As filed with the Securities and Exchange Commission on May 19, 1999
Securities Act File No. 333-*****
Investment Company Act File No. 811-09345
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ___ [ ]
Post-Effective Amendment No. ___ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. ___ [ ]
(Check appropriate box or boxes.)
WOODLAWN FUNDS TRUST
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(Exact Name of Registrant as Specified in Charter)
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27802-0069
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (252) 972-9922
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C. Frank Watson, III
105 North Washington Street, P.O. Drawer 69, Rocky Mount, NC 27802-0069
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(Name and Address of Agent for Service)
With copies to:
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Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401
Approximate Date of Proposed Public Offering: As soon as practicable after the
Effective Date of this Amendment
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It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date)pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph(a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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WOODLAWN FUNDS TRUST
Contents of Registration Statement
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This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
The Internet Index Funds
-Part A - Prospectus
-Part B - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibit Index
Exhibits
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PART A
======
Internet 100 Fund Cusip Number ______________
Internet 100-EQ Fund Cusip Number ___________
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THE INTERNET INDEX FUNDS
Series of the
Woodlawn Funds Trust
No Load Funds
- --------------------------------------------------------------------------------
PROSPECTUS
July 31, 1999
The Internet Index Funds (the "Funds") seek capital appreciation. In seeking to
achieve their objectives, the Funds will invest in equity securities of the 100
largest Internet companies domiciled in the United States, securities which
comprise the Internet 100 Index.
Investment Advisor
------------------
Internet 100 Advisors
285 Main Street
Arlington, Virginia 11234
1-800-525-3863
The Securities and Exchange Commission has not approved or disapproved the
securities being offered by this prospectus or determined whether this
prospectus is accurate and complete. Any representation to the contrary is a
criminal offense.
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TABLE OF CONTENTS
Page
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INTRODUCTION.................................................................2
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What Is an Index?......................................................2
What Is the Internet 100 Index?........................................2
THE FUNDS....................................................................3
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Investment Objective...................................................3
Principal Investment Strategies........................................3
Principal Risks of Investing in the Funds..............................4
Fees and Expenses of the Funds.........................................5
MANAGEMENT OF THE FUNDS......................................................6
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The Investment Advisor.................................................6
The Administrator......................................................6
The Transfer Agent.....................................................7
The Distributor........................................................7
INVESTING IN THE FUNDS.......................................................7
- ----------------------
Minimum Investment.....................................................7
Purchase and Redemption Price..........................................7
Purchasing Shares......................................................8
Redeeming Your Shares.................................................10
OTHER IMPORTANT INVESTOR INFORMATION........................................12
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Dividends, Distributions and Taxes....................................12
Financial Highlights..................................................12
Additional Information........................................Back Cover
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INTRODUCTION
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WHAT IS AN INDEX?
A securities market index is an unmanaged group of securities that can be used
as a proxy for the overall market, or for a specific sector of the market. The
overall performance of the index is often utilized as a standard to measure
investment performance. An index (or "passively managed") fund tries to match,
as closely as possible, the performance of an established target index. The fund
does this by holding all, or a representative sample, of the securities that
comprise the index. An index fund has operating expenses and transaction costs,
while a market index does not. Therefore, an index fund, while expected to track
its target index closely, typically will be unable to match the performance of
the index exactly.
WHAT IS THE INTERNET 100 INDEX?
The Internet 100 Index is a modified cap weighted index comprised of the 100
largest publicly traded companies whose primary source of revenues are related
to Internet dependent sources.
The Internet 100 Index has been developed by Internet 100 Advisors (the
"Advisor"), investment advisor to the Funds. The Internet 100 Index is comprised
of the 100 largest "pure play" Internet stocks in terms of market
capitalization. Internet 100 Advisors defines a `pure play' Internet company as
a company that derives the majority of its sales and customers from products
and/or services directly tied to the Internet. The Internet 100 Index provides
broad exposure to the major sectors of the Internet, including:
o E-commerce
o Content portals
o Access providers
o Financial services
o Software
o Internet services
As this rapidly growing and changing segment of the economy develops, additional
companies and sectors may become relevant. The overriding criteria for inclusion
in the Internet 100 Index will be that a company is primarily dependent on the
Internet for the majority of its revenues. The Internet 100 Index is a modified
cap weighted index, in order to provide a representation of each company's
relative contribution to the overall Internet industry and its common stocks.
2
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THE FUNDS
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INVESTMENT OBJECTIVE
The Internet Index Funds seek capital appreciation. In seeking to achieve their
objectives, the Funds will invest in equity securities of the 100 largest
Internet companies domiciled in the United States, securities which comprise the
Internet 100 Index.
PRINCIPAL INVESTMENT STRATEGIES
The Internet Index Funds attempt to provide the investor with broad investment
exposure to the Internet sector of our economy. Each Fund will pursue its
investment objective by investing in the equity securities of the Internet 100
Index, [an index comprising the largest 100 Internet companies domiciled in the
United States,] with a variation as to how each equity is weighted in its
particular portfolio. By varying the composition of the two funds, the investor
is presented with two distinct investment strategies for participating in the
potential growth of Internet companies:
o The Internet 100 Fund will hold stocks in the approximate percentage of
each company's representation in the Internet 100 Index.
o The Internet 100-EQ Fund will hold approximately equal percentages of the
stocks comprising the Internet 100 Index, without regard to market
capitalization of the underlying company.
Each Fund intends to remain fully invested at all times, investing approximately
95% of its net assets in equity securities. Approximately 5% will be left in
cash to meet liquidity needs of each Fund. As shareholder purchases are received
by the Funds, the percentage of cash will increase temporarily, while those
funds await investment in additional equity securities.
Modified Capitalization Weighting (Internet 100 Index Fund)
- -----------------------------------------------------------
Under a strict capitalization weighting methodology, constituent weights are
determined by multiplying the price of each stock by the number of shares
outstanding. Applying such a weighting scheme to the 100 largest Internet stocks
would create a non-diversified, top-heavy index, given the current market values
of a handful of the largest stocks compared to the rest of the market. For
example, as of April 30, 1999, the combined value of America Online, Yahoo,
Amazon.com and EBAY would account for approximately 60% of the weight of the
entire index.
In order to enhance diversification, while still retaining the general
characteristics of a capitalization weighted index, the Internet 100 Index
utilizes a modified capitalization weighting methodology. This proprietary
weighting scheme scales down the weights of the largest index components and
redistributes the difference among the rest of the Index components. The end
result is a more diversified portfolio in which larger companies generally
receive a greater weight than smaller companies at the start of each rebalancing
period.
Given the evolving nature of the Internet. It is expected that the weighting
formula used by the Internet 100 Index will change in the future.
Equal Weighting (Internet 100-EQ Fund)
- --------------------------------------
As the name implies, this methodology equally weights each component of the
index. For a 100 stock index, this means that each stock receives approximately
a 1% weighting at the beginning of each rebalancing period. The Internet 100
Index will be reviewed on a continuous basis. Internet 100 Advisors will add or
delete a company from the Internet 100 Index if that company falls inside or
outside the criteria of the Index for a period of 30 days or more.
3
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PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund is subject to investment risks, including the possible
loss of the principal amount invested, and there can be no assurance that the
Fund will be successful in meeting its objective. The following sections
describe some of the risks involved with portfolio investments of the Fund.
Market Risk: Market risk refers to the risk related to investments in securities
in general and the daily fluctuations in the securities markets. Each Fund's
performance per share will change daily based on many factors, including
fluctuation in interest rates, the quality of the instruments in the Funds'
investment portfolio, national and international economic conditions, and
general market conditions. Many Internet stocks have risen in value based on
anticipation of future earnings and company viability. If these future
projections prove to be overly optimistic, shares of the corresponding companies
may experience significant declines in market value.
Index Fund Risk: The Funds are not actively managed through traditional methods
of stock selection and invest in stocks included in the Internet 100 Index, or
in a representative sample of those stocks, regardless of their investment
merit. The Funds may be unable to modify their investment strategies to respond
to changes in the economy and may be particularly susceptible to a general
decline in internet-related stocks.
Concentration Risk: Due to the concentration of the Funds in the Internet
sector, shares of the Funds are also subject to risks other than those
associated with an investment in a broad market portfolio. Because of their
concentration in Internet stocks, shares of the Funds do not represent a
complete investment program.
Sector Risk: The Internet is a small and highly volatile sub-sector of the
economy that is still in its infancy. As such, shares of the Funds may fluctuate
in value to a much greater degree than the overall market. Internet companies
are subject to intense competition, obsolescence, and rapid rate of change,
which can lead to above average fluctuations in the market value of these
companies. Many Internet companies are currently operating at a loss and it is
not known when or if they will turn profitable. It is probable that some of
today's public Internet companies will not exist in the future.
Derivatives: The Funds may invest in derivative investments (e.g., futures and
options). Derivatives are financial instruments whose values are derived, in
part, from prices of other securities, indices, or rates. The use of derivatives
is a highly specialized activity and there can be no guarantee that their use
will increase the return of the Funds, or protect their assets from declining in
value. In fact, the use of derivatives may reduce the value of your investment
if they are not timed correctly or are executed under adverse market conditions.
Year 2000: Like other mutual funds, the Funds and the service providers for the
Funds rely heavily on the reasonably consistent operation of their computer
systems. Many software programs and certain computer hardware in use today
cannot properly process information after December 31, 1999, because of the
method by which dates are encoded and calculated in such programs and hardware.
This problem, commonly referred to as the "Year 2000 Issue," could, among other
things, negatively impact the processing of trades, the distribution of
securities, the pricing of securities and other investment-related and
settlement activities. The Trust is currently obtaining and assessing
information with respect to the actions that have been taken and the actions
that are planned to be taken by each of its service providers to prepare their
computer systems for the Year 2000. While the Trust expects that each of the
Funds' service providers will have adapted their computer systems to address the
Year 2000 Issue, there can be no assurance that this will be the case or that
the steps taken by the Trust will be sufficient to avoid any adverse impact to
the Funds.
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FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds:
Shareholder Fees for each Fund
(fees paid directly from your investment)
-----------------------------------------
Maximum sales charge (load)imposed on purchases
(as a percentage of the offering price).............. None
Redemption fee .......................................... None
Annual Fund Operating Expenses for each Fund
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees.....................................0.75%
Distribution and/or Service (12b-1) Fees............0.25%
Other Expenses......................................1.25%
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Total Annual Fund Operating Expenses.................2.25%*
Fee Waivers and/or Expense Reimbursement............(0.50%)
----
Net Expenses.........................................1.75%
====
* Since the Internet 100-EQ Fund and the Internet 100 Fund will
commence operations on July **, 1999, Other Expenses and Total
Annual Fund Operating Expenses for that Fund are based on amounts
estimated for the current fiscal year. The Advisor has entered
into a contractual agreement with the Fund under which it has
agreed to waive or reduce its fees and to assume other expenses
of the Fund, if necessary, in an amount that limits Total Fund
Operating Expenses (exclusive of interest, taxes, brokerage fees
and commissions, extraordinary expenses, and payments, if any,
under a Rule 12b-1 plan) to not more than 1.50% of the average
daily net assets of each Fund for the fiscal year to end ****,
2000. See "Expense Limitation Agreement" for more detailed
information.
Example. This Example shows you the expenses you may pay over time by investing
in either Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in these Funds versus other mutual
funds. The Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
- --------------------------------------- ---------------- ----------------
Period Invested 1 Year 3 Years
- --------------------------------------- ---------------- ----------------
Your Costs $178 $551
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5
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MANAGEMENET OF THE FUNDS
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THE INVESTMENT ADVISOR
Internet 100 Advisors, established as a Virginia corporation in 1999, is the
Funds' advisor. The Advisor is a new investment advisory firm, established for
the purpose of developing and monitoring the Internet 100 Index and the Internet
Index Funds. The Advisor's address is 285 Main Street, Arlington, Virginia
11234.
The Manager has not previously served as an investment manager to any other
registered investment company. However, the executives and members of the
investment advisory staff of the Advisor have extensive experience in other
capacities in managing investments for clients, including trusts, corporations,
foundations, charitable organizations, retirement plans, and individuals.
The Advisor's Compensation. As full compensation for the investment advisory
services provided to the Funds, each Fund pays the Advisor monthly compensation
based on that Fund's daily average net assets at the annual rate of 0.75%.
Expense Limitation Agreement. In the interest of limiting expenses of the Funds,
the Advisor has entered into an expense limitation agreement with the Trust,
with respect to each of the Funds ("Expense Limitation Agreement"), pursuant to
which the Advisor has agreed to waive or limit its fees and to assume other
expenses so that the total annual operating expenses of the Funds (other than
interest, taxes, brokerage commissions, other expenditures which are capitalized
in accordance with generally accepted accounting principles, and other
extraordinary expenses not incurred in the ordinary course of each Fund's
business, and amounts, if any, payable pursuant to a Rule 12b-1 Plan) are
limited to 1.50% of the average daily net assets of the Funds for the fiscal
year to end *****, 2000.
Each of the Funds may at a later date reimburse the Advisor for the management
fees waived or limited, and/or other expenses assumed and paid by the Advisor
pursuant to the Expense Limitation Agreement during any of the previous five (5)
fiscal years, provided that the particular Fund has reached a sufficient asset
size to permit such reimbursement to be made without causing the total annual
expense ratio of the particular Fund to exceed the percentage limits stated
above. Consequently, no reimbursement by a Fund will be made unless: (i) the
Fund's assets exceed $20 million; (ii) the Fund's total annual expense ratio is
less than the percentage stated above; and (iii) the payment of such
reimbursement has been approved by the Trust's Board of Trustees on a quarterly
basis.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor. Subject to seeking the most favorable net price and execution
available, the Advisor may also consider sales of shares of the Funds as a
factor in the selection of brokers and dealers.
THE ADMINISTRATOR
The Nottingham Company, Inc. (the "Administrator") assists the Trust in the
performance of its administrative responsibilities to each Fund, coordinates the
services of each vendor of services to the Funds, and provides the Funds with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Funds.
