performance of the obligations of the Advisor hereunder; and
(c) Except as provided in this Section 4 hereof, nothing contained in
this Agreement shall be deemed or construed to impose upon the Advisor any
obligation to incur, pay, or reimburse the Fund for any other Costs of or
relating to the Fund.
5. EXPENSES PAID BY THE FUND. Except as provided in Section 4 hereof,
the Fund hereby assumes and shall pay all fees, costs and expenses incurred by,
or on behalf, or for the benefit of the Fund, including without limitation:
3
<PAGE>
(a) All Costs of any custodian or depository;
(b) All Costs for bookkeeping, accounting and auditors' services;
(c) All Costs of any transfer agent and registrar of shares of the
Fund ("Shares");
(d) All Costs incurred by any Outside Trustee of the Trust in
connection with the performance of his duties relating to the affairs of the
Fund in such capacity as an Outside Trustee of the Trust;
(e) All brokers' commissions and other Costs incurred in connection
with the execution of Fund portfolio transactions;
(f) All taxes and other Costs payable by or on behalf of the Fund to
federal, state or other governmental agencies;
(g) All Costs of printing, recording and transferring certificates
representing Shares;
(h) All Costs in connection with the registration of the Fund and the
Shares with the Securities and Exchange Commission ("SEC"), and the continuous
maintenance of the effectiveness of such registrations, and the registration and
qualification of shares of the Fund under state or other securities laws,
including, without limitation, the preparation and printing of registration
statements, prospectuses and statements of additional information for filing
with the SEC and other authorities;
(i) All Costs of preparing, printing and mailing prospectuses,
statements of additional information and reports to holders of Shares;
(j) All Costs of shareholders' and Trustees' meetings and of
preparing, printing and mailing all information and documents, including without
limitation all notices, financial reports and proxy materials, to holders of
Shares;
(k) All Costs of legal counsel for the Fund and for Trustees of the
Trust in connection with the rendering of legal advice to or on behalf of the
Fund, including, without limitation, legal services rendered in connection with
the Fund's existence, corporate and financial structure and relations with its
shareholders, registrations and qualifications of securities under federal,
state and other laws, issues of securities, expenses which the Fund has herein
assumed whether customary or not, and extraordinary matters, including, without
limitation, any litigation involving the Fund, Trustees, or officers of the
Trust relating to the affairs of the Fund, employees or agents of the Fund; and
4
<PAGE>
(l) All Costs of filing annual and other reports with the SEC and
other regulatory authorities.
In the event that the Advisor provides any of the foregoing services
or pays any of these expenses, the Fund promptly shall reimburse the Advisor
therefor.
6. COMPENSATION OF THE ADVISOR.
(a) The Fund agrees to pay to the Advisor and the Advisor agrees to
accept as full compensation for all services rendered by the Advisor as such, a
monthly fee in arrears at an annual rate equal to 0.60% of the average daily
value of the Fund's Managed Assets. "Managed Assets" means the total assets of
the Fund minus the sum of accrued liabilities (other than the aggregate
indebtedness constituting financial leverage). For any period less than a month
during which this Agreement is in effect, the fee shall be prorated according to
the proportion which such period bears to a full month of 28, 29, 30 or 31 days,
as the case may be.
(b) For purposes of this Agreement, the net assets of the Fund shall
be calculated pursuant to the procedures adopted by resolutions of the Trustees
of the Trust for calculating the net asset value of the Fund's shares or
delegating such calculations to third parties.
7. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the Act, the Advisor hereby agrees that all records which it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any such records upon the Fund's request. The
Advisor further agrees to preserve for the periods prescribed by Rule 31a-2
under the Act the records required to be maintained by Rule 31a-1 under the
Act.
8. INDEMNITY.
(a) The Fund hereby agrees to indemnify the Advisor, and each of the
Advisor's directors, officers, employees, agents, associates and controlling
persons and the directors, officers, employees and agents thereof (including any
individual who serves at the Advisor's request as director, officer, partner,
member, trustee or the like of another entity) (each such person being an
"Indemnitee") against any liabilities and expenses, including amounts paid in
satisfaction of judgments, in compromise or as fines and penalties, and counsel
fees (all as provided in accordance with applicable corporate law) reasonably
incurred by such Indemnitee in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or investigative body in which such Indemnitee may be or may have
been involved as a party or otherwise or with which such Indemnitee may be or
may have been threatened,
5
<PAGE>
while acting in any capacity set forth herein or thereafter by reason of such
Indemnitee having acted in any such capacity, except with respect to any matter
as to which such Indemnitee shall have been adjudicated not to have acted in
good faith in the reasonable belief that such Indemnitee's action was in the
best interest of the Fund and furthermore, in the case of any criminal
proceeding, so long as such Indemnitee had no reasonable cause to believe that
the conduct was unlawful; provided, however, that (1) no Indemnitee shall be
indemnified hereunder against any liability to the Fund or its shareholders or
any expense of such Indemnitee arising by reason of (i) willful misfeasance,
(ii) bad faith, (iii) gross negligence or (iv) reckless disregard of the duties
involved in the conduct of such Indemnitee's position (the conduct referred to
in such clauses (i) through (iv) being sometimes referred to herein as
"disabling conduct"), (2) as to any matter disposed of by settlement or a
compromise payment by such Indemnitee, 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 settlement or
compromise is in the best interests of the Fund and that such Indemnitee appears
to have acted in good faith in the reasonable belief that such Indemnitee's
action was in the best interest of the Fund and did not involve disabling
conduct by such Indemnitee and (3) with respect to any action, suit or other
proceeding voluntarily prosecuted by any Indemnitee as plaintiff,
indemnification shall be mandatory only if the prosecution of such action, suit
or other proceeding by such Indemnitee was authorized by a majority of the full
Board of Trustees of the Trust.
(b) The Fund shall make advance payments in connection with the
expenses of defending any action with respect to which indemnification might be
sought hereunder if the Fund receives a written affirmation of the Indemnitee's
good faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to reimburse the Fund unless it is
subsequently determined that such Indemnitee is entitled to such indemnification
and if the Trustees of the Trust determine that the facts then known to them
would not preclude indemnification. In addition, at least one of the following
conditions must be met: (A) the Indemnitee shall provide a security for such
Indemnitee undertaking, (B) the Fund shall be insured against losses arising by
reason of any lawful advance, or (C) a majority of a quorum consisting of
Trustees of the Trust who are neither "interested persons" of the Fund (as
defined in Section 2(a)(19) of the Act) nor parties to the proceeding
("Disinterested Non-Party Trustees") or an independent legal counsel in a
written opinion, shall determine, based on a review of readily available facts
(as opposed to a full trial-type inquiry), that there is reason to believe that
the Indemnitee ultimately will be found entitled to indemnification.
(c) All determinations with respect to indemnification hereunder
shall be made (1) by a final decision on the merits by a court or other body
before whom the proceeding was brought that such Indemnitee is not liable by
reason of disabling conduct, or (2) in the absence of such a decision, by (i) a
majority vote of a quorum of the Disinterested Non-Party Trustees of the Trust,
or (ii) if such a quorum is not obtainable or even, if obtainable, if a majority
vote of such quorum so directs, independent legal counsel in a written opinion.
All determinations that advance payments in connection with the expense of
defending any proceeding shall be made in accordance with the immediately
preceding clause (2) above.
6
<PAGE>
The rights accruing to any Indemnitee under these provisions shall not
exclude any other right to which such Indemnitee may be lawfully entitled.
9. LIMITATION ON LIABILITY. The Advisor will not be liable for any error
of judgment or mistake of law or for any loss suffered by Advisor or by the Fund
in connection with the performance of this Agreement, except a loss resulting
from a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations or duties under this Agreement.
10. DURATION AND TERMINATION. This Agreement shall become effective as of
the date hereof, unless sooner terminated with respect to the Fund as provided
herein, and shall continue in effect for a period of two years. Thereafter, if
not terminated, this Agreement shall continue in effect with respect to the Fund
for successive annual periods, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Fund's Board of Trustees who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, or (b) by a vote of a majority of the outstanding voting securities of
the Fund. Notwithstanding the foregoing, this Agreement may be terminated by
the Fund at any time, without the payment of any penalty, upon giving the
Advisor 60 days' notice (which notice may be waived by the Advisor), provided
that such termination by the Fund shall be directed or approved by the vote of a
majority of the Trustees of the Fund in office at the time or by the vote of the
holders of a "majority" (as defined in the Act) of the voting securities of the
Fund at the time outstanding and entitled to vote, or by the Advisor on 60 days'
written notice (which notice may be waived by the Fund). This Agreement will
also immediately terminate in the event of its assignment. (As used in this
Agreement, the terms "majority of the outstanding voting securities,"
"interested person" and "assignment" shall have the same meanings of such terms
in the Act.)
11. NOTICES. Any notice under this Agreement shall be in writing to the
other party at such address as the other party may designate from time to time
for the receipt of such notice and shall be deemed to be received on the earlier
of the date actually received or on the fourth day after the postmark if such
notice is mailed first class postage prepaid.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. Any amendment of this Agreement shall be
subject to the Act.
13. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the Commonwealth of Kentucky for contracts to be performed entirely
therein without reference to choice of law principles thereof and in accordance
with the applicable provisions of the Act.
7
<PAGE>
14. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding on, and shall inure to the
benefit of the parties hereto and their respective successors.
15. COUNTERPARTS. This Agreement may be executed in counterparts by the
parties hereto, each of which shall constitute an original counterpart, and all
of which, together, shall constitute one Agreement.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument
to be executed by their duly authorized officers, all as of the day and the year
first above written.
HILLIARD LYONS RESEARCH TRUST,
on behalf of the Senbanc Fund
By:
--------------------- --------
Name: Date
Title:
HILLIARD LYONS RESEARCH ADVISORS
By:
--------------------- --------
Name: Date
Title:
8
<PAGE>
Hilliard Lyons Research Advisors
Hilliard Lyons Center
Louisville, Kentucky 40202
________ __, 1999
Hilliard Lyons Research Trust
Hilliard Lyons Center
Louisville, Kentucky 40202
Ladies and Gentlemen:
We are writing to confirm our understanding that Hilliard Lyons Research
Trust (the "Trust") has a nonexclusive, revocable license to use the word
"Hilliard Lyons" in its name and that if Hilliard Lyons Research Advisors (the
"Advisor") ceases to be an investment advisor to the Trust, the Trust will cease
using such name as promptly as practicable, making all reasonable efforts to
remove "Hilliard Lyons" from its name including calling a special meeting of
stockholders.
Execution of this letter agreement on behalf of the Fund will signify that
the Trust understands that it has a nonexclusive, revocable license to the use
of the name "Hilliard Lyons."
HILLIARD LYONS RESEARCH ADVISORS
By:
--------------------- --------
Name: Date
Title:
HILLIARD LYONS RESEARCH TRUST
By:
--------------------- --------
Name: Date
Title:
9
<PAGE>
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement"), dated as of __________ __,
1999 between HILLIARD LYONS RESEARCH TRUST, a Delaware business trust (the
"Trust"), on behalf of the SENBANC FUND, a series of the Trust (the "Fund"), and
PROVIDENT DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
RECITALS
A. The Trust is registered under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), as an open-end management investment
company and it is affirmatively in the interest of the Fund to offer its shares
for sales continuously.
B. The Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934, as amended.
C. The Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's shares in order
to provide for the sale and distribution of shares of the Fund. In
consideration of the promises and the covenants hereinafter contained, the Trust
and the Distributor hereby agree as follows:
1. APPOINTMENT OF THE DISTRIBUTOR. The Trust hereby appoints the
Distributor as agent for the Trust, to sell and distribute shares of the Fund to
the public, upon the terms and conditions and during the term of this Agreement,
and the Distributor hereby accepts such appointment and agrees to act hereunder.
2. NATURE OF DUTIES. The Distributor shall (i) sell and distribute
the Fund's shares and (ii) qualify and maintain the qualification as a
broker-dealer in such states where shares of the Fund are qualified for sale.
In carrying out its duties and responsibilities hereunder, the Distributor
intends to enter into a selling agreement with J.J.B. Hilliard, W.L. Lyons, Inc.
("Hilliard Lyons"), and may enter into other selling agreements (each a "Selling
Agreement") with brokers, dealers and other financial intermediaries
(collectively with Hilliard Lyons, "Intermediaries") in order to implement this
Agreement; such Intermediaries shall at all times be deemed to be independent
contractors retained by the Distributor and not the Trust.
3. SALE OF SHARES OF THE FUND.
3.1 The Distributor will have the right to sell on behalf of the
Fund, as its agent, any shares needed but not more than the shares needed
(except for clerical errors in transmission) to fill unconditional orders
for shares of the Fund placed with the Distributor
<PAGE>
by investors. The Distributor agrees that the Fund shall receive 100% of
the net asset value, determined as set forth in the Fund's Prospectus, for
all shares sold by the Distributor.