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THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and
dividend-disbursing agent for the Funds. As indicated later in the section of
this Prospectus, "Investing in the Fund," NCSS will handle your orders to
purchase and redeem shares of the Funds and will disburse dividends paid by the
Funds.
THE DISTRIBUTOR
Capital Investment Group, Inc. (the "Distributor") is the principal underwriter
and distributor of the Funds' shares and serves as each Fund's exclusive agent
for the distribution of Fund shares. The Distributor may sell the Funds' shares
to or through qualified securities dealers or others.
Distribution Plan. Each Fund has adopted a distribution plan in accordance with
Rule 12b-1 (the "Distribution Plan") under the Investment Company Act of 1940,
as amended ("1940 Act"). The Distribution Plan provides that each Fund will
annually pay the Distributor up to 0.25% of the average daily net assets of each
Fund's shares for activities primarily intended to result in the sale of those
shares or the servicing of those shares, including to compensate entities for
providing distribution and shareholder servicing with respect to the Funds'
shares (this compensation is commonly referred to as "12b-1 fees"). Because the
12b-1 fees are paid out of the Fund's assets on an on-going basis, these fees,
over time, will increase the cost of your investment and may cost you more than
paying other types of sales loads.
Other Expenses. In addition to the management fees and the 12b-1 fees, the Funds
pay all expenses not assumed by the Funds' Advisor, including, without
limitation: the fees and expenses of its independent auditors and of its legal
counsel; the costs of printing and mailing to shareholders annual and
semi-annual reports, proxy statements, prospectuses, statements of additional
information and supplements thereto; the costs of printing registration
statements; bank transaction charges and custodian's fees; any proxy solicitors'
fees and expenses; filing fees; any federal, state or local income or other
taxes; any interest; any membership fees of the Investment Company Institute and
similar organizations; fidelity bond and Trustees' liability insurance premiums;
and any extraordinary expenses, such as indemnification payments or damages
awarded in litigation or settlements made. All general Trust expenses are
allocated among and charged to the assets of each separate series of the Trust,
such as the Funds, on a basis that the Trustees deem fair and equitable, which
may be on the basis of relative net assets of each series or the nature of the
services performed and relative applicability to each series.
INVESTING IN THE FUNDS
----------------------
MINIMUM INVESTMENT
Shares of the Funds are sold and redeemed at net asset value. Shares may be
purchased by any account managed by the Advisor and any other institutional
investor or any broker-dealer authorized to sell shares of the Funds. The
minimum initial investment is $1,000 and the minimum additional investment is
$250 ($100 for those participating in the automatic investment plan.) The Funds
may, in the Advisor's sole discretion, accept certain accounts with less than
the minimum investment.
PURCHASE AND REDEMPTION PRICE
Determining the Funds' Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is received in good form. An order is considered to be in good form if it
includes a complete and accurate application and payment in full of the purchase
amount. Each Fund's net asset value per share is calculated by dividing the
value of the Fund's total assets, less liabilities (including Fund expenses,
which are accrued daily), by the total number of outstanding shares of that
Fund. The net asset value per share of each Fund is normally determined at the
time regular trading closes on the New York Stock Exchange (currently 4:00 p.m.
Eastern time, Monday through Friday), except on business holidays when the New
York Stock Exchange is closed.
7
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Other Matters. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The Funds
may suspend redemption, if permitted by the 1940 Act, for any period during
which the New York Stock Exchange is closed or during which trading is
restricted by the Securities Exchange Commission ("SEC") or if the SEC declares
that an emergency exists. Redemptions may also be suspended during other periods
permitted by the SEC for the protection of the Funds' shareholders.
Additionally, during drastic economic and market changes, telephone redemption
privileges may be difficult to implement. Also, if the Trustees determine that
it would be detrimental to the best interest of the Funds' remaining
shareholders to make payment in cash, the Funds may pay redemption proceeds in
whole or in part by a distribution in kind of readily marketable securities.
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Funds will charge a $20 fee or may
redeem shares of the Funds already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to the "Internet 100
Fund" or the "Internet 100-EQ Fund," to:
The Internet Index Funds
[Name of Fund]
c/o North Carolina Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Please remember to add a reference to the applicable Fund on your check to
ensure proper credit to your account.
The application must contain your social security number or Taxpayer
Identification Number ("TIN"). If you have applied for a social security number
or TIN at the time of completing your account application but you have not
received your number, please indicate this on the application. Taxes are not
withheld from distributions to U.S. investors if certain IRS requirements
regarding the TIN are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Funds at 1-800-773-3863, before wiring funds, to advise the Funds of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
8
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First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219 For credit to either:
The Internet 100 Fund
Account # 2000001******
OR
The Internet 100-EQ Fund
Account # 2000001******
For further credit to (shareholder's name and SS# or TIN#)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $250. Before adding funds by bank wire, please call the
Funds at 1-800-773-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub which is attached
to your fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Funds will automatically charge the checking account for the amount specified
($100 minimum), which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Funds.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust advised by the Advisor and offered for sale in the state in
which you reside. Shares may be exchanged for shares of any other series of the
Trust at the net asset value plus the percentage difference between that series'
sales charge and any sales charge, previously paid by you in connection with the
shares being exchanged. Prior to making an investment decision or giving us your
instructions to exchange shares, please read the prospectus for the series in
which you wish to invest.
The Advisor does not consider a pattern of frequent purchase and redemption
transactions to be in the best interest of the shareholders of the Funds. Such a
pattern may, at the discretion of the Advisor, be limited by the Funds' refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
9
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REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
The Internet Index Funds
[Name of Fund]
c/o North Carolina Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption requests should include:
(1) Your letter of instruction specifying the fund name, your account
number, and number of shares or the dollar amount to be redeemed.
This request must be signed by all registered shareholders in the
exact names in which they are registered;
(2) Any required signature guarantees (see "Signature Guarantees"
below); and
(3) Other supporting legal documents, if required in the case of
estates, trusts, guardianships, custodianships, corporations,
partnerships, pension or profit sharing plans, and other
organizations.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, a Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Funds will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Funds may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) The name of the Fund;
(2) Shareholder name and account number;
(3) Number of shares or dollar amount to be redeemed;
(4) Instructions for transmittal of redemption funds to the
shareholder; and
(5) Shareholder signature as it appears on the application then on
file with the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Redemption proceeds cannot be wired on days when
your bank is not open for business. You can change your redemption instructions
anytime you wish by filing a letter including your new redemption instructions
with the Fund. See "Signature Guarantees" below.
The Funds in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Funds $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Funds,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
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You may redeem shares, subject to the procedures outlined above, by calling the
Funds at 1-800-773-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Funds. Telephone redemption privileges authorize the Funds to act on
telephone instructions from any person representing himself or herself to be the
investor and reasonably believed by the Fund to be genuine. The Funds will
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine, and if it does not
follow such procedures, the Funds will be liable for any losses due to
fraudulent or unauthorized instructions. The Funds will not be liable for
following telephone instructions reasonably believed to be genuine.
Small Accounts. The Funds reserve the right to redeem involuntarily any account
having a net asset value of less than $1,000 (due to redemptions, exchanges, or
transfers, and not due to market action) upon 60-days' written notice. If the
shareholder brings his account net asset value up to at least $1,000 during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to federal income tax withholding.
Systematic Withdrawal Plan. A shareholder who owns shares of the Funds valued at
$2,500 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $250. Each month or quarter, as specified, the Funds will
automatically redeem sufficient shares from your account to meet the specified
withdrawal amount. The shareholder may establish this service whether dividends
and distributions are reinvested in shares of the Funds or paid in cash. Call or
write the Funds for an application form.
Signature Guarantees. To protect your account and the Funds from fraud,
signature guarantees are required to be sure that you are the person who has
authorized a change in registration or standing instructions for your account.
Signature guarantees are required for (1) change of registration requests; (2)
requests to establish or to change exchange privileges or telephone and bank
wire redemption service other than through your initial account application; and
(3) redemption requests in excess of $50,000. Signature guarantees are
acceptable from a member bank of the Federal Reserve System, a savings and loan
institution, credit union (if authorized under state law), registered
broker-dealer, securities exchange, or association clearing agency and must
appear on the written request for change of registration, establishment or
change in exchange privileges, or redemption request.
Redemptions in Kind. The Funds do not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future, which would, in the opinion of the Trustees,
make it undesirable for the Funds to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Funds. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Funds committed themselves to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Funds' net asset value at the beginning of such period.
11
<PAGE>
OTHER IMPORTANT INVESTMENT INFORMATION
--------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the SAI. Shareholders should rely their
own tax advisers for advice about the particular federal, state and local tax
consequences to them of investing in a Fund.
Each Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, may be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although a Fund will not
be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gain distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If a Fund declares a dividend in October, November or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Each year each shareholder will receive a statement detailing the
tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, each Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
FINANCIAL HIGHLIGHTS
Because the Internet Index Funds are new funds, there are no financial or
performance information included in this prospectus. Once the information
becomes available, you may request this information at no charge by calling the
Funds.
12
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
THE INTERNET INDEX FUNDS
No Load Funds
- --------------------------------------------------------------------------------
Additional information about the Funds is available in the Funds' Statement of
Additional Information, available free of charge upon request by contacting us:
By telephone: 1-800-773-3863
By mail: The Internet Index Funds
c/o North Carolina Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
Information about the Funds can also be reviewed and copied at the Securities
Exchange Commission's ("Commission") Public Reference Room in Washington, D.C.
Inquiries on the operations of the public reference room may be made by calling
the Commission at 1-800-SEC-0330. Reports and other information about the Funds
are available on the Commission's Internet site at http://www.sec.gov and copies
of this information may be obtained, upon payment of a duplicating fee, by
writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
Investment Company Act file number 811-09345
<PAGE>
PART B
======
THE INTERNET INDEX FUNDS
July 31, 1999
A Series of the
WOODLAWN FUNDS TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-800-525-3863
Table of Contents
INVESTMENT OBJECTIVES AND POLICIES..........................................B-1
INVESTMENT LIMITATIONS......................................................B-3
PORTFOLIO TRANSACTIONS......................................................B-4
NET ASSET VALUE.............................................................B-5
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..............................B-6
DESCRIPTION OF THE TRUST....................................................B-6
ADDITIONAL INFORMATION CONCERNING TAXES.....................................B-7
MANAGEMENT OF THE FUNDS.....................................................B-9
SPECIAL SHAREHOLDER SERVICES...............................................B-15
ADDITIONAL INFORMATION ON PERFORMANCE......................................B-16
APPENDIX A - DESCRIPTION OF RATINGS........................................B-19
This Statement of Additional Information (the "SAI") is meant to be read in
conjunction with the Prospectus, dated July 31, 1999, for the Internet 100 Fund
and the Internet 100-EQ Fund (collectively, the "Funds") and is incorporated by
reference in its entirety into the Prospectus. Because this SAI is not itself a
prospectus, no investment in shares of the Funds should be made solely upon the
information contained herein. Copies of the Funds' Prospectus may be obtained at
no charge by writing or calling the Funds at the address and phone number shown
above. Capitalized terms used but not defined herein have the same meanings as
in the Prospectus.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Funds were organized in 1999 as non-diversified, open-end management
companies. The following policies supplement the Funds' investment objectives
and policies as set forth in the Prospectus. Attached to this SAI is Appendix A,
which contains descriptions of the rating symbols used by Rating Agencies for
securities in which the Funds may invest.
Repurchase Agreements. Each Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to seven days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Funds will consider the creditworthiness of the vendor. If
the vendor fails to pay the agreed upon resale price on the delivery date, the
Fund will retain or attempt to dispose of the collateral. A Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Funds will not enter into any repurchase agreement which will
cause more than 10% of their net assets to be invested in repurchase agreements
which extend beyond seven days and other illiquid securities.
Money Market Instruments. Money market instruments may include U.S. Government
Securities or corporate debt securities (including those subject to repurchase
agreements), provided that they mature in thirteen months or less from the date
of acquisition and are otherwise eligible for purchase by the Funds. Money
market instruments also may include Banker's Acceptances and Certificates of
Deposit of domestic branches of U.S. banks, Commercial Paper and Variable Amount
Demand Master Notes ("Master Notes"). Banker's Acceptances are time drafts drawn
on and "accepted" by a bank. When a bank "accepts" such a time draft, it assumes
liability for its payment. When a Fund acquires a Banker's Acceptance the bank
which "accepted" the time draft is liable for payment of interest and principal
when due. The Banker's Acceptance carries the full faith and credit of such
bank. A Certificate of Deposit ("CD") is an unsecured interest-bearing debt
obligation of a bank. Commercial Paper is an unsecured, short-term debt
obligation of a bank, corporation or other borrower. Commercial Paper maturity
generally ranges from two to 270 days and is usually sold on a discounted basis
rather than as an interest-bearing instrument. The Funds will invest in
Commercial Paper only if it is rated one of the top two rating categories by
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Services
("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps ("D&P") or, if
not rated, of equivalent quality in the Advisor's opinion. Commercial Paper may
include Master Notes of the same quality. Master Notes are unsecured obligations
which are redeemable upon demand of the holder and which permit the investment
of fluctuating amounts at varying rates of interest. Master Notes are acquired
by the Funds only through the Master Note program of the Funds' custodian bank,
acting as administrator thereof. The Advisor will monitor, on a continuous
basis, the earnings power, cash flow and other liquidity ratios of the issuer of
a Master Note held by the Funds.
Illiquid Investments. Each Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of a Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of a Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Funds to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. If through a change in values, net
assets or other circumstances, a Fund were in a position where more than 10% of
its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity. The Funds may not purchase restricted
securities, which are securities that cannot be sold to the public without
registration under the federal securities laws.