3.2 The shares are to be sold by or through the Distributor to
investors at a price per share ("offering price") equal to the sum of the
net asset value per share and any applicable sales charges, determined as
set forth in the Fund's Prospectus. The Distributor shall receive
compensation for its distribution activities and services as set forth in
this Agreement and the Fund's written plan contemplated by Rule 12b-1 under
the Investment Company Act, as such plan may be amended from time to time
(the "Distribution Plan"). The Trust hereby authorizes the Distributor to
provide compensation to Intermediaries for such activities and services,
and the Distributor may reallocate all or a portion of its compensation to
such Intermediaries for such activities and services. Such reallocation
shall be in an amount as set forth from time to time in the Fund's
Prospectus.
3.3 The Trust shall have the right to suspend the sale of Fund
shares at times when redemption is suspended pursuant to the conditions set
forth in subsection 4.2. The Trust shall also have the right to suspend
the sale of Fund shares if there shall have been an event that, in the
judgment of the Trustees of the Trust, makes it impracticable or
inadvisable to sell shares, or if in the judgment of the Trustees, the
suspension of the sale of Fund shares is in the best interests of the Fund.
3.4 The Trust, or any agent of the Trust designated in writing
by the Trust, shall be promptly advised of all purchase orders for shares
received by the Distributor. Any order may be rejected by the Trust for
any reason whatsoever. The Trust (or its agent) will confirm orders upon
their receipt, will make appropriate book entries and upon receipt by the
Trust (or its agent) of payment therefore, will deliver deposit receipts or
certificates for such shares pursuant to the instructions of the
Distributor. Payment shall be made to the Trust in New York Clearing House
funds, or by federal funds wire, cashiers check or certified check. The
Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Trust (or its agent).
4. REPURCHASE OR REDEMPTION OF SHARES OF THE FUND.
4.1 Any of the outstanding shares may be tendered for redemption
at any time, and the Trust agrees to repurchase or redeem the shares so
tendered in accordance with its obligations set forth in the Trust's
Declaration of Trust, as amended from time to time, and the applicable
provision set forth in the Prospectus.
4.2 Redemption of shares or payment may be suspended: 1) at
times when the New York Stock Exchange is closed other than customary
weekend closings and holiday closings, 2) when pursuant to rules and
regulations of the Securities and Exchange Commission (the "SEC"), trading
on said Exchange is restricted or an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably
practicable
2
<PAGE>
or it is not reasonably practicable for the Fund fairly to determine the
value of its net assets, or 3) during any other period when the SEC, by
order, so permits.
5. DUTIES OF THE TRUST.
5.1 The Trust shall make available to the Distributor such
number of copies of its Prospectus, quarterly reports and annual financial
statements as the Distributor shall reasonably request.
5.2 The Trust will qualify and maintain the qualifications, at
the Trust's expense, of an appropriate number of its shares for sale under
the securities laws of such state as selected by the Trust.
6. DUTIES OF THE DISTRIBUTOR.
6.1 The Distributor shall devote reasonable time and effort to
effect sales of shares of the Fund, but shall not be obligated to sell any
specific number of shares. The Distributor will qualify and maintain the
qualifications, at the Distributor's expense, of its registration as a
broker-dealer in such states where shares of the Fund are qualified for
sale. The services of the Distributor to the Trust hereunder are not to be
deemed exclusive and nothing contained herein shall prevent the Distributor
from entering into like arrangements with other investment companies so
long as the performance of its obligations hereunder is not impaired
thereby.
6.2 In selling the shares of the Fund, the Distributor shall use
all reasonable efforts to conform in all respects with the requirements of
all federal and state laws relating to the sale of such securities.
Neither the Distributor nor any other person is authorized by the Trust to
give any information or to make any representations other than those
contained in the Registration Statement or related Prospectus or in any
sales literature specifically approved in writing by the Trust.
6.3 The Distributor shall adopt and follow procedures, as
approved by the officers of the Trust, for the confirmation of sales to
investors, the collection of amounts payable by investors on such sales,
and the cancellation of unsettled transactions, as may be necessary to
comply with the requirements of the National Association of Securities
Dealers, Inc. (the "NASD"), as such requirements may from time to time
exist.
6.4 The Distributor warrants and represents that it is, and
agrees to use all commercially reasonable efforts to remain at all times, a
member in good standing of the NASD including its Code of Conduct, with
authority to act as the Distributor.
6.5 The Distributor warrants and represents that the Selling
Agreements shall provide that the Intermediaries shall provide the
Distributor with such information as is reasonably necessary to permit the
Distributor to comply with the reporting requirements set forth in this
Agreement and the Distribution Plan.
3
<PAGE>
7. ALLOCATION OF EXPENSES.
7.1 The Distributor shall bear all expenses incurred by it in
connection with its duties and activities under this Agreement, including
the costs and expenses of qualifying and maintaining the qualifications of
its registration as a broker-dealer in such states where shares of the Fund
are qualified for sale, preparing, printing and distributing any sales
literature, advertising and other materials which it creates for its use as
Distributor.
7.2 Except as provided in subsection 7.1 hereof, nothing
contained in this Agreement shall be deemed or construed to impose upon the
Distributor any obligation to incur, pay, or reimburse the Trust for any
other costs and expenses.
7.3 The Trust shall bear the following costs and expenses
related to the continuous offering of the Fund's shares, including fees and
disbursements of its counsel and auditors, in connection with the
preparation and filing of any required Registration Statements and
Prospectuses under the Investment Company Act and the Securities Act of
1933, and all amendments and supplements thereto, and preparing and mailing
annual and interim reports and proxy materials to shareholders (including
but not limited to the expense of setting in type any such Registration
Statements, Prospectuses, annual or interim reports or proxy materials).
7.4 Except as provided in subsection 7.3 hereof, nothing
contained in this Agreement shall be deemed or construed to impose upon the
Trust any obligation to incur, pay, or reimburse the Distributor for any
other costs and expenses.
8. INDEMNIFICATION.
8.1 The Trust agrees to indemnify, defend and hold harmless the
Distributor, its officers, directors, employees, agents, and any person who
controls the Distributor, if any, within the meaning of Section 15 of the
Securities Act (each, an "Indemnified Distributor Party" and collectively,
the "Indemnified Distributor Parties"), from and against any and all
claims, demands, actions, liabilities, losses, costs and expenses
(including the cost of investigating or defending same, and any reasonable
attorneys' fees and expenses incurred in connection
therewith) (collectively, "Liabilities") which the Indemnified Distributor
Parties may incur which arise out of or are based upon (a) any untrue
statement of a material fact contained in the Registration Statement,
Prospectus or annual or interim report or (b) any omission to state a
material fact required to be stated in any thereof or necessary to make the
statements in any thereof not misleading, except insofar as such
Liabilities arise out of or are based upon any such untrue statement or
omission or untrue statement or omission made in reliance upon and in
conformity with information furnished
4
<PAGE>
to the Trust in writing in connection therewith by or on behalf of the
Distributor; provided, however, that the indemnity agreement in this
Section 8.1 shall not inure to the benefit of any Indemnified Distributor
Party unless (i) a court of competent jurisdiction shall have determined,
in a final unappealable decision on the merits, that such Indemnified
Distributor Party was not liable, by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its or his duties, or by
reason of its or his reckless disregard of its or his obligations under
this Agreement (collectively, "disabling conduct"), or (ii) in the absence
of such a judicial decision, a reasonable determination, based upon a
review of the facts, that the indemnified person was not liable by reason
of disabling conduct, evidenced by either (A) the vote of a majority of
trustees who are neither "interested persons" of the Trust as defined in
Section 2(a)(19) of the Investment Company Act nor parties to the
proceeding or matter in question, or (B) the written opinion of independent
legal counsel. The Trust's indemnification obligation as aforesaid is
expressly conditioned upon the Trust's being promptly notified, by letter
or telegram addressed to the Trust at its principal business office, of any
Liability of or against any Indemnified Distributor Person. The Trust
agrees promptly to notify the Distributor of the commencement of any
litigation or proceeding against the Trust or any Indemnified Fund Parties
(as defined below) in connection with the issue and sale of any Fund
shares.
8.2 The Distributor agrees to indemnify, defend and hold
harmless the Trust, its officers, directors, employees, agents and any
person who controls the Trust, if any, within the meaning of Section 15 of
the Securities Act (each, an "Indemnified Fund Party" and collectively, the
"Indemnified Fund Parties"), from and against any and all Liabilities which
the Indemnified Fund Parties may incur which arise out of or are based upon
(a) any untrue statement of a material fact contained in information
furnished to the Trust in writing by or on behalf of the Distributor for
use in the Registration Statement or Prospectus or any omission to state a
material fact in connection with such information required to be stated in
the Registration Statement, Prospectus or annual or interim report or
necessary to make such information not misleading; or (b) any acts or
omissions by the Indemnified Distributor Parties in connection with the
performance of the Distributor's obligations hereunder. The Distributor's
indemnification agreement as aforesaid is expressly conditioned upon the
Distributor's being promptly notified, by letter or telegram addressed to
the Distributor at its principal business office, of any Liability of or
against any Indemnified Fund Party.
9. DURATION AND TERMINATION OF THE AGREEMENT.
9.1 This Agreement shall become effective as of the date first
written above and shall remain in force from year to year thereafter, but
only so long as such continuance is specifically approved at least annually
by (i) the Trust's Board of Trustees or by the vote of a majority of the
outstanding voting securities of the Fund, and (ii) by the vote of a
majority of those Trustees who are not parties to this Agreement or
interested persons of any such party and who have no direct or indirect
financial interest in the operation of the
5
<PAGE>
Distribution Plan, this Agreement, or in any other agreement related to the
Distribution Plan, cast in person at a meeting or meetings called for the
purpose of voting on such approval.
9.2 This Agreement may be terminated at any time, without the
payment of any penalty, by the Trust's Board of Trustees or by vote of a
vote of a majority of the outstanding voting securities of the Fund, or by
the Distributor, on sixty days written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment.
10. DEFINITION OF CERTAIN TERMS. The terms "vote of a majority of
the outstanding voting securities," "assignment," "affiliated person," and
"interested person," when used in this Agreement, shall have the respective
meanings specified in the Investment Company Act and the rules and regulations
of the Commission thereunder.
11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Trust's
Board of Trustees or by the vote of a majority of outstanding voting securities
of the Fund and (ii) by the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons of any such party and who have
no direct or indirect financial interest in the operation of the Distribution
Plan, this Agreement, or in any other agreement related to the Distribution
Plan, cast in person at a meeting or meetings called for the purpose of voting
on such approval.
12. GOVERNING LAW. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of Delaware,
and the applicable provisions, of the Investment Company Act. To the extent
that the applicable laws of the State of Delaware, or any of the provisions
herein, conflict with the applicable provisions of the Investment Company Act or
the rules and regulations thereunder, the latter shall control. The parties
hereto have executed this Agreement as of the day and year first above written.
HILLIARD LYONS RESEARCH TRUST,
on behalf of the Senbanc Fund
By:
----------------------- -------------
Date
Name:
Title:
PROVIDENT DISTRIBUTORS, INC.
By:
----------------------- --------------
Date
Name:
Title:
6
<PAGE>
BROKER-DEALER AGREEMENT
Provident Distributors, Inc.
Four Falls Corporate Center - 6th Floor
West Conshohocken, Pennsylvania 19428-2961
Ladies and Gentlemen:
We desire to enter into an Agreement with you for the sale of shares of
beneficial interest in the Senbanc Fund (the "Fund"), a series of Hilliard Lyons
Research Trust (the "Trust"), a Delaware business trust and an open-end
registered investment company of which you are the principal underwriter as such
term is defined in the Investment Company Act of 1940, as amended, and for which
you are an agent for the continuous distribution of shares pursuant to the terms
of a Distribution Agreement between you and the Trust on behalf of the Fund.
Unless the context otherwise requires, as used herein the term "Prospectus"
shall mean the Fund's prospectus and related statement of additional information
(the "Statement of Additional Information") incorporated therein by reference,
as amended and supplemented, as included in the then currently effective
registration statement (or post-effective amendment thereto) of the Trust, as
filed with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, as amended (the "Registration Statement").
In consideration for the mutual covenants contained herein, it is hereby
agreed that our respective rights and obligations shall be as follows:
1. In all sales of Fund shares to the public, we shall act as dealer for
our own account and in no transaction shall we have any authority to act as
agent other than as set forth in this Agreement for the Trust, the Fund, for you
or for any other dealer.
2. All orders for the purchase of Fund shares shall be executed promptly,
at the then current public offering price per share (i.e., the net asset value
per share plus the applicable sales load, if any) and all orders for the
redemption of Fund shares shall be executed promptly at the net asset value per
share minus the contingent deferred sales load, if any, in each case as
described in the Prospectus. The minimum initial purchase order and minimum
subsequent purchase order shall be as set forth in the Prospectus. All orders
are subject to acceptance or rejection by you at your sole discretion. Unless
otherwise mutually agreed in writing, each transaction shall be confirmed
promptly in writing directly to the customer and a copy of each confirmation
shall be sent simultaneously to us. We acknowledge that the Trust has reserved
the right, at its discretion and without notice, to suspend the sale of shares
or withdraw entirely the sale of shares of the Fund.
<PAGE>
Provident Distributors, Inc.