Futures Contracts. A futures contract is a bilateral agreement to buy or sell a
security (or deliver a cash settlement price, in the case of a contract relating
to an index or otherwise not calling for physical delivery at the end of trading
in the contracts) for a set price in the future. Futures contracts are
designated by boards of trade which have been designated "contracts markets" by
the Commodities Futures Trading Commission ("CFTC"). No purchase price is paid
or received when the contract is entered into. Instead, the Fund upon entering
into a futures contract (and to maintain the Fund's open positions in futures
contracts) would be required to deposit with its custodian in a segregated
account in the name of the futures broker an amount of cash, United States
Government securities, suitable money market instruments, or liquid, high-grade
debt securities, known as "initial margin." The margin required for a particular
futures contract is set by the exchange on which the contract is traded, and may
be significantly modified from time to time by the exchange during the term of
the contract. Futures contracts are customarily purchased and sold on margin
that may range upward from less than 5% of the value of the contract being
traded. By using futures contracts as a risk management technique, given the
greater liquidity in the futures market than in the cash market, it may be
possible to accomplish certain results more quickly and with lower transaction
costs.
If the price of an open futures contract changes (by increase in the case of a
sale or by decrease in the case of a purchase) so that the loss on the futures
contract reaches a point at which the margin on deposit does not satisfy margin
requirements, the broker will require an increase in the margin. However, if the
value of a position increases because of favorable price changes in the futures
contract so that the margin deposit exceeds the required margin, the broker will
pay the excess to the Fund. These subsequent payments called "variation margin,"
to and from the futures broker, are made on a daily basis as the price of the
underlying assets fluctuate making the long and short positions in the futures
contract more or less valuable, a process known as "marking to the market." The
Funds expect to earn interest income on their initial and variation margin
deposits.
The Funds will incur brokerage fees when they purchase and sell futures
contracts. Positions taken in the futures markets are not normally held until
delivery or cash settlement is required, but are instead liquidated through
offsetting transactions which may result in a gain or a loss. While futures
positions taken by the Funds will usually be liquidated in this manner, the
Funds may instead make or take delivery of underlying securities whenever it
appears economically advantageous for the Funds to do so. A clearing
organization associated with the exchange on which futures are traded assumes
responsibility for closing out transactions and guarantees that as between the
clearing members of an exchange, the sale and purchase obligations will be
performed with regard to all positions that remain open at the termination of
the contract.
Securities Index Futures Contracts. Purchases or sales of securities index
futures contracts may be used in an attempt to protect the Funds' current or
intended investments from broad fluctuations in securities prices. A securities
index futures contract does not require the physical delivery of securities, but
merely provides for profits and losses resulting from changes in the market
value of the contract to be credited or debited at the close of each trading day
to the respective accounts of the parties to the contract. On the contract's
expiration date a final cash settlement occurs and the futures positions are
simply closed out. Changes in the market value of a particular index futures
contract reflect changes in the specified index of securities on which the
future is based.
By establishing an appropriate "short" position in index futures, the Funds may
also seek to protect the value of its portfolio against an overall decline in
the market for such securities. Alternatively, in anticipation of a generally
rising market, the Funds can seek to avoid losing the benefit of apparently low
current prices by establishing a "long" position in securities index futures and
later liquidating that position as particular securities are in fact acquired.
To the extent that these hedging strategies are successful, the Funds will be
affected to a lesser degree by adverse overall market price movements than would
otherwise be the case.
Options on Futures Contracts. The Funds may purchase exchange-traded call and
put options on futures contracts and write exchange-traded call options on
futures contracts. These options are traded on exchanges that are licensed and
regulated by the CFTC for the purpose of options trading. A call option on a
futures contract gives the purchaser the right, in return for the premium paid,
to purchase a futures contract (assume a "long" position) at a specified
exercise price at any time before the option expires. A put option gives the
purchaser the right, in return for the premium paid, to sell a futures contract
(assume a "short" position), for a specified exercise price, at any time before
the option expires.
The Funds will write only options on futures contracts which are "covered." The
Funds will be considered "covered" with respect to a put option it has written
if, so long as it is obligated as a writer of the put, the Funds segregate with
its custodian cash, United States Government securities or liquid securities at
all times equal to or greater than the aggregate exercise price of the puts it
has written (less any related margin deposited with the futures broker). The
Funds will be considered "covered" with respect to a call option they have
written on a debt security future if, so long as it is obligated as a writer of
the call, the Funds own a security deliverable under the futures contract. The
Funds will be considered "covered" with respect to a call option it has written
on a securities index future if the Funds own, so long as the Funds are
obligated as the writer of the call, the Funds of securities the price changes
of which are, in the opinion of the Manager, expected to replicate substantially
the movement of the index upon which the futures contract is based.
Upon the exercise of a call option, the writer of the option is obligated to
sell the futures contract (to deliver a "long" position to the option holder) at
the option exercise price, which will presumably be lower than the current
market price of the contract in the futures market. Upon exercise of a put, the
writer of the option is obligated to purchase the futures contract (deliver a
"short" position to the option holder) at the option exercise price which will
presumably be higher than the current market price of the contract in the
futures market. When the holder of an option exercises it and assumes a long
futures position, in the case of a call, or a short futures position, in the
case of a put, its gain will be credited to its futures margin account, while
the loss suffered by the writer of the option will be debited to its account and
must be immediately paid by the writer. However, as with the trading of futures,
most participants in the options markets do not seek to realize their gains or
losses by exercise of their option rights. Instead, the holder of an option will
usually realize a gain or loss by buying or selling an offsetting option at a
market price that will reflect an increase or a decrease from the premium
originally paid.
If Funds write options on futures contracts, the particular Fund will receive a
premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, the particular Fund will realize a
gain in the amount of the premium, which may partially offset unfavorable
changes in the value of securities held in or to be acquired for the Fund. If
the option is exercised, the Fund will incur a loss in the option transaction,
which will be reduced by the amount of the premium it has received, but which
will offset any favorable changes in the value of its portfolio securities or,
in the case of a put, lower prices of securities it intends to acquire.
Options on futures contracts can be used by the Funds to hedge substantially the
same risks as might be addressed by the direct purchase or sale of the
underlying futures contracts. If the Funds purchase an option on a futures
contract, it may obtain benefits similar to those that would result if it held
the futures position itself. Purchases of options on futures contracts may
present less risk in hedging than the purchase and sale of the underlying
futures contracts since the potential loss is limited to the amount of the
premium plus related transaction costs.
The purchase of put options on futures contracts is a means of hedging the Funds
of securities against a general decline in market prices. The purchase of a call
option on a futures contract represents a means of hedging against a market
advance when the particular Fund is not fully invested.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the underlying securities. If the futures price at
expiration is below the exercise price, the Fund will retain the full amount of
the option premium, which provides a partial hedge against any decline that may
have occurred in the value of the Fund's holdings of securities. The writing of
a put option on a futures contract is analogous to the purchase of a futures
contract in that it hedges against an increase in the price of securities the
Fund intends to acquire. However, the hedge is limited to the amount of premium
received for writing the put.
Limitations on Purchase and Sale of Futures Contracts and Options on Futures
Contracts. The Fund will not engage in transactions in futures contracts and
related options for speculation. In addition, the Fund will not purchase or sell
futures contracts or related options unless either (1) the futures contracts or
options thereon are purchased for "bona fide hedging" purposes (as that term is
defined under the CFTC regulations) or (2) if purchased for other purposes, the
sum of the amounts of initial margin deposits on the Fund's existing futures and
premiums required to establish non-hedging positions, less the amount by which
any such options positions are "in-the-money" (as defined under CFTC
regulations) would not exceed 5% of the liquidation value of the Fund's total
assets. In instances involving the purchase of futures contracts or the writing
of put options thereon by the Fund, an amount of cash and cash equivalents,
equal to the cost of such futures contracts or options written (less any related
margin deposits), will be deposited in a segregated account with its custodian,
thereby insuring that the use of such futures contracts and options is
unleveraged. In instances involving the sale of futures contracts or the writing
of call options thereon by the Fund, the securities underlying such futures
contracts or options will at all times be maintained by the Fund or, in the case
of index futures and related options, the Fund will own securities the price
changes of which are, in the opinion of the Manager, expected to replicate
substantially the movement of the index upon which the futures contract or
option is based.
Options. A call option is a contract which gives the purchaser of the option (in
return for a premium paid) the right to buy, and the writer of the option (in
return for a premium received) the obligation to sell, the underlying security
at the exercise price at any time prior to the expiration of the option,
regardless of the market price of the security during the option period. A call
option on a security is covered, for example, when the writer of the call option
owns the security on which the option is written (or on a security convertible
into such a security without additional consideration) throughout the option
period.
Writing Call Options. The Funds will write covered call options both to reduce
the risks associated with certain of its investments and to increase total
investment return through the receipt of premiums. In return for the premium
income, the Fund will give up the opportunity to profit from an increase in the
market price of the underlying security above the exercise price so long as its
obligations under the contract continue, except insofar as the premium
represents a profit. Moreover, in writing the call option, the Fund will retain
the risk of loss should the price of the security decline. The premium is
intended to offset that loss in whole or in part. Unlike the situation in which
the Fund owns securities not subject to a call option, the Fund, in writing call
options, must assume that the call may be exercised at any time prior to the
expiration of its obligation as a writer, and that in such circumstances the net
proceeds realized from the sale of the underlying securities pursuant to the
call may be substantially below the prevailing market price.
The Funds may terminate its obligation under an option it has written by buying
an identical option. Such a transaction is called a "closing purchase
transaction." The Fund will realize a gain or loss from a closing purchase
transaction if the amount paid to purchase a call option is less or more than
the amount received from the sale of the corresponding call option. Also,
because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security, any loss resulting
from the exercise or closing out of a call option is likely to be offset in
whole or part by unrealized appreciation of the underlying security owned by the
Fund. When an underlying security is sold from the Fund's securities portfolio,
the Fund will effect a closing purchase transaction so as to close out any
existing covered call option on that underlying security.
Writing Put Options. The writer of a put option becomes obligated to purchase
the underlying security at a specified price during the option period if the
buyer elects to exercise the option before its expiration date. If the Funds
write a put option, the Fund will be required to "cover" it, for example, by
depositing and maintaining in a segregated account with its custodian cash, U.S.
Government securities or other liquid securities having a value equal to or
greater than the exercise price of the option.
The Funds may write put options either to earn additional income in the form of
option premiums (anticipating that the price of the underlying security will
remain stable or rise during the option period and the option will therefore not
be exercised) or to acquire the underlying security at a net cost below the
current value (e.g., the option is exercised because of a decline in the price
of the underlying security, but the amount paid by the Fund, offset by the
option premium, is less than the current price). The risk of either strategy is
that the price of the underlying security may decline by an amount greater than
the premium received. The premium which the Fund receives from writing a put
option will reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to that market
price, the historical price volatility of the underlying security, the option
period, supply and demand and interest rates. The Fund may effect a closing
purchase transaction to realize a profit on an outstanding put option or to
prevent an outstanding put option from being exercised.
Purchasing Put and Call Options. The Funds may purchase put options on
securities to protect their holdings against a substantial decline in market
value. The purchase of put options on securities will enable the Fund to
preserve, at least partially, unrealized gains in an appreciated security in its
portfolio without actually selling the security. In addition, the Fund will
continue to receive interest or dividend income on the security. The Fund may
also purchase call options on securities to close out positions. The Fund may
sell put or call options they have previously purchased, which could result in a
net gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put or call option
which was bought.
Securities Index Options. The Funds may write covered put and call options and
purchase call and put options on securities indexes for the purpose of hedging
against the risk of unfavorable price movements adversely affecting the value of
the Fund's securities or securities it intends to purchase. The Fund writes only
"covered" options. A call option on a securities index is considered covered,
for example, if, so long as the Fund is obligated as the writer of the call, it
holds securities the price changes of which are, in the opinion of the Manager,
expected to replicate substantially the movement of the index or indexes upon
which the options written by the Fund are based. A put on a securities index
written by the Fund will be considered covered if, so long as it is obligated as
the writer of the put, the Fund segregates with its custodian cash, United
States Government securities or other liquid high-grade debt obligations having
a value equal to or greater than the exercise price of the option. Unlike a
stock option, which gives the holder the right to purchase or sell a specified
stock at a specified price, an option on a securities index gives the holder the
right to receive a cash "exercise settlement amount" equal to (i) the difference
between the exercise price of the option and the value of the underlying stock
index on the exercise date, multiplied by (ii) a fixed "index multiplier."
A securities index fluctuates with changes in the market value of the securities
so included. For example, some securities index options are based on a broad
market index such as the S&P 500 Index or the NYSE Composite Index, or a
narrower market index such as the S&P 100 Index. Indexes may also be based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index.
Forward Commitment & When-Issued Securities. The Funds may purchase securities
on a when-issued basis or for settlement at a future date if the Fund holds
sufficient assets to meet the purchase price. In such purchase transactions, the
Fund will not accrue interest on the purchased security until the actual
settlement. Similarly, if a security is sold for a forward date, the Fund will
accrue the interest until the settlement of the sale. When-issued security
purchases and forward commitments have a higher degree of risk of price movement
before settlement due to the extended time period between the execution and
settlement of the purchase or sale. As a result, the exposure to the
counterparty of the purchase or sale is increased. Although the Funds would
generally purchase securities on a forward commitment or when-issued basis with
the intention of taking delivery, the Funds may sell such a security prior to
the settlement date if the Advisor felt such action was appropriate. In such a
case, the Fund could incur a short-term gain or loss.
INVESTMENT LIMITATIONS
Each Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose, means, with respect to
a Fund, the lesser of (i) 67% of the Fund's outstanding shares represented in
person or by proxy at a meeting at which more than 50% of its outstanding shares
are represented, or (ii) more than 50% of its outstanding shares. Unless
otherwise indicated, percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Internet 100 Fund and the Internet 100-EQ
Fund:
1. May (i) borrow money from banks and (ii) make other investments or engage
in other transactions permissible under the 1940 Act which may involve a
borrowing, provided that the combination of (i) and (ii) shall not exceed
33 1/3% of the value of the Fund's total assets (including the amount
borrowed), less the Fund's liabilities (other than borrowings), except that
the Fund may borrow up to an additional 5% of its total assets (not
including the amount borrowed) from a bank for temporary or emergency
purposes (but not for leverage or the purchase of investments).
2. May not issue senior securities, except as permitted under the 1940 Act.
3. May not act as an underwriter of another issuer's securities, except to the
extent that the Fund may be deemed to be an underwriter within the meaning
of the 1933 Act in connection with the purchase and sale of portfolio
securities.
4. May not purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not prevent
the Fund from purchasing or selling options, futures contracts, or other
derivative instruments, or from investing in securities or other
instruments backed by physical commodities).
5. May not make loans if, as a result, more than 33 1/3% of the Fund's total
assets would be lent to other persons, except through (i) purchases of debt
securities or other debt instruments, or (ii) engaging in repurchase
agreements.
6. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prohibit
the Fund from purchasing or selling securities or other instruments backed
by real estate or of issuers engaged in real estate activities).
7. May, notwithstanding any other fundamental investment policy or
restriction, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and restrictions as the Fund.
Non-Fundamental Policies
The following are the Fund's non-fundamental operating policies, which may be
changed by the Board of Trustees of the Fund without shareholder approval.
The Fund may not:
1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, or
unless it covers such short sale as required by the current rules and
positions of the SEC or its staff, and provided that transactions in
options, futures contracts, options on futures contracts, or other
derivative instruments are not deemed to constitute selling securities
short.
2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions; and
provided that margin deposits in connection with futures contracts, options
on futures contracts, or other derivative instruments shall not constitute
purchasing securities on margin.
3. Invest in illiquid securities if, as a result of such investment, more than
15% of its net assets would be invested in illiquid securities, or such
other amounts as may be permitted under the 1940 Act. This percentage
restriction is with respect to the Fund's current holdings of illiquid
securities.
4. Purchase securities of other investment companies except in compliance with
the 1940 Act.
5. Engage in futures or options on futures transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act and, in
accordance with Rule 4.5, will use futures or options on futures
transactions solely for bona fide hedging transactions (within the meaning
of the Commodity Exchange Act); provided, however, that the Fund may, in
addition to bona fide hedging transactions, use futures and options on
futures transactions if the aggregate initial margin and premiums required
to establish non-hedging positions, less the amount by which any such
options positions are in the money (within the meaning of the Commodity
Exchange Act), do not exceed 5% of the liquidation value of the Fund's
total assets.
6. Borrow money except (i) from banks or (ii) through reverse repurchase
agreements or mortgage dollar rolls, and will not purchase securities when
bank borrowing exceed 5% of its total assets.
7. Make any loans other than loans of portfolio securities, except through (i)
purchases of debt securities or other debt instruments, or (ii) engaging in
repurchase agreements.
Except for the fundamental investment limitations listed above and the Funds'
investment objective, all other investment policies, limitations and
restrictions described in the Prospectus and this Statement of Additional
Information are not fundamental and may be changed with approval of the Fund's
Board of Trustees. Unless noted otherwise, if a percentage restriction is
adhered to at the time of investment, a later increase or decrease in percentage
resulting from a change in the Fund's assets (i.e., due to cash inflows or
redemptions) or in market value of the investment or the Fund's assets will not
constitute a violation of that restriction.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Funds.
The annualized portfolio turnover rate for each Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of each Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and each Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Funds are made from dealers,
underwriters and issuers. The Funds currently do not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, which may include a dealer mark-up, or otherwise involve
transactions directly with the issuer of an instrument.
The Funds may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. A Fund will engage
in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for each Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Funds. In addition, the Advisor is authorized to cause the
Funds to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Funds. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries, general
summaries of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government securities markets
and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Funds. The Trustees will periodically review
any commissions paid by the Funds to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Funds. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which investment discretion is
exercised by the Advisor. Conversely, the Funds may be the primary beneficiary
of the research or services received as a result of securities transactions
effected for such other account or investment company.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor if it believes it can obtain the best execution of transactions from
such broker. The Funds will not execute portfolio transactions through, acquire
securities issued by, make savings deposits in or enter into repurchase
agreements with the Advisor or an affiliated person of the Advisor (as such term
is defined in the 1940 Act) acting as principal, except to the extent permitted
by the Securities and Exchange Commission ("SEC"). In addition, the Funds will
not purchase securities during the existence of any underwriting or selling
group relating thereto of which the Advisor, or an affiliated person of the
Advisor, is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Funds may be at a disadvantage because of these limitations
in comparison with other investment companies that have similar investment
objectives but are not subject to such limitations.
Investment decisions for the Funds will be made independently from those for any
other Fund and any other series of the Trust, if any, and for any other
investment companies and accounts advised or managed by the Advisor. Such other
investment companies and accounts may also invest in the same securities as a
Fund. To the extent permitted by law, the Advisor may aggregate the securities
to be sold or purchased for a Fund with those to be sold or purchased for
another Fund or other investment companies or accounts in executing
transactions. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and another investment company
or account, the transaction will be averaged as to price and available
investments allocated as to amount, in a manner which the Advisor believes to be
equitable to the Funds and such other investment company or account. In some
instances, this investment procedure may adversely affect the price paid or
received by a Fund or the size of the position obtained or sold by a Fund.
NET ASSET VALUE
The net asset value per share of each Fund is determined at the time normal
trading closes on the New York Stock Exchange (currently 4:00 p.m., New York
time), Monday through Friday, except on business holidays when the New York
Stock Exchange is closed. The New York Stock Exchange recognizes the following
holidays: New Year's Day, Martin Luther King, Jr., Day, President's Day, Good
Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas
Day. Any other holiday recognized by the New York Stock Exchange will be deemed
a business holiday on which the net asset value of each Class of the Funds will
not be calculated.
The net asset value per share of each Fund is calculated separately by adding
the value of the Fund's securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares. "Assets belonging to" a Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Assets belonging to a Fund are charged with the direct
liabilities of the Fund and with a share of the general liabilities of the
Trust, which are normally allocated in proportion to the number of or the
relative net asset values of all of the Trust's series at the time of allocation
or in accordance with other allocation methods approved by the Board of
Trustees. Subject to the provisions of the Declaration of Trust, determinations
by the Board of Trustees as to the direct and allocable liabilities, and the
allocable portion of any general assets, with respect to a Fund are conclusive.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of each Fund are offered and sold on a continuous basis and
may be purchased through authorized investment dealers or directly by contacting
the Distributor or the Funds. Selling dealers have the responsibility of
transmitting orders promptly to the Funds. The public offering price of shares
of each Fund equals net asset value. Capital Investment Group, Inc. (the
"Distributor") serves as distributor of shares of the Funds.
Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for each of the Funds pursuant to Rule 12b-1 under the 1940 Act (see "The
Distributor - Distribution Plan" in the Funds' Prospectus). Under the Plan the
Fund may expend a percentage of the Funds' Shares average net assets annually to
finance any activity which is primarily intended to result in the sale of shares
of the Funds and the servicing of shareholder accounts, provided the Trust's
Board of Trustees has approved the category of expenses for which payment is
being made. The current fee paid under the Plan are 0.25% of the average net
assets of the Funds' Shares, respectively. Such expenditures paid as service
fees to any person who sells shares of the Fund may not exceed 0.25% of the
average annual net asset value of such shares. Potential benefits of the Plan to
the Fund include improved shareholder servicing, savings to the Fund in transfer
agency costs, benefits to the investment process from growth and stability of
assets and maintenance of a financially healthy management organization.
All of the distribution expenses incurred by the Distributor and others, such as
broker-dealers, in excess of the amount paid by the Fund will be borne by such
persons without any reimbursement from the Fund. Subject to seeking best
execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms which receive payments under the Plan.
From time to time, the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan and the Distribution Agreement with the Distributor have been approved
by the Board of Trustees of the Trust, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the Plan or any related
agreements, by vote cast in person or at a meeting duly called for the purpose
of voting on the Plan and such Agreement. Continuation of the Plan and the
Distribution Agreement must be approved annually by the Board of Trustees in the
same manner as specified above.
Each year the Trustees must determine whether continuation of the Plan is in the
best interest of shareholders of the Fund and that there is a reasonable
likelihood of its providing a benefit to the Fund, and the Board of Trustees has
made such a determination for the current year of operations under the Plan. The
Plan, the Distribution Agreement and the Dealer Agreement with any
broker/dealers may be terminated at any time without penalty by a majority of
those trustees who are not "interested persons" or, with respect to a particular
Fund, by a majority vote of the Fund's outstanding voting stock relating to that
particular Fund. Any amendment materially increasing the maximum percentage
payable under the Plan, with respect to a particular Fund, must likewise be
approved by a majority vote of that Class of Investor Shares' outstanding voting
stock relating to that particular Class, as well as by a majority vote of those
trustees who are not "interested persons." Also, any other material amendment to
the Plan must be approved by a majority vote of the trustees including a
majority of the noninterested Trustees of the Trust having no interest in the
Plan. In addition, in order for the Plan to remain effective, the selection and
nomination of Trustees who are not "interested persons" of the Trust must be
effected by the Trustees who themselves are not "interested persons" and who
have no direct or indirect financial interest in the Plan. Persons authorized to
make payments under the Plan must provide written reports at least quarterly to
the Board of Trustees for their review.
Redemptions. Under the 1940 Act, each Fund may suspend the right of redemption
or postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. Each Fund may also suspend or
postpone the recordation of the transfer of shares upon the occurrence of any of
the foregoing conditions.
In addition to the situations described in the Prospectus under "How Shares may
be Redeemed," each Fund may redeem shares involuntarily to reimburse the Fund
for any loss sustained by reason of the failure of a shareholder to make full
payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Fund shares as provided in the Prospectus from time to time.
DESCRIPTION OF THE TRUST
The Trust, which is an unincorporated business trust organized under
Massachusetts law on May **, 1999, is an open-end diversified management
investment company. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of two series: the Internet 100 Fund and the
Internet 100-EQ Fund. The Funds are managed by Internet 100 Advisors of
Arlington, Virginia. The number of shares of each series shall be unlimited. The
Trust does not intend to issue share certificates.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as each Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.
Shareholders of all of the series of the Trust will vote together and not
separately on a series-by-series basis except as otherwise required by law or
when the Board of Trustees determines that the matter to be voted upon affects
only the interests of the shareholders of a particular series or class. Rule
18f-2 under the 1940 Act provides that any matter required to be submitted to
the holders of the outstanding voting securities of an investment company such
as the Trust shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each series
or class affected by the matter. A series or class is affected by a matter
unless it is clear that the interests of each series or class in the matter are
substantially identical or that the matter does not affect any interest of the
series or class. Under Rule 18f-2, the approval of an investment advisory
agreement or any change in a fundamental investment policy would be effectively
acted upon with respect to a series only if approved by a majority of the
outstanding shares of such series. However, the Rule also provides that the
ratification of the appointment of independent accountants, the approval of
principal underwriting contracts and the election of Trustees may be effectively
acted upon by shareholders of the Trust voting together, without regard to a
particular series or class.
When used in the Prospectus or this SAI, a "majority" of shareholders means the
vote of the lesser of (1) 67% of the shares of the Trust or the applicable
series or class present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Trust or the applicable series or class.
When issued for payment as described in the Prospectus and this SAI, shares of
each Fund will be fully paid and non-assessable.
The Declaration of Trust provides that the Trustees of the Trust will not be
liable in any event in connection with the affairs of the Trust, except as such
liability may arise from his or her own bad faith, willful misfeasance, gross
negligence, or reckless disregard of duties. It also provides that all third
parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the exceptions stated,
the Declaration of Trust provides that a Trustee or officer is entitled to be
indemnified against all liability in connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting each Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof, such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
Each series of the Trust, including each Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectus, certain requirements with respect to the source of its income
for a taxable year. At least 90% of the gross income of each series must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the series' business of
investing in such stock, securities or currencies. Any income derived by a
series from a partnership or trust is treated as derived with respect to the
series' business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the series in the same manner as by the
partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. Each
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including each Fund, will designate any distribution
of long-term capital gains as a capital gain dividend in a written notice mailed
to shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long-term capital loss
to the extent of the capital gain dividends received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including each Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including each Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure properly to
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."
Dividends paid by the Funds derived from net investment income or net short-term
capital gains are taxable to shareholders as ordinary income, whether received
in cash or reinvested in additional shares. Long-term capital gains
distributions, if any, are taxable as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held.
The Funds will send shareholders information each year on the tax status of
dividends and disbursements. A dividend or capital gains distribution paid
shortly after shares have been purchased, although in effect a return of
investment, is subject to federal income taxation. Dividends from net investment
income, along with capital gains, will be taxable to shareholders, whether
received in cash or shares and no matter how long you have held Fund shares,
even if they reduce the net asset value of shares below your cost and thus, in
effect, result in a return of a part of your investment.
MANAGEMENT OF THE FUNDS
Trustees and Officers. The Trustees and executive officers of the Trust, their
addresses, ages, and their principal occupations for the last five years are as
follows:
TRUSTEES
- ----------------------------- ------------------ -------------------------------
Principal Occupation(s)
Name, Age and Address Position During Past 5 Years
- ----------------------------- ------------------ -------------------------------
- ---------------------------
*Indicates that Trustee is an "interested person" of the Trust for purposes of
the 1940 Act because of his position with one of the investment advisors to the
Trust.