Page 2
3. In ordering Fund shares, we shall rely solely and conclusively on the
representations contained in the Prospectus. We agree that we shall not offer
or sell Fund shares except in compliance with all applicable federal and state
securities laws and the rules and regulations of applicable regulatory agencies
or authorities. In connection with offers to sell and sales of Fund shares, we
agree to deliver or cause to be delivered to each person to whom any such offer
or sale is made, at or prior to the time of such offer or sale, a copy of the
Prospectus and, upon request, the Statement of Additional Information. We
further agree to obtain from each customer to whom we sell Fund shares any
taxpayer identification number certification required under Section 3406 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder, and to provide you or your designee with timely written
notice of any failure to obtain such taxpayer identification number
certification in order to enable the implementation of any required backup
withholding in accordance with Section 3406 of the Code and the regulations
thereunder. Unless otherwise mutually agreed in writing, you shall deliver or
cause to be delivered to each customer who purchases shares of the Fund from or
through us copies of all annual and interim reports, proxy solicitation
materials, and any other information and materials relating to the Fund and
prepared by or on behalf of you, the Fund or its investment advisor, custodian,
transfer agent or dividend disbursing agent for distribution to each customer.
You agree to supply us with copies of the Prospectus, Statement of Additional
Information, annual reports, interim reports, proxy solicitation materials and
any other such information and materials relating to the Fund in reasonable
quantities upon request.
4. We shall not make any representations concerning Fund shares other
than those contained in the Prospectus or in any promotional materials or sales
literature furnished to us by you or the Fund. Except as otherwise provided in
Paragraph 3 of this Agreement, we shall not furnish or cause to be furnished to
any person or display or publish any information or materials relating to the
Fund (including, without limitation, promotional materials and sale literature,
advertisements, press releases, announcements, statements, posters, signs or
other similar material), except such information and materials as may be
furnished to us by you or the Fund, and such other information and materials as
may be approved in writing by you.
5. In determining the amount of any dealer reallowance payable to us
hereunder, you reserve the right to exclude any sales which you reasonably
determine are not made in accordance with the terms of the Prospectus and the
provisions of this Agreement.
6. (a) In the case of Fund shares sold with a sales load, customers
may be entitled to a reduction in sales load on purchases made from the Fund by
utilizing a letter of intent ("Letter of Intent") in accordance with the
Prospectus. In such case, our dealer reallowance will be paid based upon the
reduced sales load, but an adjustment to the dealer reallowance will be made in
accordance with the Prospectus to reflect the investor's actual purchases if he
or she should fail to fulfill the
<PAGE>
Provident Distributors, Inc.
Page 3
commitment in the Letter of Intent. The sales load and/or dealer reallowance
may be changed at any time in the sole discretion of the Trust.
(b) Subject to and in accordance with the terms of the
Prospectus, a reduced sales load may be applicable with respect to customer
accounts through a right of accumulation under which customers are permitted to
purchase Fund shares at the then current public offering price per share
applicable to the total of (i) the dollar amount of shares then being purchased
plus (ii) an amount equal to the then current net asset value or public offering
price originally paid for shares already purchased, whichever is higher. In
such case, we agree to furnish to you or to the Fund's transfer agent, as such
term is defined in the Prospectus (the "Transfer Agent"), sufficient information
to permit your confirmation of qualification for a reduced sales load;
acceptance of the purchase order is subject to such confirmation.
(c) With respect to Fund shares sold with a sales load, we agree
to advise you promptly at your request as to amounts of any and all sales by us
qualifying for a reduced sales load.
7. We agree to provide distribution and marketing services in the
promotion and sale of Fund shares and to furnish services and assistance to our
customers who invest in or own Fund shares. For such services, you agree to
compensate us in accordance with the current schedule of dealer compensation
that you have furnished us. We acknowledge that we will only receive
compensation through the Fund's Rule 12b-1 plan and that we will only receive
compensation with respect to the Fund so long as the Rule 12b-1 plan for the
Fund remains in effect. We further acknowledge that you will provide to the
Board of Trustees of the Trust, and the Board of Trustees will review, at least
quarterly, a written report of the amounts expended pursuant to this Agreement
and the purposes for which such expenditures were made. In connection with such
reviews, we will furnish you or your designees with such information as you or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to our customers of the services
described herein), and will otherwise cooperate with you and your designee
(including, without limitation, any auditors designated by you), in connection
with the preparation of reports to the Board of Trustees of the Trust concerning
this Agreement and the monies paid or payable by you pursuant hereto, as well as
any other reports or filings that may be required by law.
8. The procedures relating to all orders and the handling thereof will be
subject to the terms of the Prospectus and your written instructions to us from
time to time. No conditional orders will be accepted. We agree to place orders
with you immediately for the same number of shares and at the same price as any
sales by us. We shall not withhold placing orders received from customers so as
to profit ourselves as a result of such withholding by a change in the net asset
value from that used in determining the offering price to such customers, or
otherwise; provided, however, that the foregoing shall not prevent the purchase
of Fund shares by us for our own bona fide investment. We agree that: (a) we
shall not effect any transactions (including, without limitation, any purchases
and
<PAGE>
Provident Distributors, Inc.
Page 4
redemptions) in Fund shares registered in the name of, or beneficially owned by,
any customer unless such customer has granted us full right, power and authority
to effect such transactions on his or her behalf and (b) you, the Fund, the
Trust, the Transfer Agent and your and their respective officers, directors or
trustees, agents, employees and affiliates shall not be liable for, and shall be
fully indemnified and held harmless by us from and against, any and all claims,
demands, liabilities and expenses (including without limitation, reasonable
attorneys fees) which may be incurred by you or any of the foregoing persons
entitled to indemnification from us hereunder arising out of or in connection
with the execution of any transactions in Fund shares registered in the name of,
or beneficially owned by, any customer in reliance upon any oral or written
instructions believed to be genuine and to have been given by or on behalf of
us.
9. (a) We agree to pay for purchase orders of Fund shares from us
in accordance with the terms of the Prospectus. On or before the settlement
date of each purchase order for Fund shares, we shall either (i) remit to an
account designated by you with the Transfer Agent an amount equal to the then
current public offering price of the Fund shares less our dealer reallowance, if
any, with respect to such purchase order as determined by you in accordance with
the terms of the Prospectus, or (ii) remit to an account designated by you with
the Transfer Agent an amount equal to the then current pubic offering price of
the Fund shares without deduction for our dealer reallowance, if any, with
respect to such purchase order as determined by you in accordance with the terms
of the Prospectus, in which case our dealer reallowance, if any, shall be
payable to us on at least a monthly basis. If payment for any purchase order is
not received in accordance with the terms of the Prospectus, you reserve the
right, without notice, to cancel the sale and to hold us responsible for any
loss sustained as a result thereof.
(b) If any shares sold to us under the terms of this Agreement
are sold with a sales load and are redeemed for the account of the Fund or are
tendered for redemption within seven (7) days after confirmation of our purchase
order for such shares: (i) we shall forthwith refund to you the full dealer
reallowance received by us on the sale; and (ii) you shall forthwith pay to the
Fund your portion of the sales load on the sale which had been retained by you
and shall also pay to the Fund the amount refunded by us.
10. If the Trust issues certificates for Fund shares, certificates for
shares sold to us hereunder shall only be issued in accordance with the terms of
the Prospectus and upon our customer's specific request and, upon such request,
shall be promptly delivered to us by the Transfer Agent unless we make other
arrangements. However, in making delivery of such share certificates to us, the
Transfer Agent shall have adequate time to clear any checks drawn for the
payment of Fund shares.
<PAGE>
Provident Distributors, Inc.
Page 5
11. We hereby represent and warrant to you that:
(a) we are a corporation, partnership or other entity duly
organized and validly existing in good standing under the laws of the
jurisdiction in which we were organized;
(b) the execution and delivery of this Agreement and the
performance of the transactions contemplated hereby have been duly authorized by
all necessary action and all other authorization and approvals (if any) required
for our lawful execution and delivery of this Agreement and our performance
hereunder have been obtained; and
(c) upon execution and delivery by us, and assuming due and
valid execution and delivery to you, this Agreement will constitute a valid and
binding agreement, enforceable against us in accordance with its terms.
12. We further represent and warrant to you that we are a member in good
standing of the NASD and, with respect to any sales in the United States, we
agree to abide by all of the rules and regulations of the NASD, including,
without limitation, its Business Conduct Rules. We agree to comply with all
applicable federal and state laws, rules and regulations. You agree to inform
us, upon our request, as to the states in which you believe Fund shares have
qualified for sale under, or are exempt from the requirements of, the respective
securities laws of such states, but you shall have no obligation or
responsibility as to our right to sell shares in any jurisdiction. We agree to
notify you immediately in the event of (a) our expulsion or suspension from the
NASD, or (b) our violation of any applicable federal or state law, rule or
regulation arising out of or in connection with this Agreement or which may
otherwise affect in any material way our ability to act as a dealer in
accordance with the terms of this Agreement. Our expulsion from the NASD will
automatically terminate this Agreement immediately without notice. Our
suspension from the NASD for violation of any applicable federal or state law,
rule or regulation will terminate this Agreement effective immediately upon your
written notice to us of termination, and we agree to provide immediate written
notice to you of any such suspension.
13. In the event that you breach any of the terms and conditions of this
Agreement, you will indemnify us, the Fund, the Trust and our affiliates for any
damages, losses, costs and expenses (including reasonable attorneys' fees and
expenses) arising out of or relating to such breach. In the event that we
breach any of the terms and conditions of this Agreement, we will indemnify you,
the Fund, the Trust and your affiliates for any damages, losses, costs and
expenses (including reasonable attorneys' fees and expenses) arising out of or
relating to such breach.
<PAGE>
Provident Distributors, Inc.
Page 6
14. The names and addresses and other information concerning our customers
are and shall remain our sole property, and neither you nor your affiliates
shall use such names, addresses or other information for any purpose except in
connection with the performance of your duties and responsibilities hereunder
and except for servicing and informational mailings relating to the Fund.
Notwithstanding the foregoing, this Paragraph 14 shall not prohibit you or any
of your affiliates from utilizing for any purposes the names, addresses or other
information concerning any of our customers if such names, addresses or other
information are obtained in any manner other than from us pursuant to this
Agreement. The provisions of this Paragraph 14 shall survive the termination of
this Agreement.
15. By requesting expedited redemption, we agree that you, the Fund, the
Trust, the Transfer Agent, and your and their respective officers, directors or
trustees, agents, employees and affiliates shall not be liable for and shall be
fully indemnified and held harmless by us from and against any and all claims,
demands, liabilities and expenses (including, without limitation, reasonable
attorneys' fees and expenses) arising out of or in connection with any expedited
redemption payments.
16. Neither this Agreement nor the performance of the services of the
respective parties hereunder shall be considered to constitute an exclusive
arrangement, or to create a partnership, association or joint venture between
you and us. Neither party hereto shall be, act as, or represent itself as, the
agent or representative of the other other than as set forth in this Agreement,
nor shall either party have the right or authority to assume, create or incur
any liability or any obligation of any kind, express or implied, against or in
the name of, or on behalf of the other party other than as set forth in this
Agreement. This Agreement is not intended to, and shall not create any rights
against either party hereto by any third party solely on account of this
Agreement. Neither party hereto shall use the name of the other party in any
manner without the other party's prior written consent, except as required by
any applicable federal or state law, rule or regulation, and except pursuant to
any promotional programs mutually agreed upon in writing by the parties hereto.
17. Except as otherwise specifically provided herein, all notices required
or permitted to be given pursuant to this Agreement shall be given in writing
and delivered by personal delivery or by postage prepaid, registered or
certified United States first class mail, return receipt requested, or by telex,
telegram or similar means of same day delivery (with a confirming copy by mail
as provided herein). Unless otherwise notified in writing, all notices to you
shall be given or sent to you at your offices, located at Four Falls Corporate
Center, 6th Floor, West Conshohocken, PA 19428-2961 and all notices to us shall
be given or sent to us at our address shown below.
<PAGE>
Provident Distributors, Inc.
Page 7
18. This Agreement shall become effective only when accepted and signed by
you, and may be terminated at any time by either party hereto upon fifteen (15)
days prior written notice to the other party. Notwithstanding the termination
of this Agreement, all unfulfilled obligations, duties and liabilities of either
party to the other as of the date of termination including, without limitation,
all obligations of indemnification of either to the other shall remain the
responsibility of the respective party. This Agreement may be amended only by a
written instrument signed by both the parties hereto and may not be assigned by
either party without the prior written consent of the other party. This
Agreement constitutes the entire agreement and understanding between the parties
hereto relating to the subject matter hereof and supersedes any and all prior
agreements between the parties hereto relating to the subject matter hereof.
19. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware, without giving effect to the
principles of conflicts of laws.
Very truly yours,
J.J.B. HILLIARD, W.L. LYONS, INC.
---------------------------------------------
Name of Broker-Dealer (Please Print or Type)
---------------------------------------------
---------------------------------------------
Address
Dated:
---------------------------------------
By:
------------------------------------------
Authorized Dealer
<PAGE>
Provident Distributors, Inc.