OFFICERS
<TABLE>
<S> <C> <C>
- ----------------------------------------------- -------------------------------- ---------------------------------------------
Principal Occupation(s)
Name, Age and Address Position During Past 5 Years
- ----------------------------------------------- -------------------------------- ---------------------------------------------
C. Frank Watson, III, 28 Secretary Chief Operating Officer, The Nottingham
105 North Washington Street Company, Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802
Julian G. Winters, 30 Treasurer and Assistant Legal and Compliance Director, The
105 North Washington Street Secretary Nottingham Company, Rocky Mount, North
Rocky Mount, North Carolina Carolina, since 1996; previously Operations
Manager, Tar Heel Medical, Nashville, North
Carolina
- ----------------------------------------------- -------------------------------- ---------------------------------------------
</TABLE>
Compensation. The officers of the Trust will not receive compensation from the
Trust for performing the duties of their offices. Each Trustee who is not an
"interested person" of the Trust receives a fee of $2,000 each year plus $250
per series of the Trust per meeting attended in person and $100 per series of
the Trust per meeting attended by telephone. All Trustees are reimbursed for any
out-of-pocket expenses incurred in connection with attendance at meetings.
Compensation Table *
<TABLE>
<S> <C> <C> <C> <C>
Aggregate Pension Retirement
Compensation Benefits Accrued As Estimated Annual Total Compensation
from each of the Part of Fund Benefits Upon from the Trust Paid
Name of Person, Position Funds Expenses Retirement to Trustees
- ------------------------ ----- -------- ---------- -----------
* Figures are estimates for the fiscal year to end ******, 2000.
</TABLE>
Principal Holders of Voting Securities. As of May 12, 1999, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) 0.000% of the then outstanding shares of the Internet 100
Fund, and 0.000% of the Internet 100-EQ Fund. On the same date the following
shareholders owned of record more than 5% of the outstanding shares of the
Funds. Except as provided below, no person is known by the Trust to be the
beneficial owner of more than 5% of the outstanding shares of the Funds as of
May 12, 1999.
INTERNET 100 FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
- ---------------- -------------------- -------
INTERNET 100-EQ FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent
- ---------------- -------------------- -------
Investment Advisor. Information about Internet Advisors 100, Arlington, Virginia
(the "Advisor") and its duties and compensation as Advisor is contained in the
Prospectus.
Compensation of the Advisor with regards to the Internet 100 Fund and the
Internet 100-EQ Fund, based upon the Funds' average daily net assets, is at the
annual rate of 0.75% for each fund.
The Advisor has entered into an expense limitation agreement with the Trust,
with respect to the both the Funds, pursuant to which the Advisor has agreed to
waive or limit its fees and to assume other expenses so that the total annual
operating expenses of the Fund (other than interest, taxes, brokerage
commissions, other expenditures which are capitalized in accordance with
generally accepted accounting principles, other extraordinary expenses not
incurred in the ordinary course of the Fund's business, and amounts, if any,
payable pursuant to a Rule l2b-1 Plan) are limited to 1.50% of the average daily
assets of each of the Funds.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Funds in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
Administrator. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company, Inc. (the
"Administrator"), a North Carolina corporation, whose address is 105 North
Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina
27802-0069.
The Administrator performs the following services for the Fund: (1) coordinate
with the Custodian and monitor the services it provides to the Fund; (2)
coordinate with and monitor any other third parties furnishing services to the
Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the SEC and other federal and state regulatory authorities as may
be required by applicable law; (8) review and submit to the officers of the
Trust for their approval invoices or other requests for payment of Fund expenses
and instruct the Custodian to issue checks in payment thereof; and (9) take such
other action with respect to the Fund as may be necessary in the opinion of the
Administrator to perform its duties under the agreement. The Administrator will
also provide certain accounting and pricing services for the Fund.
Compensation of the Administrator, based upon the average daily net assets of
each fund, is at the following annual rates: 0.175% of the Fund's first $125
million, 0.150% on the next $125 million, and 0.125% on average daily net assets
over $250 million, subject to a minimum fee of $1,000 per month, per fund. In
addition, the Administrator currently receives a monthly fee of $2,250 per Fund
for accounting and recordkeeping services and an additional fee of $750 per
month for each additional Class of shares. The Administrator also charges the
Trust for certain costs involved with the daily valuation of investment
securities and is reimbursed for out-of-pocket expenses.
Transfer Agent. The Trust has entered into a Dividend Disbursing and Transfer
Agent Agreement with NC Shareholder Services, LLC (the "Transfer Agent"), a
North Carolina limited liability company, to serve as transfer, dividend paying,
and shareholder servicing agent for the Funds. The address of the Transfer Agent
is 107 North Washington Street, Post Office Box 4365, Rocky Mount, North
Carolina 27803-0365. The Transfer Agent is compensated for its services based
upon a $15 fee per shareholder per year, subject to a minimum fee of $1,000 per
month, per fund.
Distributor. Capital Investment Group, Inc. (the "Distributor"), Post Office Box
32249, Raleigh, North Carolina 27622, acts as an underwriter and distributor of
each Fund's shares for the purpose of facilitating the registration of shares of
the Fund under state securities laws and to assist in sales of Fund shares
pursuant to a Distribution Agreement (the "Distribution Agreement") approved by
the Board of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
each Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the SEC and a member in good
standing of the National Association of Securities Dealers, Inc.
The Distribution Agreement may be terminated by either party upon 60-days' prior
written notice to the other party.
Custodian. First Union National Bank of North Carolina (the "Custodian"), Two
First Union Center, Charlotte, North Carolina 28288-1151, serves as custodian
for each Fund's assets. The Custodian acts as the depository for each Fund,
safekeeps its portfolio securities, collects all income and other payments with
respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties as Custodian. For its services
as Custodian, the Custodian is entitled to receive from each Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
Independent Auditors. Deloitte & Touche LLP, 2500 One PPG Place, Pittsburgh,
Pennsylvania 15222-5401, serves as independent auditors for the Funds, audits
the annual financial statements of the Funds, prepares each Fund's federal and
state tax returns, and consults with each Fund on matters of accounting and
federal and state income taxation. A copy of the most recent annual report of
the Fund will accompany this SAI whenever it is requested by a shareholder or
prospective investor.
Legal Counsel. Dechert Price & Rhoads serves as legal counsel to the Woodlawn
Funds Trust and the Funds.
SPECIAL SHAREHOLDER SERVICES
Each Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year-to-date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Funds will automatically charge the checking account for the amount specified
($100 minimum) which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Funds.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $10,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Funds to redeem the necessary number of shares periodically
(each month, or quarterly in the months of March, June, September and December)
in order to make the payments requested. Each Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Funds. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Funds. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the
Funds upon sixty days written notice or by a shareholder upon written notice to
the Funds. Applications and further details may be obtained by calling the Funds
at 1-800-525-3863, or by writing to:
The Internet Index Funds
[Name of fund]
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. Each Fund may accept securities in lieu of cash in payment
for the purchase of shares in the Fund. The acceptance of such securities is at
the sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long term investment of the Fund, the marketability
of such securities, and other factors which the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus.
Redemptions in Kind. The Funds do not intend, under normal circumstances, to
redeem their securities by payment in kind. It is possible, however, that
conditions may arise in the future, which would, in the opinion of the Trustees,
make it undesirable for the Funds to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein each Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the applicable Fund at the address shown herein. Your request should
include the following: (1) the Fund name and existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s) on
the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (See the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Funds.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each Fund may be quoted in
advertisements, sales literature, shareholder reports or other communications to
shareholders. Each Fund computes the "average annual total return" of each Fund
by determining the average annual compounded rates of return during specified
periods that equate the initial amount invested to the ending redeemable value
of such investment. This is done by determining the ending redeemable value of a
hypothetical $ 1,000 initial payment. This calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the beginning
of the period.
P = hypothetical initial payment of $1,000 from which the maximum
sales load is deducted.
n = period covered by the computation, expressed in terms of years.
Each Fund may also compute the aggregate total return of each Fund, which is
calculated in a similar manner, except that the results are not annualized.
The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. Each Fund may also quote other total
return information that does not reflect the effects of the sales load.
Each Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, each Fund may compare its performance to
the S&P 500 Total Return Index. The Funds may also compare their performance to
[insert any additional indices here]. Comparative performance may also be
expressed by reference to a ranking prepared by a mutual fund monitoring service
or by one or more newspapers, newsletters or financial periodicals. Each Fund
may also occasionally cite statistics to reflect its volatility and risk. Each
Fund may also compare its performance to other published reports of the
performance of unmanaged portfolios of companies. The performance of such
unmanaged portfolios generally does not reflect the effects of dividends or
dividend reinvestment. Of course, there can be no assurance that any Fund will
experience the same results. Performance comparisons may be useful to investors
who wish to compare a Fund's past performance to that of other mutual funds and
investment products. Of course, past performance is not a guarantee of future
results.
Each Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time, each Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Funds' Prospectus to obtain a
more complete view of each Fund's performance before investing. Of course, when
comparing a Fund's performance to any index, factors such as composition of the
index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for each Fund may quote total returns that are calculated
on nonstandardized base periods. The total returns represent the historic change
in the value of an investment in the Fund based on monthly reinvestment of
dividends over a specified period of time.
From time to time each Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the reflects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. Each Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). Each Fund may also depict the historical performance
of the securities in which the Fund may invest over periods reflecting a variety
of market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
Each Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Funds may acquire from time to time fixed income securities that meet the
following minimum rating criteria ("Investment Grade Debt Securities") or, if
unrated, are in the Advisor's opinion comparable in quality to Investment Grade
Debt Securities. The various ratings used by the nationally recognized
securities rating services are described below.
A rating by 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 fixed income
securities in which the Funds may invest should be continuously reviewed and
that individual analysts give different weightings 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 is evaluated independently. Ratings are
based on current information furnished by the issuer or obtained by the rating
services from other sources that 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.
Standard & Poor's Ratings Services. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Services ("S&P") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity of the obligor to meet its
financial commitment on the obligation.
AA - Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation
is very strong.
A - Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB - Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
Investment-Grade Debt Securities and are regarded, on balance, as having
significant speculative characteristics with respect to the obligor's capacity
to meet its financial commitment on the obligation. BB indicates the lowest
degree of speculation and C the highest degree of speculation. While such bonds
may have some quality and protective characteristics, these may be outweighed by
large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-I+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to short term notes and
indicates strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation. The rating SP-2 indicates a satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes
over the term of the notes.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of 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 an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds that are 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 securities
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 securities.
A - Debt which is rated A possesses many favorable investment
attributes and is to be considered as an upper medium grade obligation.
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 - Debt which is rated Baa is considered as a medium grade
obligation, i.e., it is 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 debt
lacks outstanding investment characteristics and in fact has
speculative characteristics as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated 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 bond ranks in the lower end of
its generic rating category. Bonds which are rated Ba, B, Caa, Ca or C by
Moody's are not considered "Investment-Grade Debt Securities" by the Advisor.
Bonds rated Ba are judged to have speculative elements because their future
cannot be considered as well assured. Uncertainty of position characterizes
bonds in this class, because the protection of interest and principal payments
often may be very moderate and not well safeguarded.
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 security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
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.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or supporting institutions) are considered to have a
superior ability for repayment of short-term promissory obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternative liquidity. Issuers rated Prime-2 (or supporting institutions) are
considered to have a strong ability for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings' trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriated may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarizes the two highest ratings used by Moody's for short-term
notes and variable rate demand obligations:
MIG-1; VMIG-1 - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows,
superior liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG-2; VMIG-2 - Obligations bearing these designations are of a high
quality with ample margins of protection.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The
risk factors are more variable and greater in periods of economic
stress.
BBB - Bonds rated BBB have below-average protection factors but are
still considered sufficient for prudent investment. There is
considerable variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff 1 is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff 1+, Duff 1 and
Duff 1- within the highest rating category. Duff 1+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff l- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
Investment-Grade Debt Securities by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated
AAA. Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds
with higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category. A "ratings outlook" is used to describe the
most likely direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative." The absence of a designation indicates a
stable outlook.
Bonds rated BB, B and CCC by Fitch are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the two highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+.
The term symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
Bonds rated BB, B and CCC by Fitch are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-l+
F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great
as for issues assigned F-1+ and F-1 ratings.
<PAGE>
PART C
======
WOODLAWN FUNDS TRUST
FORM N-1A
OTHER INFORMATION
ITEM 23. Exhibits
--------
(a) Declaration of Trust.
(b) By-Laws.
(c) Certificates for shares are not issued. Articles II and VII of the
Declaration of Trust, previously filed as Exhibit (a)(1) hereto, define
the rights of holders of Shares.
(d) Investment Management Agreement between the Woodlawn Funds Trust and
Internet 100 Advisors, as Manager.^1
(e) Distribution Agreement between the Woodlawn Funds Trust and Capital
Investment Group, Inc., as Distributor.^1
(f) Not Applicable.
(g) Custodian Agreement between the Woodlawn Funds Trust and First Union
National Bank of North Carolina, as Custodian.^1
(h)(1) Fund Accounting and Compliance Administration Agreement between the
Woodlawn Funds Trust and The Nottingham Company, Inc., as
Administrator.^1
(h)(2) Dividend Disbursing and Transfer Agent Agreement between the Woodlawn
Funds Trust and NC Shareholder Services, LLC, as Transfer Agent.^1
(h)(3) Expense Limitation Agreement between the Woodlawn Funds Trust and
Internet 100 Advisors.^1
(i) Opinion and Consent of Dechert Price & Rhoads regarding the legality of
securities registered.^1
(j) Consent of Deloitte & Touche LLP, Independent Public Accountants.^1
(k) Balance Sheet.^1
(l) Stock Subscription Agreement.^1
(m) Distribution Plan under Rule 12b-1 for the Woodlawn Funds Trust
regarding the Internet 100 Fund and the Internet 100-EQ Fund.^1
(n) Not applicable.
(o) Form of Rule 18f-3 Plan.^1
(p) Copy of Power of Attorney.^1
- -----------------------
1. To be filed by amendment.
ITEM 24. Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
No person is controlled by or under common control with the Woodlawn Funds
Trust.
ITEM 25. Indemnification
---------------
Reference is made to Article X of the Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and, therefore, is 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 trustees, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares 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 Act and will be governed by the final adjudication of such
issues.
<PAGE>
ITEM 26. Business and other Connections of the Investment Advisor
--------------------------------------------------------
The description of Internet 100 Advisors under the caption of "The Investment
Advisor" in the Prospectus and under the caption "Investment Advisor" in the
Statement of Additional Information constituting Parts A and B, respectively, of
this Registration Statement are incorporated by reference herein. Information
concerning the directors and officers of Internet 100 Advisors as set forth in
Internet 100 Advisors' Form ADV filed with the Securities and Exchange
Commission on **********, 1999 (File No. 801-*****), and amended through the
date hereof, is incorporated by reference herein.
ITEM 27. Principal Underwriter
---------------------
(a) Capital Investment Group, Inc., the Registrant's distributor, is also the
underwriter and distributor for the Chesapeake Aggressive Growth Fund,
Chesapeake Growth Fund, Chesapeake Core Growth Fund, WST Growth & Income Fund,
CarolinasFund, Capital Value Fund, Investek Fixed Income Trust, The Brown
Capital Management Equity Fund, The Brown Capital Management Balanced Fund, The
Brown Capital Management Small Company Fund, The Brown Capital Management
International Equity Fund, Blue Ridge Total Return Fund, and SCM Strategic
Growth Fund.
(b) Set forth below is certain information regarding the directors and officers
of Capital Investment Group, Inc.
NAME AND PRINCIPAL POSITION(S) AND OFFICE(S) WITH POSITION(S) AND OFFICE(S)
BUSINESS ADDRESS CAPITAL INVESTMENT GROUP, INC. WITH REGISTRANT
- ---------------- ------------------------------ ---------------
Richard K. Bryant President NONE
17 Glenwood Avenue
Raleigh, N.C.
E.O. Edgerton, Jr. Vice President NONE
17 Glenwood Avenue
Raleigh, N.C.
(c) Not applicable.
ITEM 28. Location of Accounts and Records
--------------------------------
All account books and records not normally held by First Union National Bank of
North Carolina, the Custodian to the Woodlawn Funds Trust, are held by the
Woodlawn Funds Trust, in the offices of The Nottingham Company, Inc., Fund
Accountant and Administrator; NC Shareholder Services, LLC, Transfer Agent to
the Woodlawn Funds Trust; or Internet 100 Advisors, the Investment Advisor to
the Woodlawn Funds Trust.
The address of The Nottingham Company, Inc. is 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069. The address of NC
Shareholder Services, LLC is 107 North Washington Street, Post Office Box 4365,
Rocky Mount, North Carolina 27803-0365. The address of Internet 100 Advisors is
285 Main Street, Arlington, Virginia 11234. The address of First Union National
Bank of North Carolina is Two First Union Center, Charlotte, North Carolina
28288-1151.
ITEM 29. Management Services
-------------------
Not Applicable.
ITEM 30. Undertakings
------------
The Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement, containing financial statements that need not be
certifed, within four to six months following the effective date of this
registration statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Rocky Mount, and State of North Carolina on this
19th day of May, 1999.
WOODLAWN FUNDS TRUST
By: /s/ Julian G. Winters
_______________________
Julian G. Winters
Trustee
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Julian G. Winters
_______________________________ Trustee May 19, 1999
Julian G. Winters
<PAGE>
INDEX TO EXHIBITS
(FOR REGISTRATION STATEMENT)
- --------------------------------------------------------------------------------
EXHIBIT NO.
UNDER PART C
OF FORM N-1A NAME OF EXHIBIT
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(a) Declaration of Trust
(b) Bylaws of the Trust
Exhibit (a): Declaration of Trust
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WOODLAWN FUNDS TRUST
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TRUST INSTRUMENT
Dated as of May 19,1999
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WOODLAWN FUNDS TRUST
TABLE OF CONTENTS
Page
ARTICLE I NAME AND DEFINITIONS...............................................1
Section 1.01 Name...................................................1
Section 1.02 Definitions............................................1
ARTICLE II BENEFICIAL INTEREST...............................................2
Section 2.01 Shares of Beneficial Interest..........................2
Section 2.02 Issuance of Shares.....................................2
Section 2.03 Register of Shares and Share Certificates..............3
Section 2.04 Transfer of Shares.....................................3
Section 2.05 Treasury Shares........................................3
Section 2.06 Establishment of Series................................3
Section 2.07 Investment in the Trust................................4
Section 2.08 Assets and Liabilities of Series.......................4
Section 2.09 No Preemptive Rights...................................5
Section 2.10 No Personal Liability of Shareholder...................5
Section 2.11 Assent to Trust Instrument.............................5
ARTICLE III THE TRUSTEES.....................................................5
Section 3.01 Management of the Trust................................6
Section 3.02 Initial Trustees.......................................6
Section 3.03 Term of Office.........................................6
Section 3.04 Vacancies and Appointments.............................6
Section 3.06 Number of Trustees.....................................7
Section 3.07 Effect of Ending of a Trustee's Service................7
Section 3.08 Ownership of Assets of the Trust.......................7
ARTICLE IV POWER OF THE TRUSTEES.............................................7
Section 4.01 Powers.................................................8
Section 4.02 Issuance and Repurchase of Shares.....................10
Section 4.03 Trustees and Officers as Shareholders.................10
Section 4.04 Action by the Trustees................................11
Section 4.05 Chairman of the Trustees..............................11
Section 4.06 Principal Transactions................................11
ARTICLE V EXPENSES OF THE TRUST.............................................11
ARTICLE VI INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT.................................12
Section 6.01 Investment Adviser....................................12
Section 6.02 Principal Underwriter.................................12
Section 6.03 Administration........................................13
Section 6.04 Transfer Agent........................................13
Section 6.05 Parties to Contract...................................13
Section 6.06 Provisions and Amendments.............................13
ARTICLE VII SHAREHOLDER VOTING POWERS AND MEETINGS...........................14
Section 7.01 Voting Powers.........................................14
Section 7.02 Meetings..............................................14
Section 7.03 Quorum and Required Vote..............................14
ARTICLE VIII CUSTODIAN......................................................15
Section 8.01 Appointment and Duties................................15
Section 8.02 Central Certificate System............................15
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS....................................15
Section 9.01 Distributions.........................................16
Section 9.02 Redemptions...........................................16
Section 9.03 Determination of Net Asset Value and
Valuation of Portfolio Assets.........................16
Section 9.04 Suspension of the Right of Redemption.................17
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ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION.......................17
Section 10.01 Limitation of Liability..............................17
Section 10.02 Indemnification......................................18
Section 10.03 Shareholders.........................................19
ARTICLE XI MISCELLANEOUS....................................................19
Section 11.01 Trust Not A Partnership..............................19
Section 11.02 Trustee's Good Faith Action, Expert Advice,
No Bond or Surety....................................19
Section 11.03 Establishment of Record Dates........................20
Section 11.04 Termination of Trust.................................20
Section 11.05 Reorganization.......................................21
Section 11.06 Filing of Copies, References, Headings...............21
Section 11.07 Applicable Law.......................................22
Section 11.08 Amendments...........................................22
Section 11.09 Fiscal Year..........................................23
Section 11.10 Provisions in Conflict With Law......................23
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WOODLAWN FUNDS TRUST
May 19, 1999
TRUST INSTRUMENT, made by Julian G. Winters (the "Trustee").
WHEREAS, the Trustee desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustee declare that all money and property
contributed to the Trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
Section 1.01 Name. The name of the Trust created hereby is Woodlawn
Funds Trust.
Section 1.02 Definitions. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) "Bylaws" means the Bylaws of the Trust as adopted by the
Trustees, as amended from time to time.
(b) "Commission" has the meaning given it in the 1940 Act.
"Affiliated Person," "Assignment," "Interested Person" and "Principal
Underwriter" shall have the respective meanings given them in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the Commission
or any rules or regulations adopted by or interpretive releases of the
Commission thereunder. "Majority Shareholder Vote" shall have the same meaning
as the term "vote of a majority of the outstanding voting securities" is given
in the 1940 Act, as modified by or interpreted by any applicable order or orders
of the Commission or any rules or regulations adopted by or interpretive
releases of the Commission thereunder.
(c) "Delaware Act" refers to Chapter 38 of Title 12 of the
Delaware Code entitled "Treatment of Delaware Business Trusts," as amended from
time to time.
(d) "Net Asset Value" means the net asset value of each Series of
the Trust determined in the manner provided in Article IX, Section 9.03 hereof.
(e) "Outstanding Shares" means those Shares shown from time to
time in the books of the Trust or its transfer agent as then issued and
outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the treasury of the
Trust.
(f) "Principal Underwriter" means a party, other than the Trust,
to a contract described in Article VI, Section 6.02 hereof.
(g) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06 hereof.
(h) "Shareholder" means a record owner of Outstanding Shares of
the Trust.
(i) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or class thereof shall be divided and may include fractions of Shares as
well as whole Shares.
(j) The "Trust" means the Woodlawn Funds Trust and reference to the
Trust, when applicable to one or more Series of the Trust, shall refer to any
such Series.
(k) The "Trustees" means the person or persons who has or have
signed this Trust Instrument, so long as he or they shall continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly qualified and serving as Trustees in accordance with the provisions
of Article III hereof and reference herein to a Trustee or to the Trustees shall
refer to the individual Trustees in their capacity as Trustees hereunder.
(l) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of one or
more of the Trust or any Series, or the Trustees on behalf of the Trust or any
Series.
(m) The "1940 Act" means the Investment Company Act of 1940, as
amended from time to time.
ARTICLE II
BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or classes of a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series, and class
thereof, authorized hereunder is unlimited and each Share shall have a par value
of $0.00. All Shares issued hereunder, including without limitation, Shares
issued in connection with a dividend in Shares or a split or reverse split of
Shares, shall be fully paid and nonassessable.
Section 2.02 Issuance of Shares. The Trustees in their discretion may,
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and Outstanding Shares and Shares held in the treasury, to
such party or parties and for such amount and type of consideration, subject to
applicable law, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof. The Trustees, the Principal Underwriter or any other
person the Trustees may authorize for the purpose may, in their discretion,
reject any application for the issuance of Shares.
Section 2.03 Register of Shares and Share Certificates. A register
shall be kept at the principal office of the Trust or at the office of the
Trust's transfer agent which shall contain the names and addresses of the
Shareholders of each Series, the number of Shares of that Series (or any class
or classes thereof) held by them respectively and a record of all transfers
thereof. As to Shares for which no certificate has been issued, such register
shall be conclusive as to who are the holders of the Shares and who shall be
entitled to receive dividends or other distributions or otherwise to exercise or
enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or other distribution, nor to have notice given to him
as herein or in the Bylaws provided, until he has given his address to the
transfer agent or such officer or other agent of the Trustees as shall keep the
said register for entry thereon. It is not contemplated that certificates will
be issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate appropriate rules
and regulations as to their use.
Section 2.04 Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by his agent thereunto duly authorized in writing, upon
delivery to the Trustees or the Trust's transfer agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required. Upon such
delivery, the transfer shall be recorded on the register of the Trust, after
which the transferee of Shares will be regarded as a Shareholder. Until such
record is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the Trustees nor the Trust,
nor any transfer agent or registrar nor any officer, employee or agent of the
Trust shall be affected by any notice of the proposed transfer.
Section 2.05 Treasury Shares. Shares held in the treasury shall not,
until reissued pursuant to Section 2.02 hereof, confer any voting rights on the
Trustees, nor shall such Shares be entitled to any dividends or other
distributions declared with respect to the Shares.
Section 2.06 Establishment of Series. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees shall have full power and authority, in their
sole discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series of the Trust, to establish and designate and to
change in any manner any such Series of Shares or any classes of initial or
additional Series and to fix such preferences, voting powers, rights and
privileges of such Series or classes thereof as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or classes thereof
into a greater or lesser number, to classify or reclassify any issued Shares or
any Series or classes thereof into one or more Series or classes of Shares, and
to take such other action with respect to the Shares as the Trustees may deem
desirable. The establishment and designation of any Series shall be effective
upon the adoption of a resolution by a majority of the Trustees setting forth
such establishment and designation and the relative rights and preferences of
the Shares of such Series. A Series may issue any number of Shares and need not
issue certificates. At any time that there are no Shares outstanding of any
particular Series previously established and designated, the Trustees may by a
majority vote abolish that Series and the establishment and designation thereof.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series, or classes thereof, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series of
the Trust, and each class thereof, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series. Each holder of Shares of a Series
shall be entitled to receive his pro rata share of all distributions made with
respect to such Series. Upon redemption of his Shares, such Shareholder shall be
paid solely out of the funds and property of such Series of the Trust.
Section 2.07 Investment in the Trust. The Trustees shall accept
investments in any Series of the Trust from such persons and on such terms as
they may from time to time authorize. At the Trustees' discretion, such
investments, subject to applicable law, may be in the form of cash or securities
in which the affected Series is authorized to invest, valued as provided in
Article IX, Section 9.03 hereof. Investments in a Series shall be credited to
each Shareholder's account in the form of full Shares at the Net Asset Value per
Share next determined after the investment is received or accepted as may be
determined by the Trustees; provided, however, that the Trustees may, in their
sole discretion, (a) fix the Net Asset Value per Share of the initial capital
contribution, (b) impose a sales charge upon investments in the Trust in such
manner and at such time determined by the Trustees, or (c) issue fractional
Shares.
Section 2.08 Assets and Liabilities of Series. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto, which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto, shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to each
particular Series shall be charged with the liabilities of that Series and all
expenses, costs, charges and reserves attributable to that Series. Any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees between or among any one or more of the Series in
such manner as the Trustees in their sole discretion deem fair and equitable.