Page 8
Note:
Please sign and return both copies of this Agreement to Provident Distributors,
Inc. Upon acceptance a countersigned copy will be returned to you for your
files.
Accepted:
Provident Distributors, Inc.
Dated:
--------------------------
By:
-----------------------------
Authorized Signature
<PAGE>
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of , 1999 by and between PFPC
TRUST COMPANY, a limited purpose trust incorporated under the laws of Delaware
("PFPC Trust"), and HILLIARD LYONS RESEARCH TRUST, a Delaware business trust
(the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC Trust to provide custodian services
to its investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time by mutual agreement
of the parties hereto (each a "Portfolio"), and PFPC Trust wishes to furnish
custodian services, either directly or through an affiliate or affiliates, as
more fully described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c) "AUTHORIZED PERSON" means any officer of the Fund and any other person
authorized by the Fund's Board of Trustees to give Oral or Written
Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto or any amendment thereto as may be
received by PFPC Trust. An Authorized Person's scope of authority may
be limited by the Fund by setting
<PAGE>
forth such limitation in the Authorized Persons Appendix.
(d) "BOOK-ENTRY SYSTEM" means Federal Reserve Treasury book-entry system
for United States and federal agency securities, its successor or
successors, and its nominee or nominees and any book-entry system
maintained by an exchange registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC Trust from
an Authorized Person or from a person reasonably believed by PFPC
Trust to be an Authorized Person.
(g) "PFPC TRUST" means PFPC Trust Company or a subsidiary or affiliate of
PFPC Trust Company.
(h) "SEC" means the Securities and Exchange Commission.
(i) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(j) "SHARES" mean the shares of beneficial interest of any class of any
Portfolio.
(k) "PROPERTY" means:
(i) any and all securities and other investment items which the
Fund may from time to time deposit on behalf of a Portfolio,
or cause to be deposited, with PFPC Trust or which PFPC Trust
may from time to time hold for the Fund on behalf of a
Portfolio;
(ii) all income in respect of any of such securities or other
investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the Fund on
behalf of a Portfolio, which are received by PFPC Trust from
time to time, from or on behalf of a Portfolio.
(l) "WRITTEN INSTRUCTIONS" mean written instructions signed by two
Authorized Persons and received by PFPC Trust. The instructions may
be delivered by hand,
2
<PAGE>
mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC Trust to provide custodian
services to each of the Portfolios in accordance with the terms set forth
in this Agreement and PFPC Trust accepts such appointment and agrees to
furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PFPC Trust with the following:
(a) certified or authenticated copies of the resolutions of the Fund's
Board of Trustees, approving the appointment of PFPC Trust or its
affiliates to provide services to each Portfolio and approving this
Agreement;
(b) a copy of the Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreements;
(d) a copy of the distribution agreement with respect to each class of
Shares representing an interest in a Portfolio;
(e) a copy of each Portfolio's administration agreement;
(f) copies of any shareholder servicing agreements made in respect of any
Portfolio; and
(g) copies (certified or authenticated, where applicable) of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH LAWS.
PFPC Trust undertakes to comply with material applicable requirements of
the Securities Laws and material laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties to
be performed by PFPC Trust hereunder. Except as specifically set forth
herein, PFPC Trust assumes no responsibility for such compliance by the
Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC Trust shall act only
upon
3
<PAGE>
Oral Instructions or Written Instructions.
(b) PFPC Trust shall be entitled to rely upon any Oral Instructions or
Written Instructions it receives from an Authorized Person (or from a
person reasonably believed by PFPC Trust to be an Authorized Person)
pursuant to this Agreement. PFPC Trust may assume that any Oral
Instructions or Written Instructions received hereunder are not in any
way inconsistent with the provisions of organizational documents of
the Fund or of any vote, resolution or proceeding of the Fund's Board
of Trustees or of the Fund's shareholders, unless and until PFPC Trust
receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Trust Written Instructions
confirming Oral Instructions (except where such Oral Instructions are
given by PFPC Trust or its affiliates) so that PFPC Trust receives the
Written Instructions by the close of business on the same day that
such Oral Instructions are received. The fact that such confirming
Written Instructions are not received by PFPC Trust shall in no way
invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral Instructions or
Written Instructions reasonably appear to have been received from an
Authorized Person, PFPC Trust shall incur no liability to the Fund in
acting upon such Oral Instructions or Written Instructions provided
that PFPC Trust's actions comply with the other provisions of this
Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC Trust is in doubt as to any action it
should or should not take, PFPC Trust may request directions or
advice, including Oral Instructions
4
<PAGE>
or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC Trust shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC
Trust may request advice at its own cost from such counsel of its own
choosing (who may be counsel for the Fund, the Fund's investment
advisor or PFPC Trust, at the option of PFPC Trust).
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC Trust
receives from the Fund, and the advice it receives from counsel, PFPC
Trust shall be entitled to rely upon and follow the advice of counsel.
In the event PFPC Trust so relies on the advice of counsel, PFPC Trust
remains liable for any action or omission on the part of PFPC Trust
which constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC Trust of any duties, obligations or
responsibilities set forth in this Agreement.
(d) PROTECTION OF PFPC TRUST. PFPC Trust shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral
Instructions or Written Instructions it receives from the Fund or from
counsel and which PFPC Trust believes, in good faith, to be consistent
with those directions, advice or Oral Instructions or Written
Instructions. Nothing in this section shall be construed so as to
impose an obligation upon PFPC Trust (i) to seek such directions,
advice or Oral Instructions or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral Instructions or
Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC
5
<PAGE>
Trust's properly taking or not taking such action. Nothing in this
subsection shall excuse PFPC Trust when an action or omission on the
part of PFPC Trust constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PFPC Trust of any duties,
obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund and any
Portfolio, which are in the possession or under the control of PFPC Trust,
shall be the property of the Fund. Such books and records shall be
prepared and maintained as required by the 1940 Act and other applicable
securities laws, rules and regulations. The Fund and Authorized Persons
shall have access to such books and records at all times during PFPC
Trust's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC Trust to the
Fund or to an authorized representative of the Fund, at the Fund's expense.
8. CONFIDENTIALITY. PFPC Trust agrees to keep confidential all records of the
Fund and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in
writing, by the Fund. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC Trust may be
exposed to civil or criminal contempt proceedings or when PFPC Trust is
required to divulge such information or records to duly constituted
authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC Trust shall cooperate with the Fund's
independent public accountants and shall take all reasonable action to make
any requested information available to such accountants as reasonably
requested by the Fund.
6
<PAGE>
10. DISASTER RECOVERY. PFPC Trust shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment
failures, PFPC Trust shall, at no additional expense to the Fund, take
reasonable steps to minimize service interruptions. PFPC Trust shall have
no liability with respect to the loss of data or service interruptions
caused by equipment failure provided such loss or interruption is not
caused by PFPC Trust's own willful misfeasance, bad faith, gross negligence
or reckless disregard of its duties or obligations under this Agreement.
11. YEAR 2000 READINESS DISCLOSURE. PFPC Trust (a) has reviewed its business
and operations as they relate to the services provided hereunder, (b) has
developed or is developing a program to remediate or replace computer
applications and systems, and (c) has developed a testing plan to test the
remediation or replacement of computer applications/systems, in each case,
to address on a timely basis the risk that certain computer
applications/systems used by PFPC Trust may be unable to recognize and
perform date sensitive functions involving dates prior to, including and
after December 31, 1999, including dates such as February 29, 2000 (the
"Year 2000 Challenge"). To the best of PFPC Trust's knowledge and belief,
the reasonably foreseeable consequences of the Year 2000 Challenge will not
adversely effect PFPC Trust's ability to perform its duties and obligations
under this Agreement.
12. COMPENSATION. As compensation for custody services rendered by PFPC Trust
during the term of this Agreement, the Fund, on behalf of each of the
Portfolios, will pay to PFPC Trust a fee or fees as may be agreed to in
writing from time to time by the Fund
7
<PAGE>
and PFPC Trust.
13. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to
indemnify and hold harmless PFPC Trust from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state or foreign
securities or blue sky laws, and amendments thereto, and expenses,
including (without limitation) attorneys' fees and disbursements), arising
directly or indirectly from any action or omission to act which PFPC Trust
takes (i) in connection with providing its service hereunder, (ii) at the
request or on the direction of or in reliance on the advice of the Fund or
(iii) upon Oral Instructions or Written Instructions. PFPC Trust shall not
be indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC Trust's own willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties under this Agreement.
Any amounts payable by the Fund hereunder shall be satisfied only against
the relevant Portfolio's assets and not against the assets of any other
investment portfolio of the Fund.
14. RESPONSIBILITY OF PFPC TRUST.
(a) PFPC Trust shall be under no duty to take any action on behalf of the
Fund or any Portfolio except as specifically set forth herein or as
may be specifically agreed to by PFPC Trust in writing. PFPC Trust
shall be obligated to exercise care and diligence in the performance
of its duties hereunder, to act in good faith and to use its best
efforts, within reasonable limits, in performing services provided for
under this Agreement. PFPC Trust shall be liable for any damages
arising out of PFPC Trust's failure to perform its duties under this
Agreement to the extent such damages arise out of PFPC Trust's willful
misfeasance, bad faith, gross
8
<PAGE>
negligence or reckless disregard of its duties under this Agreement.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC Trust shall not be under any duty or
obligation to inquire into and shall not be liable for (i) the
validity or invalidity or authority or lack thereof of any Oral
Instruction or Written Instruction, notice or other instrument which
PFPC Trust reasonably believes to be genuine; or (ii) subject to
section 10, delays, errors, loss of data or other losses occurring by
reason of circumstances beyond PFPC Trust's control, including acts of
civil or military authority, national emergencies, fire, flood,
catastrophe, acts of God, insurrection, war, riots or failure of the
mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC Trust nor its affiliates shall be liable to the Fund or to any
Portfolio for any consequential, special or indirect losses or damages
which the Fund may incur or suffer, whether or not the likelihood of
such losses or damages was known by PFPC Trust or its affiliates.
15. DESCRIPTION OF SERVICES.
(a) DELIVERY OF THE PROPERTY. The Fund will deliver or arrange for
delivery to PFPC Trust, all the Property owned by the Portfolios,
including cash received as a result of the distribution of Shares,
during the term of this Agreement. PFPC Trust will not be responsible
for such property until actual receipt.
(b) RECEIPT AND DISBURSEMENT OF MONEY. PFPC Trust, acting upon Written
Instructions, shall open and maintain separate accounts in the Fund's
name using all cash received from or for the account of the Fund,
subject to the terms of this
9
<PAGE>
Agreement. In addition, upon Written Instructions, PFPC Trust shall
open separate custodial accounts for each Portfolio of the Fund
(collectively, the "Accounts") and shall hold in the Accounts all cash
received from or for the Accounts of the Fund specifically designated
to each Portfolio.
PFPC Trust shall make cash payments from or for the Accounts of a
Portfolio only for:
(i) purchases of securities in the name of a Portfolio, PFPC
Trust, PFPC Trust's nominee or a sub-custodian or nominee
thereof as provided in sub-section (j) and for which PFPC
Trust has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) purchase or redemption of Shares delivered to PFPC Trust;
(iii) payment of, subject to Written Instructions, interest, taxes,
administration, accounting, distribution, advisory, management
fees or similar expenses which are to be borne by a Portfolio;
(iv) payment to, subject to receipt of Written Instructions, a
Portfolio's transfer agent, as agent for the shareholders, of
an amount equal to the amount of dividends and distributions
stated in the Written Instructions to be distributed in cash
by the transfer agent to shareholders, or, in lieu of paying a
Portfolio's transfer agent, PFPC Trust may arrange for the
direct payment of cash dividends and distributions to
shareholders in accordance with procedures mutually agreed
upon from time to time by and among the Fund, on behalf of a
Portfolio, PFPC Trust and a Portfolio's transfer agent.
(v) payments, upon receipt of Written Instructions, in connection
with the conversion, exchange or surrender of securities owned
or subscribed to by a Portfolio and held by or delivered to
PFPC Trust;
(vi) payments of the amounts of dividends received with respect to
securities sold short;
(vii) payments made to a sub-custodian pursuant to provisions in
sub-section (c) of this Section; and
(viii) other payments, upon Written Instructions.
PFPC Trust is hereby authorized to endorse and collect all checks, drafts
or other orders
10
<PAGE>
for the payment of money received as custodian for the Accounts.
(c) RECEIPT OF SECURITIES; SUBCUSTODIANS.
(i) PFPC Trust shall hold all securities received by it for the
Accounts in a separate account that physically segregates such
securities from those of any other persons, firms or
corporations, except for securities held in a Book-Entry
System. All such securities shall be held or disposed of only
upon Written Instructions of the Fund pursuant to the terms of
this Agreement. PFPC Trust shall have no power or authority
to assign, hypothecate, pledge or otherwise dispose of any
such securities or investment, except upon the express terms
of this Agreement or upon Written Instructions authorizing the
transaction. In no case may any member of the Fund's Board of
Trustees, or any officer, employee or agent of the Fund
withdraw any securities.