Each such allocation shall be conclusive and binding upon the Shareholders of
all Series for all purposes. Without limitation of the foregoing provisions of
this Section 2.08, but subject to the right of the Trustees in their discretion
to allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular Series shall be
enforceable against the assets of such Series only, and not against the assets
of the Trust generally. Notice of this contractual limitation on inter-Series
liabilities may, in the Trustees' sole discretion, be set forth in the
Certificate of Trust of the Trust (whether originally or by amendment) as filed
or to be filed in the Office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act, and upon the giving of such notice in the
certificate of trust, the statutory provisions of Section 3804 of the Delaware
Act relating to limitations on inter-Series liabilities (and the statutory
effect under Section 3804 of setting forth such notice in the certificate of
trust) shall become applicable to the Trust and each Series. Any person
extending credit to, contracting with or having any claim against any Series may
look only to the assets of that Series to satisfy or enforce any debt,
liability, obligation or expense incurred, contracted for or otherwise existing
with respect to that Series. No Shareholder or former Shareholder of any Series
shall have a claim on or any right to any assets allocated or belonging to any
other Series.
Section 2.09 No Preemptive Rights. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
Section 2.10 No Personal Liability of Shareholder. Each Shareholder of
the Trust and of each Series shall not be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or by or on behalf of any Series. The
Trustees shall have no power to bind any Shareholder personally or to call upon
any Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay by
way of subscription for any Shares or otherwise. Every note, bond, contract or
other undertaking issued by or on behalf of the Trust or the Trustees relating
to the Trust or to a Series shall include a recitation limiting the obligation
represented thereby to the Trust or to one or more Series and its or their
assets (but the omission of such a recitation shall not operate to bind any
Shareholder or Trustee of the Trust).
Section 2.11 Assent to Trust Instrument. Every Shareholder, by virtue
of having purchased a Share, shall become a Shareholder and shall be held to
have expressly assented and agreed to be bound by the terms hereof.
ARTICLE III
THE TRUSTEES
Section 3.01 Management of the Trust. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Trust Instrument. The Trustees shall have power to conduct the
business of the Trust and to carry on its operations in any and all of its
branches and maintain offices both within and without the State of Delaware, in
any and all states of the United States of America, in the District of Columbia,
in any and all commonwealths, territories, dependencies, colonies, or
possessions of the United States of America, and in any foreign jurisdiction and
to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination as
to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Trust Instrument, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 3.04 of this Article III, the Trustees shall be elected by
the Shareholders owning of record a plurality of the Shares voting at a meeting
of Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
In the event that less than a majority of the Trustees holding office have been
elected by Shareholders, the Trustees then in office will call a Shareholders'
meeting for the election of Trustees.
Section 3.02 Initial Trustees. The initial Trustees shall be the
persons named herein. On a date fixed by the Trustees, the Shareholders shall
elect at least one (1) but not more than fifteen (15) Trustees, as specified by
the Trustees pursuant to Section 3.05 of this Article III.
Section 3.03 Term of Office. The Trustees shall hold office during the
lifetime of this Trust, and until its termination as herein provided; except (a)
that any Trustee may resign his trust by written instrument signed by him and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired or who has died, become physically or mentally incapacitated by reason
of disease or otherwise, or is otherwise unable to serve, may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (d) that a Trustee may be removed at any meeting of
the Shareholders of the Trust by a vote of Shareholders owning at least
two-thirds of the Outstanding Shares.
Section 3.04 Vacancies and Appointments. In case of the declination to
serve, death, resignation, retirement, removal, physical or mental incapacity by
reason of disease or otherwise, other inability of a Trustee to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder and the certification of the other
Trustees of such vacancy shall be conclusive. In the case of an existing
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
person as they in their discretion shall see fit consistent with the limitations
under the 1940 Act. Such appointment shall be evidenced by a written instrument
signed by a majority of the Trustees in office or by resolution of the Trustees,
duly adopted, which shall be recorded in the minutes of a meeting of the
Trustees, whereupon the appointment shall take effect.
An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur by reason of retirement, resignation or
increase shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this Trust,
the Trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he or she shall
be deemed a Trustee hereunder. The power to appoint a Trustee pursuant to this
section 3.04 is subject to the provisions of Section 16(a) of the 1940 Act.
Section 3.05 Number of Trustees. The number of Trustees shall be at
least one (1), and thereafter shall be such number as shall be fixed from time
to time by a majority of the Trustees, provided, however, that the number of
Trustees shall in no event be more than fifteen (15).
Section 3.06 Effect of Ending of a Trustee's Service. The
disinclination to serve, death, resignation, retirement, removal, incapacity, or
inability of the Trustees, or any one of them, shall not operate to terminate
the Trust or to revoke any existing agency created pursuant to the terms of this
Trust Instrument.
Section 3.07 Ownership of Assets of the Trust. The assets of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by or in the name of the Trust, or in the name
of any person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.01 Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust, and to
vary the investments of any Series in accordance with the prospectus applicable
to such Series. The Trustees shall not in any way be bound or limited by present
or future laws or customs in regard to Trust investments, but shall have full
authority and power to make any and all investments which they, in their sole
discretion, shall deem proper to accomplish the purpose of this Trust without
recourse to any court or other authority. Subject to any applicable limitation
in this Trust Instrument or the Bylaws of the Trust, the Trustees shall have the
power and authority:
(a) To invest and reinvest cash and other property, and to hold
cash or other property uninvested, without in any event being bound or limited
by any present or future law or custom in regard to investments by Trustees, and
to sell, exchange, lend, pledge, mortgage, hypothecate, write options on and
lease any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate to the conduct of
such operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging, pledging or
otherwise subjecting as security the Trust Property; to endorse, guarantee, or
undertake the performance of an obligation or engagement of any other person and
to lend Trust Property;
(d) To provide for the distribution of interests of the Trust
either through a Principal Underwriter in the manner hereinafter provided for or
by the Trust itself, or both, or otherwise pursuant to a plan of distribution of
any kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders; such
Bylaws shall be deemed incorporated and included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate
such agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that
are members of a national securities exchange or such other entities as the
Commission may permit as custodians of any assets of the Trust subject to any
conditions set forth in this Trust Instrument or in the Bylaws;
(h) To retain one or more transfer agents, shareholder servicing
agents, and/or fund accountants;
(i) To set record dates in the manner provided herein or in the
Bylaws;
(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager, custodian,
underwriter or other agent or independent contractor;
(k) To sell or exchange any or all of the assets of the Trust,
subject to the provisions of Article XI, Subsection 11.04(b) hereof;
(l) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property, and to execute and
deliver powers of attorney to such person or persons as the Trustees shall deem
proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(m) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other negotiable form; or
either in the name of the Trust or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the usual
practice of Delaware business trusts or investment companies;
(o) To establish separate and distinct Series with separately
defined investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article II hereof and to establish classes of
such Series having relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act,
to allocate assets, liabilities and expenses of the Trust to a particular Series
or to apportion the same between or among two or more Series, provided that any
liabilities or expenses incurred by a particular Series shall be payable solely
out of the assets belonging to that Series as provided for in Article II hereof;
(q) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern; and to
pay calls or subscriptions with respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor
of or against the Trust or any matter in controversy including, but not limited
to, claims for taxes;
(s) To make distributions of income and of capital gains to
Shareholders in the manner provided herein;
(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or classes, and to require
the redemption of the Shares of any Shareholders whose investment is less than
such minimum, or who does not satisfy any other criteria the Trustees may set
from time to time, upon giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the
powers of the Trustees to said committees and to adopt a committee charter
providing for such responsibilities, membership (including Trustees, officers or
other agents of the Trust therein) and any other characteristics of said
committees as the Trustees may deem proper. Notwithstanding the provisions of
this Article IV, and in addition to such provisions or any other provision of
this Trust Instrument or of the Bylaws, the Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees then in office,
which committee may be empowered to act for and bind the Trustees and the Trust,
as if the acts of such committee were the acts of all the Trustees then in
office, with respect to the institution, prosecution, dismissal, settlement,
review or investigation of any action, suit or proceeding which shall be pending
or threatened to be brought before any court, administrative agency or other
adjudicatory body;
(v) To interpret the investment policies, practices or limitations
of any Series;
(w) To establish a registered office and have a registered agent
in the state of Delaware; and
(x) In general to carry on any other business in connection with
or incidental to any of the foregoing powers, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the attainment of
any object or the furtherance of any power hereinbefore set forth, either alone
or in association with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid business or
purposes, objects or powers.
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
Section 4.02 Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
Section 4.03 Trustees and Officers as Shareholders. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if he were not a Trustee, officer or agent; and the Trustees
may issue and sell or cause to be issued and sold, Shares, to and buy such
Shares from, any such person or any firm or company in which he is interested,
subject only to the general limitations herein contained as to the sale and
purchase of such Shares; and all subject to any restrictions which may be
contained in the Bylaws.
Section 4.04 Action by the Trustees. Except as otherwise provided
herein or in the Bylaws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees (a quorum being
present), including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of the entire number
of Trustees then in office. The Trustees may adopt Bylaws not inconsistent with
this Trust Instrument to provide for the conduct of the business of the Trust
and may amend or repeal such Bylaws to the extent such power is not reserved to
the Shareholders.
Section 4.05 Chairman of the Trustees. The Trustees shall appoint one
of their number to be Chairman of the Board of Trustees. The Chairman shall
preside at all meetings of the Trustees, shall be responsible for the execution
of policies established by the Trustees and the administration of the Trust, and
may be (but is not required to be) the chief executive, financial and/or
accounting officer of the Trust.
Section 4.06 Principal Transactions. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from or sell any securities to, or lend any assets of the Trust to, any Trustee
or officer of the Trust or any firm of which any such Trustee or officer is a
member acting as principal, or have any such dealings with any investment
adviser, administrator, distributor or transfer agent for the Trust or with any
Interested Person of such person; and the Trust may employ any such person, or
firm or company in which such person is an Interested Person, as broker, legal
counsel, registrar, investment adviser, administrator, distributor, transfer
agent, dividend disbursing agent, custodian or in any other capacity upon
customary terms.
ARTICLE V
EXPENSES OF THE TRUST
Subject to the provisions of Article II, Section 2.08 hereof, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; certain insurance premiums;
applicable fees, interest charges and expenses of third parties, including the
Trust's investment advisers, managers, administrators, distributors, custodian,
transfer agent and fund accountant; fees of pricing, interest, dividend, credit
and other reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining corporate
existence; costs of preparing and printing the Trust's prospectuses, statements
of additional information and shareholder reports and delivering them to
existing shareholders; expenses of meetings of shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trustees;
compensation of the Trust's officers and employees and costs of other personnel
performing services for the Trust; costs of Trustee meetings; Securities and
Exchange Commission registration fees and related expenses; state or foreign
securities laws registration fees and related expenses; and for such
non-recurring items as may arise, including litigation to which the Trust (or a
Trustee acting as such) is a party, and for all losses and liabilities by them
incurred in administering the Trust, and for the payment of such expenses,
disbursements, losses and liabilities the Trustees shall have a lien on the
assets belonging to the appropriate Series, or in the case of an expense
allocable to more than one Series, on the assets of each such Series, prior to
any rights or interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned fees and
expenses.
ARTICLE VI
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER,
ADMINISTRATOR AND TRANSFER AGENT
Section 6.01 Investment Adviser. The Trustees may in their discretion,
from time to time, enter into an investment advisory contract or contracts with
respect to the Trust or any Series whereby the other party or parties to such
contract or contracts shall undertake to furnish the Trustees with such
investment advisory, statistical and research facilities and services and such
other facilities and services, if any, all upon such terms and conditions as may
be prescribed in the Bylaws or as the Trustees may in their discretion determine
(such terms and conditions not to be inconsistent with the provisions of this
Trust Instrument or of the Bylaws). Notwithstanding any other provision of this
Trust Instrument, the Trustees may authorize any investment adviser (subject to
such general or specific instructions as the Trustees may from time to time
adopt) to effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of the
Trustees, or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser (and all without further action by the Trustees). Any such purchases,
sales and exchanges shall be deemed to have been authorized by all of the
Trustees.
The Trustees may, subject to the requirements of the 1940 Act,
authorize the investment adviser to employ, from time to time, one or more
sub-advisers to perform such of the acts and services of the investment adviser,
and upon such terms and conditions, as may be agreed upon between the investment
adviser and sub-adviser (such terms and conditions not to be inconsistent with
the provisions of this Trust Instrument or of the Bylaws). Any reference in this
Trust Instrument to the investment adviser shall be deemed to include such
sub-advisers, unless the context otherwise requires.
Section 6.02 Principal Underwriter. The Trustees may in their
discretion from time to time enter into an exclusive or non-exclusive
underwriting contract or contracts providing for the sale of Shares, whereby the
Trust may either agree to sell Shares to the other party to the contract or
appoint such other party as its sales agent for such Shares. In either case, the
contract shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws); and such contract may also provide for the repurchase or sale
of Shares by such other party as principal or as agent of the Trust.
Section 6.03 Administration. The Trustees may in their discretion from
time to time enter into one or more management or administrative contracts
whereby the other party or parties shall undertake to furnish the Trustees with
management or administrative services. The contract or contracts shall be on
such terms and conditions as may be prescribed in the Bylaws and as the Trustees
may in their discretion determine (such terms and conditions not to be
inconsistent with the provisions of this Trust Instrument or of the Bylaws).
Section 6.04 Transfer Agent. The Trustees may in their discretion from
time to time enter into one or more transfer agency and shareholder service
contracts whereby the other party or parties shall undertake to furnish the
Trustees with transfer agency and shareholder services. The contract or
contracts shall be on such terms and conditions as may be prescribed in the
Bylaws and as the Trustees may in their discretion determine (such terms and
conditions not to be inconsistent with the provisions of this Trust Instrument
or of the Bylaws).