At PFPC Trust's own expense and for its own convenience, PFPC
Trust may enter into sub-custodian agreements with other banks
or trust companies to perform duties described in this
sub-section (c) with respect to domestic assets. Such bank or
trust company shall have an aggregate capital, surplus and
undivided profits, according to its last published report, of
at least one million dollars ($1,000,000), if it is a
subsidiary or affiliate of PFPC Trust, or at least twenty
million dollars ($20,000,000) if such bank or trust company is
not a subsidiary or affiliate of PFPC Trust. In addition,
such bank or trust company must be qualified to act as
custodian and agree to comply with the relevant provisions of
applicable rules and regulations. Any such arrangement will
not be entered into without prior written notice to the Fund
(or as otherwise provided in the 1940 Act).
In addition, PFPC Trust may enter into arrangements with
sub-custodians with respect to services regarding foreign
assets. Any such arrangement will be entered into with prior
written notice to the Fund (or as otherwise provided in the
1940 Act).
PFPC Trust shall remain responsible for the performance of all
of its duties as described in this Agreement and shall hold
the Fund and each Portfolio harmless from its own acts or
omissions, under the standards of care provided for herein, or
the acts and omissions of any sub-custodian chosen by PFPC
Trust under the terms of this sub-section (c).
(d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral
Instructions or Written Instructions and not otherwise, PFPC Trust,
directly or through the use of the Book-Entry System, shall:
11
<PAGE>
(i) deliver any securities held for a Portfolio against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be designated in
such Oral Instructions or Written Instructions, proxies,
consents, authorizations, and any other instruments whereby
the authority of a Portfolio as owner of any securities may be
exercised;
(iii) deliver any securities to the issuer thereof, or its agent,
when such securities are called, redeemed, retired or
otherwise become payable at the option of the holder; provided
that, in any such case, the cash or other consideration is to
be delivered to PFPC Trust;
(iv) deliver any securities held for a Portfolio against receipt of
other securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, tender offer,
merger, consolidation or recapitalization of any corporation,
or the exercise of any conversion privilege;
(v) deliver any securities held for a Portfolio to any protective
committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it to
evidence such delivery;
(vi) make such transfer or exchanges of the assets of the
Portfolios and take such other steps as shall be stated in
said Oral Instructions or Written Instructions to be for the
purpose of effectuating a duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Fund or any Portfolio;
(vii) release securities belonging to a Portfolio to any bank or
trust company for the purpose of a pledge or hypothecation to
secure any loan incurred by the Fund on behalf of that
Portfolio; provided, however, that securities shall be
released only upon payment to PFPC Trust of the monies
borrowed, except that in cases where additional collateral is
required to secure a borrowing already made subject to proper
prior authorization, further securities may be released for
that purpose; and repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon surrender
of the note or notes evidencing the loan;
(viii) release and deliver securities owned by a Portfolio in
connection with any repurchase agreement entered into on
behalf of that Portfolio, but only on receipt of payment
therefor; and pay out moneys of the Portfolio in connection
with such repurchase agreements, but only upon the delivery of
the securities;
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<PAGE>
(ix) release and deliver or exchange securities owned by a
Portfolio in connection with any conversion of such
securities, pursuant to their terms, into other securities;
(x) release and deliver securities to a broker in connection with
the broker's custody of margin collateral relating to futures
and options transactions;
(xi) release and deliver securities owned by a Portfolio for the
purpose of redeeming in kind shares of that Portfolio upon
delivery thereof to PFPC Trust; and
(xii) release and deliver or exchange securities owned by a
Portfolio for other purposes.
PFPC Trust must also receive a certified resolution describing
the nature of the corporate purpose and the name and address
of the person(s) to whom delivery shall be made when such
action is pursuant to sub-paragraph d(xii).
(c) USE OF BOOK-ENTRY SYSTEM. PFPC Trust is authorized and instructed, on
a continuous basis, to deposit in the Book-Entry System all securities
belonging to the Portfolios eligible for deposit therein and to
utilize the Book-Entry System to the extent possible in connection
with settlements of purchases and sales of securities by the
Portfolios, and deliveries and returns of securities loaned, subject
to repurchase agreements or used as collateral in connection with
borrowings. PFPC Trust shall continue to perform such duties until it
receives Written Instructions or Oral Instructions authorizing
contrary actions.
PFPC Trust shall administer the Book-Entry System as follows:
(i) With respect to securities of each Portfolio which are
maintained in the Book-Entry System, the records of PFPC Trust
shall identify by Book-Entry or otherwise those securities
belonging to each Portfolio.
(i) Assets of each Portfolio deposited in the Book-Entry System
will at all times be segregated from any assets and cash
controlled by PFPC Trust in other than a fiduciary or
custodian capacity but may be commingled with other assets
held in such capacities. PFPC Trust and its sub-custodian, if
13
<PAGE>
any, will pay out money only upon receipt of securities and
will deliver securities only upon the receipt of money.
(iii) All books and records maintained by PFPC Trust which relate to
the Fund's participation in the Book-Entry System will at all
times during PFPC Trust's regular business hours be open to
the inspection of Authorized Persons, and PFPC Trust will
furnish to the Fund all information in respect of the services
rendered as it may require.
PFPC Trust will provide the Fund with such reports on its own system
of internal control as the Fund may reasonably request from time to
time.
(f) REGISTRATION OF SECURITIES. All Securities held for a Portfolio which
are issued or issuable only in bearer form, except such securities
held in the Book-Entry System, shall be held by PFPC Trust in bearer
form; all other securities held for a Portfolio may be registered in
the name of the Fund on behalf of that Portfolio, PFPC Trust, the
Book-Entry System, a sub-custodian, or any duly appointed nominee of
the Fund, PFPC Trust, Book-Entry System or sub-custodian. The Fund
reserves the right to instruct PFPC Trust as to the method of
registration and safekeeping of the securities of the Fund. The Fund
agrees to furnish to PFPC Trust appropriate instruments to enable PFPC
Trust to hold or deliver in proper form for transfer, or to register
in the name of its nominee or in the name of the Book-Entry System or
in the name of another appropriate entity, any securities which it may
hold for the Accounts and which may from time to time be registered in
the name of the Fund on behalf of a Portfolio.
(g) VOTING AND OTHER ACTION. Neither PFPC Trust nor its nominee shall
vote any of the securities held pursuant to this Agreement by or for
the account of a Portfolio, except in accordance with Written
Instructions. PFPC Trust, directly or through the use of the
Book-Entry System, shall execute in blank and promptly
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deliver all notices, proxies and proxy soliciting materials received
by PFPC Trust as custodian of the Property to the registered holder of
such securities. If the registered holder is not the Fund on behalf
of a Portfolio, then Written Instructions or Oral Instructions must
designate the person who owns such securities.
(h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of contrary
Written Instructions, PFPC Trust is authorized to take the following
actions:
(i) COLLECTION OF INCOME AND OTHER PAYMENTS.
(A) collect and receive for the account of each Portfolio,
all income, dividends, distributions, coupons, option
premiums, other payments and similar items, included or
to be included in the Property, and, in addition,
promptly advise each Portfolio of such receipt and
credit such income, as collected, to each Portfolio's
custodian account;
(B) endorse and deposit for collection, in the name of the
Fund, checks, drafts, or other orders for the payment
of money;
(C) receive and hold for the account of each Portfolio all
securities received as a distribution on the
Portfolio's securities as a result of a stock dividend,
share split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of
rights or similar securities issued with respect to any
securities belonging to a Portfolio and held by PFPC
Trust hereunder;
(D) present for payment and collect the amount payable upon
all securities which may mature or be, on a mandatory
basis, called, redeemed, or retired, or otherwise
become payable on the date such securities become
payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and the endorsement for
collection of checks, drafts, and other negotiable
instruments.
(ii) MISCELLANEOUS TRANSACTIONS.
(A) PFPC Trust is authorized to deliver or cause to be
delivered
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Property against payment or other consideration or
written receipt therefor in the following cases:
(1) for examination by a broker or dealer selling for
the account of a Portfolio in accordance with
street delivery custom;
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3) for transfer of securities into the name of the
Fund on behalf of a Portfolio or PFPC Trust or a
sub-custodian or a nominee of one of the
foregoing, or for exchange of securities for a
different number of bonds, certificates, or
other evidence, representing the same aggregate
face amount or number of units bearing the same
interest rate, maturity date and call provisions,
if any; provided that, in any such case, the new
securities are to be delivered to PFPC Trust.
(B) unless and until PFPC Trust receives Oral Instructions
or Written Instructions to the contrary, PFPC Trust
shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the account
of each Portfolio;
(2) collect interest and cash dividends received, with
notice to the Fund, to the account of each
Portfolio;
(3) hold for the account of each Portfolio all stock
dividends, rights and similar securities issued
with respect to any securities held by PFPC Trust;
and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required by the
Internal Revenue Code or the Income Tax
Regulations of the United States Treasury
Department or under the laws of any state now or
hereafter in effect, inserting the Fund's name, on
behalf of a Portfolio, on such certificate as the
owner of the securities covered thereby, to the
extent it may lawfully do so.
(i) SEGREGATED ACCOUNTS.
(i) PFPC Trust shall upon receipt of Written Instructions or Oral
Instructions establish and maintain segregated accounts on its
records for and on
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<PAGE>
behalf of each Portfolio. Such accounts may be used to
transfer cash and securities, including securities in the
Book-Entry System:
(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option exchange,
providing such procedures comply with the 1940 Act and
any releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies;
and
(B) upon receipt of Written Instructions, for other
corporate purposes.
(ii) PFPC Trust shall arrange for the establishment of IRA
custodian accounts for such shareholders holding Shares
through IRA accounts, in accordance with the Fund's
prospectuses, the Internal Revenue Code of 1986, as amended
(including regulations promulgated thereunder), and with such
other procedures as are mutually agreed upon from time to time
by and among the Fund, on behalf of a Portfolio, PFPC Trust
and a Portfolio's transfer agent.
(j) PURCHASES OF SECURITIES. PFPC Trust shall settle purchased securities
upon receipt of Oral Instructions or Written Instructions that
specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
(vii) the name of the person from whom or the broker through whom
the purchase was made. PFPC Trust shall upon receipt of
securities purchased by or for a Portfolio pay out of the
moneys held for the account of the Portfolio the total amount
payable to the person from whom or the broker through whom the
purchase was made, provided that the same conforms to the
total amount payable as set forth in such Oral Instructions or
Written Instructions.
(k) SALES OF SECURITIES. PFPC Trust shall settle sold securities upon
receipt of Oral
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<PAGE>
Instructions or Written Instructions that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom the
sale was made;
(vii) the location to which the security must be delivered and
delivery deadline, if any; and
(viii) the Portfolio involved.
PFPC Trust shall deliver the securities upon receipt of the total amount
payable to the Portfolio upon such sale, provided that the total amount
payable is the same as was set forth in the Oral Instructions or Written
Instructions. Notwithstanding the other provisions thereof, PFPC Trust may
accept payment in such form as shall be satisfactory to it, and may deliver
securities and arrange for payment in accordance with the customs
prevailing among dealers in securities.
(l) REPORTS; PROXY MATERIALS.
(i) PFPC Trust shall furnish to the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the account of each portfolio, listing each
portfolio security belonging to each Portfolio with the
adjusted average cost of each issue and the market
value at the end of such month and stating the cash
account of each Portfolio including disbursements;
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<PAGE>
(C) the reports required to be furnished to the Fund
pursuant to Rule 17f-4 of the 1940 Act; and
(D) such other information as may be agreed upon from time
to time between the Fund and PFPC Trust.
(ii) PFPC Trust shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion or
similar communication received by it as custodian of the
Property. PFPC Trust shall be under no other obligation to
inform the Fund as to such actions or events.
(m) COLLECTIONS. All collections of monies or other property in respect,
or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by PFPC Trust) shall be at the sole risk of the
Fund. If payment is not received by PFPC Trust within a reasonable
time after proper demands have been made, PFPC Trust shall notify the
Fund in writing, including copies of all demand letters, any written
responses and memoranda of all oral responses and shall await
instructions from the Fund. PFPC Trust shall not be obliged to take
legal action for collection unless and until reasonably indemnified to
its satisfaction. PFPC Trust shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not
collected in due course and shall provide the Fund with periodic
status reports of such income collected after a reasonable time.
16. DURATION AND TERMINATION. This Agreement shall continue until terminated
by the Fund or PFPC Trust on sixty (60) days' prior written notice to the
other party. In the event this Agreement is terminated (pending appointment
of a successor to PFPC Trust or vote of the shareholders of the Fund to
dissolve or to function without a custodian of its cash, securities or
other property), PFPC Trust shall not deliver cash, securities or
19
<PAGE>
other property of the Portfolios to the Fund. It may deliver them to a
bank or trust company of PFPC Trust's choice, having an aggregate capital,
surplus and undivided profits, as shown by its last published report, of
not less than twenty million dollars ($20,000,000), as a custodian for the
Fund to be held under terms similar to those of this Agreement. PFPC Trust
shall not be required to make any delivery or payment of assets upon
termination until full payment shall have been made to PFPC Trust of all of
its fees, compensation, costs and expenses. PFPC Trust shall have a
security interest in and shall have a right of setoff against the Property
as security for the payment of such fees, compensation, costs and expenses.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex
or facsimile sending device. Notice shall be addressed (a) if to PFPC
Trust at 200 Stevens Drive, Lester, Pennsylvania 19113, Attention: Sam
Sparhawk; (b) if to the Fund, at 501 South Fourth Street, Louisville,
Kentucky 40202, Attn: Ann F. Cody, with a copy to Vedder, Price, Kaufman &
Kammholz, 222 North LaSalle Street, Suite 2500, Chicago, Illinois 60601,
Attn: James A. Arpaia; or (c) if to neither of the foregoing, at such other
address as shall have been given by like notice to the sender of any such
notice or other communication by the other party. If notice is sent by
confirming telegram, cable, telex or facsimile sending device, it shall be
deemed to have been given immediately. If notice is sent by first-class
mail, it shall be deemed to have been given five days after it has been
mailed. If notice is sent by messenger, it shall be deemed to have been
given on the day it is delivered.
18. AMENDMENTS. This Agreement, or any term hereof, may be changed or waived
only by a written amendment, signed by the party against whom enforcement
of such change or
20
<PAGE>
waiver is sought.
19. DELEGATION; ASSIGNMENT. PFPC Trust may assign its rights and delegate its
duties hereunder to any affiliate of PFPC Trust or of PNC Bank Corp.,
provided that (i) PFPC Trust gives the Fund 30 days' prior written notice
of such assignment or delegation; (ii) the assignee or delegate agrees to
comply with the relevant provision of the 1940 Act; and (iii) PFPC Trust
and such assignee or delegate promptly provide such information as the Fund
may reasonably request, and respond to such questions as the Fund may
reasonably ask, relative to the assignment or delegation (including,
without limitation, the capabilities of the assignee or delegate).
20. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
21. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their
agreement, if any, with respect to delegated duties or Oral
Instructions.
(b) CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
21
<PAGE>
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract made
in Delaware and governed by Delaware law, without regard to principles
of conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by
such party.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC TRUST COMPANY
By:________________
Title:_____________
HILLIARD LYONS RESEARCH TRUST
By:________________
Title:_____________
23
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of ___________, 1999, is Exhibit A to that certain
Custodian Services Agreement dated as of ____________, 1999 between PFPC Trust
Company and Hilliard Lyons Research Trust.
PORTFOLIOS
Senbanc Fund
24
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
25
<PAGE>
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of ______________, 1999 by and between PFPC
INC., a Delaware corporation ("PFPC"), and HILLIARD LYONS RESEARCH TRUST, a
Delaware business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to its
investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time by mutual agreement
of the parties hereto (each a "Portfolio"), and PFPC wishes to furnish such
services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 ACT" means the Securities Act of 1933, as amended.
(b) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(c) "AUTHORIZED PERSON" means any officer of the Fund and any other person
duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed
on the Authorized Persons Appendix attached hereto and made a part
hereof or any amendment thereto as may be
1
<PAGE>
received by PFPC. An Authorized Person's scope of authority may be
limited by the Fund by setting forth such limitation in the Authorized
Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be
an Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(h) "SHARES" mean the shares of beneficial interest of any class of any
Portfolio.
(i) "WRITTEN INSTRUCTIONS" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile
sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent to
each of the Portfolios in accordance with the terms set forth in this
Agreement. PFPC accepts such appointment and agrees to furnish such
services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of the Fund's
Board of Trustees, approving the appointment of PFPC or its affiliates
to provide services to each Portfolio and approving this Agreement;
(b) A copy of the Fund's most recent effective registration statement;
(c) A copy of the advisory agreement or agreements with respect to each
Portfolio;
2
<PAGE>
(d) A copy of the distribution agreement with respect to each class of
Shares representing an interest in a Portfolio;
(e) A copy of each Portfolio's administration agreements if PFPC is not
providing the Portfolio with such services;
(f) Copies of any shareholder servicing agreements made in respect of any
Portfolio; and
(g) Copies (certified or authenticated where applicable) of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with all
applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to
the duties to be performed by PFPC hereunder. Except as specifically set
forth herein, PFPC assumes no responsibility for such compliance by the
Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to
this Agreement. PFPC may assume that any Oral Instruction or Written
Instruction received hereunder is not in any way inconsistent with the
provisions of organizational documents or this Agreement or of any
vote, resolution or proceeding of the Fund's Board of Trustees or of
the Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
3
<PAGE>
(c) The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions (except where such Oral Instructions are given by
PFPC or its affiliates) so that PFPC receives the Written Instructions
by the close of business on the same day that such Oral Instructions
are received. The fact that such confirming Written Instructions are
not received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the Oral
Instructions. Where Oral Instructions or Written Instructions
reasonably appear to have been received from an Authorized Person,
PFPC shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions
comply with the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question of
law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Fund, the Fund's investment advisor or
PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC receives from
the Fund, and the advice it receives from counsel, PFPC may rely upon
and follow the advice of counsel. In the event PFPC so relies on the
advice of counsel, PFPC remains liable for any
4
<PAGE>
action or omission on the part of PFPC which constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this
Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Fund or from counsel and
which PFPC believes, in good faith, to be consistent with those
directions, advice or Oral Instructions or Written Instructions.
Nothing in this section shall be construed so as to impose an
obligation upon PFPC (i) to seek such directions, advice or Oral
Instructions or Written Instructions, or (ii) to act in accordance
with such directions, advice or Oral Instructions or Written
Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PFPC's properly taking or not
taking such action. Nothing in this subsection shall excuse PFPC when
an action or omission on the part of PFPC constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this
Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund and any
Portfolios, which are in the possession or under the control of PFPC, shall
be the property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities
laws, rules and regulations. The Fund and Authorized Persons shall have
access to such books and records at all times during PFPC's normal business
hours. Upon the reasonable request of the Fund, copies of any such books
and
5
<PAGE>
records shall be provided by PFPC to the Fund or to an Authorized Person,
at the Fund's expense.
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the Fund
and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in
writing, by the Fund. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to
civil or criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the
expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent
appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect
to the loss of data or service interruptions caused by equipment failure,
provided such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
duties or obligations under this Agreement.
11. YEAR 2000 READINESS DISCLOSURE. PFPC (a) has reviewed its business and
operations as they relate to the services provided hereunder, (b) has
developed or is developing a
6
<PAGE>
program to remediate or replace computer applications and systems, and (c)
has developed a testing plan to test the remediation or replacement of
computer applications/systems, in each case, to address on a timely basis
the risk that certain computer applications/systems used by PFPC may be
unable to recognize and perform properly date sensitive functions involving
dates prior to, including and after December 31, 1999, including dates such
as February 29, 2000 (the "Year 2000 Challenge"). To the best of PFPC's
knowledge and belief, the reasonably foreseeable consequences of the Year
2000 Challenge will not adversely effect PFPC's ability to perform its
duties and obligations under this Agreement.
12. COMPENSATION. As compensation for services rendered by PFPC during the
term of this Agreement, the Fund, on behalf of each Portfolio, will pay to
PFPC a fee or fees as may be agreed to from time to time in writing by the
Fund and PFPC.
13. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to
indemnify and hold harmless PFPC and its affiliates from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the Securities Laws and any state and
foreign securities and blue sky laws, and amendments thereto), and
expenses, including (without limitation) attorneys' fees and disbursements,
arising directly or indirectly from (i) any action or omission to act which
PFPC takes (a) at the request or on the direction of or in reliance on the
advice of the Fund or (b) upon Oral Instructions or Written Instructions or
(ii) the acceptance, processing and/or negotiation of checks or other
methods utilized for the purchase of Shares. Neither PFPC, nor any of its
affiliates, shall be indemnified against any liability (or any expenses
incident to such
7
<PAGE>
liability) arising out of PFPC's or its affiliates' own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
duties and obligations under this Agreement, provided that in the absence
of a finding to the contrary the acceptance, processing and/or negotiation
of a fraudulent payment for the purchase of Shares shall be presumed not to
have been the result of PFPC's or its affiliates' own willful misfeasance,
bad faith, gross negligence or reckless disregard of such duties and
obligations. Any amounts payable by the Fund hereunder shall be satisfied
only against the relevant Portfolio's assets and not against the assets of
any other investment portfolio of the Fund.
14. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the Fund
except as specifically set forth herein or as may be specifically
agreed to by PFPC in writing. PFPC shall be obligated to exercise
care and diligence in the performance of its duties hereunder, to act
in good faith and to use its best efforts, within reasonable limits,
in performing services provided for under this Agreement. PFPC shall
be liable for any damages arising out of PFPC's failure to perform its
duties under this Agreement to the extent such damages arise out of
PFPC's willful misfeasance, bad faith, gross negligence or reckless
disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC, shall not be liable for losses
beyond its control, provided that PFPC has acted in accordance with
the standard of care set forth above; and (ii) PFPC shall not be under
any duty or obligation to inquire into and shall not be
8
<PAGE>
liable for (A) the validity or invalidity or authority or lack thereof
of any Oral Instruction or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B)
subject to Section 10, delays or errors or loss of data occurring by
reason of circumstances beyond PFPC's control, including acts of civil
or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure
of the mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund
may incur or suffer by or as a consequence of PFPC's or its
affiliates' performance of the services provided hereunder, whether or
not the likelihood of such losses or damages was known by PFPC or its
affiliates.
15. DESCRIPTION OF SERVICES.
(a) SERVICES PROVIDED BY PFPC ON AN ONGOING BASIS, IF APPLICABLE.
(i) Calculate 12b-1 payments;
(ii) Maintain proper shareholder registrations;
(iii) Review new applications and correspond with shareholders to
complete or correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in conjunction with
proxy solicitations;
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<PAGE>
(vi) Countersign share certificates;
(vii) Prepare and mail to shareholders confirmation of activity;
(viii) Provide toll-free lines for direct shareholder use, plus
customer liaison staff for on-line inquiry response;
(ix) Mail duplicate confirmations to broker-dealers of their
clients' activity, whether executed through the
broker-dealer or directly with PFPC;
(x) Provide periodic shareholder lists and statistics to the
clients;
(xi) Provide detailed data for underwriter/broker confirmations;
(xii) Prepare periodic mailing of year-end tax and statement
information;
(xiii) Notify on a timely basis the investment advisor, accounting
agent, and custodian of fund activity; and
(xiv) Perform other participating broker-dealer shareholder
services as may be agreed upon from time to time.
(b) SERVICES PROVIDED BY PFPC UNDER ORAL INSTRUCTIONS OR WRITTEN
INSTRUCTIONS.
(i) Accept and post daily Fund purchases and redemptions;
(ii) Accept, post and perform shareholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies; and
(v) Issue and cancel certificates (when requested in writing by
the shareholder).
(c) PURCHASE OF SHARES. PFPC shall issue and credit an account of an
investor, in the manner described in the Fund's prospectus, once it
receives:
(i) A purchase order;
(ii) Proper information to establish a shareholder account; and
(iii) Confirmation of receipt or crediting of funds for such order
to the Fund's
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<PAGE>
custodian.
(d) REDEMPTION OF SHARES. PFPC shall redeem Shares only if that function
is properly authorized by the certificate of incorporation or
resolution of the Fund's Board of Trustees. Shares shall be redeemed
and payment therefor shall be made in accordance with the Fund's
prospectus, when the recordholder tenders Shares in proper form and
directs the method of redemption. If Shares are received in proper
form, Shares shall be redeemed before the funds are provided to PFPC
from the Fund's custodian (the "Custodian"). If the recordholder has
not directed that redemption proceeds be wired, when the Custodian
provides PFPC with funds, the redemption check shall be sent to and
made payable to the recordholder, unless:
(i) the surrendered certificate is drawn to the order of an
assignee or holder and transfer authorization is signed by
the recordholder; or
(ii) Transfer authorizations are signed by the recordholder when
Shares are held in book-entry form.
When a broker-dealer notifies PFPC of a redemption desired by a
customer, and the Custodian provides PFPC with funds, PFPC shall
prepare and send the redemption check to the broker-dealer and made
payable to the broker-dealer on behalf of its customer.
(e) DIVIDENDS AND DISTRIBUTIONS. Upon receipt of a resolution of the
Fund's Board of Trustees authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and
distributions declared by the Fund in Shares, or, upon shareholder
election, pay such dividends and distributions in cash, if
11
<PAGE>
provided for in the Fund's prospectus. Such issuance or payment, as
well as payments upon redemption as described above, shall be made
after deduction and payment of the required amount of funds to be
withheld in accordance with any applicable tax laws or other laws,
rules or regulations. PFPC shall mail to the Fund's shareholders such
tax forms and other information, or permissible substitute notice,
relating to dividends and distributions paid by the Fund as are
required to be filed and mailed by applicable law, rule or regulation.
PFPC shall prepare, maintain and file with the IRS and other
appropriate taxing authorities reports relating to all dividends above
a stipulated amount paid by the Fund to its shareholders as required
by tax or other law, rule or regulation.
(f) SHAREHOLDER ACCOUNT SERVICES.
(i) PFPC may arrange, in accordance with the prospectus, for
issuance of Shares obtained through:
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks and
applications.
(ii) PFPC may arrange, in accordance with the prospectus, for a
shareholder's:
- Exchange of Shares for shares of another fund with
which the Fund has exchange privileges;
- Automatic redemption from an account where that
shareholder participates in a automatic redemption plan;
and/or
- Redemption of Shares from an account with a
checkwriting privilege.
(g) COMMUNICATIONS TO SHAREHOLDERS. Upon timely Written Instructions,
PFPC shall mail all communications by the Fund to its shareholders,
including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of each Portfolio's
Shares;
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<PAGE>
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Proxy material; and
(vi) Tax form information.
In addition, PFPC will receive and tabulate the proxy cards for the
meetings of the Fund's shareholders.
(h) RECORDS. PFPC shall maintain records of the accounts for each
shareholder showing the following information:
(i) Name, address and United States Tax Identification or Social
Security number;
(ii) Number and class of Shares held and number and class of
Shares for which certificates, if any, have been issued,
including certificate numbers and denominations;
(iii) Historical information regarding the account of each
shareholder, including dividends and distributions paid and
the date and price for all transactions on a shareholder's
account;
(iv) Any stop or restraining order placed against a shareholder's
account;
(v) Any correspondence relating to the current maintenance of a
shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the transfer agent to
perform any calculations contemplated or required by this
Agreement.
(i) LOST OR STOLEN CERTIFICATES. PFPC shall place a stop notice against
any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or
alleged misappropriation. A new certificate shall be registered and
issued only upon:
(i) The shareholder's pledge of a lost instrument bond or such
other
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<PAGE>
appropriate indemnity bond issued by a surety company
approved by PFPC; and
(ii) Completion of a release and indemnification agreement signed
by the shareholder to protect PFPC and its affiliates.
(j) SHAREHOLDER INSPECTION OF STOCK RECORDS. Upon a request from any Fund
shareholder to inspect stock records, PFPC will notify the Fund and
the Fund will issue instructions granting or denying each such
request. Unless PFPC has acted contrary to the Fund's instructions,
the Fund agrees and does hereby release PFPC from any liability for
refusal of permission for a particular shareholder to inspect the
Fund's stock records.
(k) WITHDRAWAL OF SHARES AND CANCELLATION OF CERTIFICATES.
Upon receipt of Written Instructions, PFPC shall cancel outstanding
certificates surrendered by the Fund to reduce the total amount of
outstanding shares by the number of shares surrendered by the Fund.
16. DURATION AND TERMINATION. This Agreement shall continue until terminated
by the Fund or by PFPC on sixty (60) days' prior written notice to the
other party.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex
or facsimile sending device. Notices shall be addressed (a) if to PFPC, at
400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at
501 South Fourth Street, Louisville, Kentucky 40202 Attn: Ann F. Cody with
a copy to Vedder, Price, Kaufman & Kammholz, Attn: James A. Arpaia, 222
North LaSalle Street, Suite 2500, Chicago, IL 60601 or (c) if to neither of
the foregoing, at such other address as shall have been given by like
notice to the sender of
14
<PAGE>
any such notice or other communication by the other party. If notice is
sent by confirming telegram, cable, telex or facsimile sending device, it
shall be deemed to have been given immediately. If notice is sent by
first-class mail, it shall be deemed to have been given three days after it
has been mailed. If notice is sent by messenger, it shall be deemed to
have been given on the day it is delivered.
18. AMENDMENTS. This Agreement, or any term thereof, may be changed or waived
only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its duties
hereunder to any majority-owned direct or indirect subsidiary of PFPC or
PNC Bank Corp., provided that (i) PFPC gives the Fund 30 days prior written
notice of such assignment or delegation, (ii) the assignee or delegate
agrees to comply with the relevant provision of the 1940 Act, and (iii)
PFPC and such assignee or delegate promptly provide such information as the
Fund may reasonably request, and respond to such questions as the Fund may
reasonably ask, relative to the assignment or delegation (including,
without limitation, the capabilities of the assignee or delegate).
20. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
21. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. MISCELLANEOUS.
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<PAGE>
(a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided
that the parties may embody in one or more separate documents their
agreement, if any, with respect to delegated duties and Oral
Instructions.
(b) CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) GOVERNING LAW. This Agreement shall be deemed to be a contract made
in Delaware and governed by Delaware law, without regard to principles
of conflicts of law.
(d) PARTIAL INVALIDITY. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) FACSIMILE SIGNATURES. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by
such party.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:________________________
Title:_____________________
HILLIARD LYONS RESEARCH TRUST
By:________________________
Title:_____________________
17
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of _________________, 1999, is Exhibit A to that
certain Transfer Agency Services Agreement dated as of ___________, 1999 between
PFPC Inc. and Hilliard Lyons Research Trust.
PORTFOLIOS
Senbanc Fund
18
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
__________________________________ ______________________________
__________________________________ ______________________________
__________________________________ ______________________________
__________________________________ ______________________________
__________________________________ ______________________________
__________________________________ ______________________________
__________________________________ ______________________________
__________________________________ ______________________________
19
<PAGE>
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of , 1999 by and between HILLIARD
LYONS RESEARCH TRUST, a Delaware business trust (the "Fund"), and PFPC INC., a
Delaware corporation ("PFPC"), which is an indirect wholly owned subsidiary of
PFPC Worldwide, Inc.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to provide administration and
accounting services to its investment portfolios listed on Exhibit A attached
hereto and made a part hereof, as such Exhibit A may be amended from time to
time by mutual agreement of the parties hereto (each a "Portfolio"), and PFPC
wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give Oral
Instructions and Written Instructions on behalf of the Fund and listed
on the Authorized Persons Appendix attached hereto and made a part
hereof or any amendment thereto as may be received by PFPC. An
Authorized Person's scope of authority may be limited by the Fund by
setting forth such limitation in the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
<PAGE>
(e) "Oral Instructions" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be
an Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(h) "Shares" means the shares of beneficial interest of any class of any
Portfolio.
(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile
sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to provide administration and
accounting services to the each of the Portfolios, in accordance with the
terms set forth in this Agreement. PFPC accepts such appointment and
agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the Fund's
Board of Trustees, approving the appointment of PFPC or its affiliates
to provide services to each Portfolio and approving this Agreement;
(b) a copy of Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each class of
Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreements with respect to a
Portfolio;
(f) a copy of any shareholder servicing agreement made in respect of any
Portfolio; and
(g) copies (certified or authenticated, where applicable) of any and all
amendments or supplements to the foregoing.
2
<PAGE>
4. COMPLIANCE WITH RULES AND REGULATIONS.
PFPC undertakes to comply with all applicable requirements of the
Securities Laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed
by PFPC hereunder. Except as specifically set forth herein, PFPC assumes
no responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral Instructions and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral Instructions and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to
this Agreement. PFPC may assume that any Oral Instruction or Written
Instruction received hereunder is not in any way inconsistent with the
provisions of organizational documents or this Agreement or of any
vote, resolution or proceeding of the Fund's Board of Trustees or of
the Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions (except where such Oral Instructions are given by
PFPC or its affiliates) so that PFPC receives the Written Instructions
by the close of business on the same day that such Oral Instructions
are received. The fact that such confirming Written Instructions are
not received by PFPC shall in no way invalidate the transactions or
enforceability of the transactions authorized by the
3
<PAGE>
Oral Instructions. Where Oral Instructions or Written Instructions
reasonably appear to have been received from an Authorized Person,
PFPC shall incur no liability to the Fund in acting upon such Oral
Instructions or Written Instructions provided that PFPC's actions
comply with the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including Oral
Instructions or Written Instructions, from the Fund.
(b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question of
law pertaining to any action it should or should not take, PFPC may
request advice at its own cost from such counsel of its own choosing
(who may be counsel for the Fund, the Fund's investment advisor or
PFPC, at the option of PFPC).
(c) CONFLICTING ADVICE. In the event of a conflict between directions,
advice or Oral Instructions or Written Instructions PFPC receives from
the Fund and the advice PFPC receives from counsel, PFPC may rely upon
and follow the advice of counsel. In the event PFPC so relies on the
advice of counsel, PFPC remains liable for any action or omission on
the part of PFPC which constitutes willful misfeasance, bad faith,
gross negligence or reckless disregard by PFPC of any duties,
obligations or responsibilities set forth in this Agreement.
(d) PROTECTION OF PFPC. PFPC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral Instructions
or Written Instructions it receives from the Fund or from counsel and
which PFPC believes, in good faith, to be consistent with those
directions, advice and Oral Instructions
4
<PAGE>
or Written Instructions. Nothing in this section shall be construed
so as to impose an obligation upon PFPC (i) to seek such directions,
advice or Oral Instructions or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral Instructions or
Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or
not taking such action. Nothing in this subsection shall excuse PFPC
when an action or omission on the part of PFPC constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this
Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Fund and the Portfolios which
are in the possession or under the control of PFPC shall be the
property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities
laws, rules and regulations. The Fund and Authorized Persons shall
have access to such books and records at all times during PFPC's
normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the
Fund or to an Authorized Person, at the Fund's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to each Portfolio's books
of account;
(ii) records of each Portfolio's securities transactions; and
(iii) all other books and records as PFPC is required to maintain
pursuant to Rule 31a-1 of the 1940 Act in connection with the
services provided hereunder.
5
<PAGE>
8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the Fund
and information relating to the Fund and its shareholders, unless the
release of such records or information is otherwise consented to, in
writing, by the Fund. The Fund agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to
civil or criminal contempt proceedings or when required to divulge such
information or records to duly constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal
year summaries, and other audit-related schedules with respect to each
Portfolio. PFPC shall take all reasonable action in the performance of its
duties under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their opinion, as
required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect with
appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent
appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect
to the loss of data or service interruptions caused by equipment failure,
provided such loss or interruption is not caused by PFPC's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its
duties or obligations under this Agreement.
11. YEAR 2000 READINESS DISCLOSURE. PFPC (a) has reviewed its business and
operations as they relate to the services provided hereunder, (b) has
developed or is developing a program to remediate or replace computer
applications and systems, and (c) has
6
<PAGE>
developed a testing plan to test the remediation or replacement of computer
applications/systems, in each case, to address on a timely basis the risk
that certain computer applications/systems used by PFPC may be unable to
recognize and perform properly date sensitive functions involving dates
prior to, including and after December 31, 1999, including dates such as
February 29, 2000 (the "Year 2000 Challenge"). To the best of PFPC's
knowledge and belief, the reasonably foreseeable consequences of the Year
2000 Challenge will not adversely effect PFPC's ability to perform its
duties and obligations under this Agreement.
12. COMPENSATION. As compensation for services rendered by PFPC during the
term of this Agreement, the Fund, on behalf of each Portfolio, will pay to
PFPC a fee or fees as may be agreed to from time to time in writing by the
Fund and PFPC.
13. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to
indemnify and hold harmless PFPC and its affiliates from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the Securities Laws and any state or
foreign securities and blue sky laws, and amendments thereto), and
expenses, including (without limitation) attorneys' fees and disbursements
arising directly or indirectly from any action or omission to act which
PFPC takes (i) at the request or on the direction of or in reliance on the
advice of the Fund or (ii) upon Oral Instructions or Written Instructions.
Neither PFPC, nor any of its affiliates, shall be indemnified against any
liability (or any expenses incident to such liability) arising out of
PFPC's or its affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement. Any amounts payable by the Fund hereunder shall be satisfied
only against the relevant Portfolio's assets and not against the
7
<PAGE>
assets of any other investment portfolio of the Fund.
14. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the Fund
or any Portfolio except as specifically set forth herein or as may be
specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within
reasonable limits, in performing services provided for under this
Agreement. PFPC shall be liable for any damages arising out of PFPC's
failure to perform its duties under this Agreement to the extent such
damages arise out of PFPC's willful misfeasance, bad faith, gross
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses
beyond its control, provided that PFPC has acted in accordance with
the standard of care set forth above; and (ii) PFPC shall not be
liable for (A) the validity or invalidity or authority or lack thereof
of any Oral Instruction or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B)
subject to Section 10, delays or errors or loss of data occurring by
reason of circumstances beyond PFPC's control, including acts of civil
or military authority, national emergencies, labor difficulties, fire,
flood, catastrophe, acts of God, insurrection, war, riots or failure
of the mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its
8
<PAGE>
affiliates shall be liable to the Fund or to any Portfolio for any
consequential, special or indirect losses or damages which the Fund or
any Portfolio may incur or suffer by or as a consequence of PFPC's or
any affiliates' performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by
PFPC or its affiliates.
15. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following accounting services with respect to each
Portfolio:
(i) Journalize investment, capital share and income and expense
activities;
(ii) Verify investment buy/sell trade tickets when received from the
investment advisor for a Portfolio (the "Advisor") and transmit
trades to each Portfolio's custodian (the "Custodian") for proper
settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of each Portfolio with the
Custodian, and provide the Advisor with the beginning cash balance
available for investment purposes;
(vi) Update the cash availability throughout the day as required by the
Advisor;
(vii) Post to and prepare the Statement of Assets and Liabilities and
the Statement of Operations;
(viii) Calculate various contractual expenses (E.G., advisory and custody
fees);
(ix) Monitor the expense accruals and notify an officer of the Fund of
any proposed adjustments;
(x) Control all disbursements and authorize such disbursements upon
Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii) Obtain security market quotes from independent pricing services
approved by the
9
<PAGE>
Advisor, or if such quotes are unavailable, then obtain such
prices from the Advisor, and in either case calculate the market
value of each Portfolio's Investments;
(xiv) Transmit or mail a copy of the daily portfolio valuation to the
Advisor;
(xv) Compute net asset value;
(xvi) As appropriate, compute yields, total return, expense ratios,
portfolio turnover rate, and, if required, portfolio average
dollar-weighted maturity; and
(xvii) Prepare a monthly financial statement, which will include the
following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
16. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following administration services with respect to
each Portfolio:
(i) Prepare quarterly broker security transactions summaries;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Portfolio and Fund statistical
data as requested on an ongoing basis;
(iv) Prepare for execution and file the Fund's Federal and state tax
returns;
(v) Monitor each Portfolio's status as a regulated investment
company under Sub-chapter M of the Internal Revenue Code of 1986,
as amended;
(vi) Prepare and file with the SEC the Fund's annual, semi-annual, and
quarterly shareholder reports;
(vii) Prepare, coordinate with the Fund's counsel and file with the SEC
Post-Effective Amendments to the Fund's Registration Statement,
prepare reports to the SEC including, the preparation and filing of
(i) semi-annual reports on Form N-SAR and (ii) Notice pursuant to
Rule 24F-2;
(viii) Assist in the preparation of notices of Annual or Special Meetings
of Shareholders and Proxy materials relating to such meetings;
(ix) Assist in obtaining the fidelity bond and directors' and
officers'/errors and omissions insurance policies for the Fund in
accordance with the requirements of Rule 17g-1 and 17d-1(d)(7)
under the 1940 Act as such bond and policies are approved by the
Fund's Board of Trustees;
(x) Monitor the Fund's assets to assure adequate fidelity bond coverage
is maintained;
(xi) Draft agendas, resolutions and materials for quarterly and special
Board meetings;
(xii) Coordinate the preparation, assembly and mailing of Board
materials;
(xiii) Maintain the Fund's corporate calendar to assure compliance with
various filing deadlines;
(xiv) Coordinate contractual relationships and communications between
the Fund and its contractual service providers; and
10
<PAGE>
(xv) Monitor the Fund's compliance with the amounts and conditions of
each state qualification.
17. DURATION AND TERMINATION. This Agreement shall continue until terminated
by the Fund or by PFPC on sixty (60) days' prior written notice to the
other party.
18. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex
or facsimile sending device. If notice is sent by confirming telegram,
cable, telex or facsimile sending device, it shall be deemed to have been
given immediately. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it has been mailed. If notice
is sent by messenger, it shall be deemed to have been given on the day it
is delivered. Notices shall be addressed (a) if to PFPC, at 400 Bellevue
Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at 501 South
Fourth Street, Louisville, Kentucky 40202, Attn: Ann F. Cody with a copy
to Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street, Suite 2500,
Chicago, Illinois 60601, Attn: James A. Arpaia ; or (c) if to neither of
the foregoing, at such other address as shall have been provided by like
notice to the sender of any such notice or other communication by the other
party.
20. AMENDMENTS. This Agreement, or any term thereof, may be changed or waived
only by written amendment, signed by the party against whom enforcement of
such change or waiver is sought.
21. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its duties
hereunder to any majority-owned direct or indirect subsidiary of PFPC or
PNC Bank Corp., provided that (i) PFPC gives the Fund 30 days prior written
notice of such assignment or delegation, (ii) the assignee or delegate
agrees to comply with the relevant provision of
11
<PAGE>
the 1940 Act, and (iii) PFPC and such assignee or delegate promptly provide
such information as the Fund may reasonably request, and respond to such
questions as the Fund may reasonably ask, relative to the assignment or
delegation (including, without limitation, the capabilities of the assignee
or delegate).
22. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
23. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
24. MISCELLANEOUS.
(a) This Agreement embodies the entire agreement and understanding between
the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, provided that the parties may
embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions. The captions in
this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. Notwithstanding any provision
hereof, the services of PFPC are not, nor shall they be, construed as
constituting legal advice or the provision of legal services for or on
behalf of the Fund or any other person.
(b) This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware law, without regard to principles of conflicts of
law.
(c) If any provision of this Agreement shall be held or made invalid by a
court
12
<PAGE>
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(d) The facsimile signature of any party to this Agreement shall
constitute the valid and binding execution hereof by such party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By:___________________
Title:________________
HILLIARD LYONS RESEARCH TRUST
By:___________________
Title:________________
13
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of _______________, 1999, is Exhibit A to that
certain Administration and Accounting Services Agreement dated as of
_____________, 1999 between PFPC Inc. and Hilliard Lyons Research Trust.
PORTFOLIOS
Senbanc Fund
14
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
_____________________________ _____________________________
15
<PAGE>
[VEDDER PRICE LETTERHEAD]
June 2, 1999
Hilliard Lyons Research Trust
Hilliard Lyons Center
501 South 4th Street
Louisville, Kentucky 40202
Ladies and Gentlemen:
Reference is made to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A under the Securities Act of 1933 being filed by Hilliard
Lyons Research Trust (the "Trust") in connection with the proposed public
offering of an indefinite number of shares of beneficial interest, no par value
("Shares"), in the Senbanc Fund (the "Fund"), the sole initial series of the
Trust.
We have acted as counsel to the Trust since its inception, and in such
capacity are familiar with the Trust's organization and have counseled the Trust
regarding various legal matters. We have examined such Trust records and other
documents and certificates as we have considered necessary or appropriate for
the purposes of this opinion. In our examination of such materials, we have
assumed the genuineness of all signatures and the conformity to original
documents of all copies submitted to us.
Based upon the foregoing and assuming that the Trust's Declaration of Trust
dated January 12, 1999, as amended by the Written Instrument Amending the
Declaration of Trust dated May 4, 1999, and the By-Laws of the Trust adopted May
4, 1999, are presently in full force and effect and have not been amended in any
respect except as provided in the above-referenced documents and that the
resolutions adopted by the Board of Trustees of the Trust on May 4, 1999
relating to organizational matters, securities matters and the issuance of
shares are presently in full force and effect and have not been amended in any
respect, we advise you and opine that (a) the Trust is a duly formed and validly
existing business trust under the laws of the State of Delaware (commonly known
as a Delaware business trust) and is authorized to issue an unlimited number of
Shares in the Fund; and (b) upon issuance of the Shares for cash at net asset
value plus any applicable front-end sales charges and receipt by the Trust of a
purchase price not less than the net asset value thereof, the Shares of the Fund
will be legally issued and outstanding, fully paid and nonassessable.
This opinion is solely for the benefit of the Trust, the Trust's Board of
Trustees and the Trust's officers and may not be relied upon by any other person
without our prior written consent. We hereby consent to the use of this opinion
in connection with said Pre-Effective Amendment.
Very truly yours,
/s/ VEDDER, PRICE, KAUFMAN & KAMMHOLZ
JAA/DAS
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Statement of Additional Information and to the use of our report dated
June 2, 1999, in Pre-Effective Amendment No. 1 to the Registration Statement
(Form N-1A) (No. 333-75851) of Hilliard Lyons Research Trust.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
June 14, 1999
<PAGE>
________ __, 1999
Board of Trustees
Hilliard Lyons Research Trust
501 South Fourth Street
Louisville, Kentucky 40202
Re: Subscription for Shares of the Senbanc Fund (the "Fund")
--------------------------------------------------------
Dear Trustees:
J.J.B. Hilliard, W.L. Lyons, Inc. offers to purchase from Hilliard Lyons
Research Trust, 10,000 shares of beneficial interest of the Fund at a price of
$10.00 per share for an aggregate purchase price of $100,000 cash, all such
shares to be validly issued, fully paid and non-assessable upon issuance of such
shares and receipt of said payment by the Fund.
These shares are not being purchased with any present intent of
distributing or reselling the same to the public, and will be held for
investment by J.J.B. Hilliard, W.L. Lyons, Inc.
Sincerely,
J.J.B. HILLIARD, W.L. LYONS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
ACCEPTED AND AGREED this _____
day of __________________, 1999.
HILLIARD LYONS RESEARCH TRUST
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
DISTRIBUTION PLAN
The plan set forth below (the "Distribution Plan") is the written plan
contemplated by Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for HILLIARD LYONS RESEARCH TRUST, a Delaware
business trust (the "Trust"), on behalf of the SENBANC FUND, a series of the
Trust (the "Fund"). This Distribution Plan describes the material terms and
conditions under which assets of the Fund may be used in connection with
financing distribution related activities with respect to the shares of
beneficial interest of the Fund (the "Shares").
The Trust has entered into a distribution agreement (the "Distribution
Agreement") with Provident Distributors, Inc. (the "Distributor"), pursuant to
which the Distributor acts as the principal underwriter of the Shares and
provides services for the Fund. The Distributor intends to enter into a selling
agreement with J.J.B. Hilliard, W.L. Lyons, Inc. ("Hilliard Lyons"), and may
enter into other selling agreements ("Selling Agreements") with brokers, dealers
and other financial intermediaries (collectively with Hilliard Lyons,
"Intermediaries") in order to implement the Distribution Agreement.
1. The Trust, out of the Fund's assets, hereby is authorized to pay the
Distributor a distribution fee to compensate the Distributor and the
Intermediaries for activities performed by the Distributor and the
Intermediaries which are primarily intended to result in the sale of Shares
("distribution related activities"). Such distribution related activities
include without limitation: (a) 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 such Distributor and
Intermediaries in connection with the offering of Shares; (b) preparing,
printing or otherwise manufacturing and distributing any other literature or
materials of any nature used by such Distributor and Intermediaries in
connection with promoting, distributing or offering the Shares; (c) advertising,
promoting and selling Shares to broker-dealers, banks and the public;
(d) distribution related overhead and the provision of information programs and
shareholder services intended to enhance the attractiveness of investing in the
Fund; (e) incurring initial outlay expenses in connection with compensating
Intermediaries for (i) selling Shares and (ii) 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 (f) acting as agent for the Trust in connection with
implementing this Distribution Plan.
2. The Trust will pay a distribution fee out of the Fund's assets to the
Distributor an annual amount not to exceed the lesser of (i) 0.60% of the Fund's
average daily net asset value during such year attributable to the Shares sold
on or after the date on which this Distribution Plan is first implemented and
(ii) the actual amount of distribution related expenses incurred by the
Distributor with respect to the Shares.
<PAGE>
3. Payments pursuant to this Distribution Plan shall not be made more
often than monthly upon receipt by the Trust of a separate written expense
report setting forth the expenses qualifying for such reimbursement and the
purposes thereof.
4. In the event that amounts payable hereunder with respect to the Shares
do not fully reimburse the Distributor for its actual distribution related
expenses incurred in any quarter, those amounts can be carried forward from one
quarter to the next, but no expenses may be carried over from year to year.
5. The Trust and the Distributor shall prepare separate written reports
for the Shares and shall submit such reports to the Trust's Board of Trustees on
a quarterly basis summarizing all payments made by them pursuant to this
Distribution Plan, and the agreements contemplated hereby, the purposes for
which such payments were made and such other information as the Board of
Trustees or the Disinterested Trustees (defined below) may reasonably request
from time to time, and the Board of Trustees shall review such reports and other
information.
6. This Distribution Plan shall become effective upon its approval by a
majority of the Board of Trustees, including a majority of the Trustees who are
not "interested persons" of the Trust and who have no direct or indirect
financial interest in the operation of this Distribution Plan or in any
agreements related to this Plan (the "Disinterested Trustees"), cast in person
at a meeting called for the purpose of voting on this Distribution Plan.
7. This Distribution Plan shall continue in effect beyond the first
anniversary of its adoption by the Board of Trustees of the Trust only so long
as (a) its continuation is approved at least annually in the manner set forth in
Paragraph 6 above or by a "majority of the outstanding voting securities" (as
such phrase is defined in the 1940 Act) of the Fund, and (b) the selection and
nomination of those trustees of the Trust who are not "interested persons" of
the Trust are committed to the discretion of such trustees.
8. This Distribution Plan may be terminated without penalty at any time
by a majority of the Disinterested Trustees or by a "majority of the outstanding
voting securities" of the Fund.
9. This Distribution Plan may not be amended to increase materially the
maximum amounts permitted to be expended hereunder except with the approval of a
"majority of the outstanding voting securities" of the Fund. All material
amendments to this Distribution Plan must in any event be approved by a majority
of the Board of Trustees, including a majority of the Disinterested Trustees,
cast in person at a meeting called for such purpose. Amendments required to
conform this Distribution Plan to changes in the Rule or to other changes in the
1940 Act or the rules and regulations thereunder shall not be deemed to be
material amendments.
2