Section 6.05 Parties to Contract. Any contract of the character
described in Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or any
contract of the character described in Article VIII hereof may be entered into
with any corporation, firm, partnership, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
trustee, shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered void or voidable by reason of the
existence of any relationship, nor shall any person holding such relationship be
disqualified from voting on or executing the same in his capacity as Shareholder
and/or Trustee, nor shall any person holding such relationship be liable merely
by reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article VI or Article VIII hereof or of
the Bylaws. The same person (including a firm, corporation, partnership, trust,
or association) may be the other party to contracts entered into pursuant to
Sections 6.01, 6.02, 6.03 and 6.04 of this Article VI or pursuant to Article
VIII hereof, and any individual may be financially interested or otherwise
affiliated with persons who are parties to any or all of the contracts mentioned
in this Section 6.05.
Section 6.06 Provisions and Amendments. Any contract entered into
pursuant to Sections 6.01 or 6.02 of this Article VI shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, if applicable, or
other applicable Act of Congress hereafter enacted with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 6.01 of this Article VI shall be effective
unless assented to in a manner consistent with the requirements of said Section
15, as modified by any applicable rule, regulation or order of the Commission.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Article III, Sections 3.01
and 3.02 hereof, (b) for the removal of Trustees as provided in Article III,
Subsection 3.03(d) hereof, (c) with respect to any investment advisory contract
as provided in Article VI, Section 6.01 hereof, and (d) with respect to such
additional matters relating to the Trust as may be required by law, by this
Trust Instrument, or the Bylaws or any registration of the Trust with the
Commission or any state, or as the Trustees may consider desirable.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted separately by individual Series, except (i) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual Series; and
(ii) when the Trustees have determined that the matter affects the interests of
more than one Series, then the Shareholders of all such Series shall be entitled
to vote thereon. The Trustees may also determine that a matter affects only the
interests of one or more classes of a Series, in which case any such matter
shall be voted on by such class or classes. Each whole Share shall be entitled
to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy or in any manner provided for in the Bylaws. A proxy may
be given in writing. The Bylaws may provide that proxies may also, or may
instead, be given by any electronic or telecommunications device or in any other
manner. Notwithstanding anything else herein or in the Bylaws, in the event a
proposal by anyone other than the officers or Trustees of the Trust is submitted
to a vote of the Shareholders of one or more Series or of the Trust, or in the
event of any proxy contest or proxy solicitation or proposal in opposition to
any proposal by the officers or Trustees of the Trust, Shares may be voted only
in person or by written proxy. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required or
permitted by law, this Trust Instrument or any of the Bylaws of the Trust to be
taken by Shareholders.
Section 7.02 Meetings. A meeting of the Shareholders shall be held at
such times, on such day and at such hour as the Trustees may from time to time
determine, either at the principal office of the Trust, or at such other place,
within or without the State of Delaware, as may be designated by the Trustees,
for such purposes as may be specified by the Trustees.
Section 7.03 Quorum and Required Vote. One-third of Shares entitled to
vote in person or by proxy shall be a quorum for the transaction of business at
a Shareholders' meeting, except that where any provision of law or of this Trust
Instrument permits or requires that holders of any Series shall vote as a Series
(or that holders of a class shall vote as a class), then one-third of the
aggregate number of Shares of that Series (or that class) entitled to vote shall
be necessary to constitute a quorum for the transaction of business by that
Series (or that class). Any lesser number shall be sufficient for adjournments.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by law or by any provision of this Trust
Instrument or the Bylaws, a majority of the Shares voted in person or by proxy
shall decide any questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Trust Instrument permits or requires that
the holders of any Series shall vote as a Series (or that the holders of any
class shall vote as a class), then a majority of the Shares present in person or
by proxy of that Series (or class) or, if required by law, a majority of the
Shares of that Series (or class), voted on the matter in person or by proxy
shall decide that matter insofar as that Series (or class) is concerned.
Shareholders may act by unanimous written consent. Actions taken by Series (or
class) may be consented to unanimously in writing by Shareholders of that Series
(or class).
ARTICLE VIII
CUSTODIAN
Section 8.01 Appointment and Duties. Except to the extent not required
with respect to any Series that is a feeder fund, the Trustees shall employ a
bank, a company that is a member of a national securities exchange, or a trust
company that has capital, surplus and undivided profits of at least two million
dollars ($2,000,000) and is a member of the Depository Trust Company, as
custodian with authority as its agent, but subject to such restrictions,
limitations and other requirements, if any, as may be contained in the Bylaws of
the Trust. Said custodian shall be authorized: (a) to hold the securities owned
by the Trust and deliver the same upon written order or oral order confirmed in
writing; (b) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may direct;
and (c) to disburse such funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, subject to such
restrictions, limitations and other requirements, if any, as may be contained in
the Bylaws of the Trust.
Section 8.02 Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, as amended, or such other
person as may be permitted by the Commission, or otherwise in accordance with
the 1940 Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust or its custodians, sub-custodians or other agents.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions.
(a) The Trustees may from time to time declare and pay dividends
or other distributions with respect to any Series. The amount of such dividends
or distributions and the payment of them and whether they are in cash or any
other Trust Property shall be within the sole discretion of the Trustees.
(b) Dividends and other distributions may be paid or made to the
Shareholders of record at the time of declaring a dividend or other distribution
or among the Shareholders of record at such other date or time or dates or times
as the Trustees shall determine, which dividends or distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary
notwithstanding, the Trustees may at any time declare and distribute a stock
dividend pro rata among the Shareholders of a particular Series, or class
thereof, as of the record date of that Series fixed as provided in Subsection
9.01(b) hereof.
Section 9.02 Redemptions. In case any holder of record of Shares of a
particular Series desires to dispose of his Shares or any portion thereof, he
may deposit at the office of the transfer agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the Principal
Underwriter of the Series shall purchase his said Shares, but only at the Net
Asset Value thereof (as described in Section 9.03 of this Article IX). Any
Shareholder may be required to redeem some or all of his shares involuntarily
under such circumstances as the Trustees may determine from time to time. The
Series shall make payment for any such Shares to be redeemed, as aforesaid, in
cash or property from the assets of that Series and payment for such Shares
shall be made by the Series or the Principal Underwriter of the Series to the
Shareholder of record within seven (7) days after the date upon which the
request is effective, or such longer period as may be permitted. Upon
redemption, Shares shall become Treasury shares and may be re-issued from time
to time.
Section 9.03 Determination of Net Asset Value and Valuation of
Portfolio Assets. The term "Net Asset Value" of any Series shall mean that
amount by which the assets of that Series exceed its liabilities, all as
determined by or under the direction of the Trustees. Such value shall be
determined separately for each Series and shall be determined on such days and
at such times as the Trustees may determine. Such determination shall be made
with respect to securities for which market quotations are readily available, at
the market value of such securities; and with respect to other securities and
assets, at the fair value as determined in good faith by the Trustees; provided,
however, that the Trustees, without Shareholder approval, may alter the method
of valuing portfolio securities insofar as permitted under the 1940 Act and the
rules, regulations and interpretations thereof promulgated or issued by the
Commission or insofar as permitted by any Order of the Commission applicable to
the Series. The Trustees may delegate any of their powers and duties under this
Section 9.03 with respect to valuation of assets and liabilities. The resulting
amount, which shall represent the total Net Asset Value of the particular
Series, shall be divided by the total number of Shares of that Series
outstanding at the time and the quotient so obtained shall be the Net Asset
Value per Share of that Series. At any time the Trustees may cause the Net Asset
Value per Share last determined to be determined again in similar manner and may
fix the time when such redetermined value shall become effective. If, for any
reason, the net income of any Series, determined at any time, is a negative
amount, the Trustees shall have the power with respect to that Series (a) to
offset each Shareholder's pro rata share of such negative amount from the
accrued dividend account of such Shareholder; (b) to reduce the number of
Outstanding Shares of such Series by reducing the number of Shares in the
account of each Shareholder by a pro rata portion of that number of full and
fractional Shares which represents the amount of such excess negative net
income; (c) to cause to be recorded on the books of such Series an asset account
in the amount of such negative net income (provided that the same shall
thereupon become the property of such Series with respect to such Series and
shall not be paid to any Shareholder), which account may be reduced by the
amount, of dividends declared thereafter upon the Outstanding Shares of such
Series on the day such negative net income is experienced, until such asset
account is reduced to zero; (d) to combine the methods described in clauses (a)
and (b) and (c) of this sentence; or (e) to take any other action they deem
appropriate, in order to cause (or in order to assist in causing) the Net Asset
Value per Share of such Series to remain at a constant amount per Outstanding
Share immediately after each such determination and declaration. The Trustees
shall also have the power not to declare a dividend out of net income for the
purpose of causing the Net Asset Value per Share to be increased. The Trustees
shall not be required to adopt, but may at any time adopt, discontinue or amend
the practice of maintaining the Net Asset Value per Share of the Series at a
constant amount.
Section 9.04 Suspension of the Right of Redemption. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
as permitted under the 1940 Act. Such suspension shall take effect at such time
as the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share next determined after the termination of
the suspension. In the event that any Series is divided into classes, the
provisions of this Section 9.03, to the extent applicable as determined in the
discretion of the Trustees and consistent with applicable law, may be equally
applied to each such class.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any person other than the Trust or a
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
Section 10.02 Indemnification.
(a) Subject to the exceptions and limitations contained in
Subsection 10.02(b):
(i) every person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof;
(ii) the words "claim," "action," "suit," or "proceeding"
shall apply to all claims, actions, suits or proceedings (civil,
criminal or other, including appeals), actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts
paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office, (A) by the court or other
body approving the settlement; (B) by at least a majority of those
Trustees who are neither Interested Persons of the Trust nor are
parties to the matter based upon a review of readily available facts
(as opposed to a full trial-type inquiry); or (C) by written opinion of
independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry); provided, however,
that any Shareholder may, by appropriate legal proceedings, challenge
any such determination by the Trustees or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation
of a defense to any claim, action, suit or proceeding of the character described
in Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments, or (iii) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under Section 10.02.
Section 10.03 Shareholders. In case any Shareholder of any Series shall
be held to be personally liable solely by reason of his being or having been a
Shareholder of such Series and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives, or, in the case of a corporation
or other entity, its corporate or other general successor) shall be entitled out
of the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
on behalf of the affected Series, shall, upon request by the Shareholder, assume
the defense of any claim made against the Shareholder for any act or obligation
of the Series and satisfy any judgment thereon from the assets of the Series.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Trust Not A Partnership. It is hereby expressly declared
that a trust and not a partnership is created hereby; provided, however, that it
is acknowledged that, for federal tax purposes, the trust created hereby may be
characterized as a corporation. No Trustee hereunder shall have any power to
bind personally either the Trust officers or any Shareholder. All persons
extending credit to, contracting with or having any claim against the Trust or
the Trustees shall look only to the assets of the appropriate Series or (if the
Trustees shall have yet to have established Series) of the Trust for payment
under such credit, contract or claim; and neither the Shareholders nor the
Trustees, nor any of their agents, whether past, present or future, shall be
personally liable therefor.
Section 11.02 Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
X hereof and to Section 11.01 of this Article XI, the Trustees shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may take
advice of counsel or other experts with respect to the meaning and operation of
this Trust Instrument, and subject to the provisions of Article X hereof and
Section 11.01 of this Article XI, shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
Section 11.03 Establishment of Record Dates. The Trustees may close the
Share transfer books of the Trust for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividends or other distributions, or the date for the allotment of
rights, or the date when any change or conversion or exchange of Shares shall go
into effect. In lieu of closing the stock transfer books as aforesaid, the
Trustees may fix in advance a date, not exceeding sixty (60) days preceding the
date of any meeting of Shareholders, or the date for payment of any dividend or
other distribution, or the date for the allotment of rights, or the date when
any change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such dividend
or other distribution, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of Shares, and in
such case such Shareholders and only such Shareholders as shall be Shareholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting, or to receive payment of such dividend or other distribution,
or to receive such allotment or rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any Shares on the books of the Trust
after any such record date fixed as aforesaid.
Section 11.04 Termination of Trust.
(a) This Trust shall continue without limitation of time but
subject to the provisions of Subsection 11.04(b).
(b) The Trustees may, subject to a Majority Shareholder Vote of
each Series affected by the matter or, if applicable, to a Majority Shareholder
Vote of the Trust, and subject to a vote of a majority of the Trustees,
(i) sell and convey all or substantially all of the assets of
the Trust or any affected Series to another trust, partnership,
association or corporation, or to a separate series of shares thereof,
organized under the laws of any state which trust, partnership,
association or corporation is an open-end management investment company
as defined in the 1940 Act, or is a series thereof, for adequate
consideration which may include the assumption of all outstanding
obligations, taxes and other liabilities, accrued or contingent, of the
Trust or any affected Series, and which may include shares of
beneficial interest, stock or other ownership interests of such trust,
partnership, association or corporation or of a series thereof; or
(ii) at any time sell and convert into money all of the assets
of the Trust or any affected Series.
Upon making reasonable provision, in the determination of the Trustees, for the
payment of all such liabilities in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) of each Series (or class) ratably among the holders of Shares
of that Series then outstanding.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in Subsection 11.05(b), the Trust or any
affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged.
Upon termination of the Trust, following completion of the winding up
of its business, the Trustees shall cause a certificate of cancellation of the
Trust's Certificate of Trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any one Trustee.
Without limiting the generality of the foregoing, the existence of the
Trust shall not be affected by sales or purchases of Shares or status of any
Shareholders.
Section 11.05 Reorganization. Notwithstanding anything else herein, the
Trustees, in order to change the form of organization of the Trust, may, without
prior Shareholder approval, (a) cause the Trust to merge or consolidate with or
into one or more trusts, partnerships, associations or corporations so long as
the surviving or resulting entity is an open-end management investment company
under the 1940 Act, or is a series thereof, that will succeed to or assume the
Trust's registration under that Act and which is formed, organized or existing
under the laws of a state, commonwealth, possession or colony of the United
States or (b) cause the Trust to incorporate under the laws of Delaware. Any
agreement of merger or consolidation or certificate of merger may be signed by a
majority of Trustees and facsimile signatures conveyed by electronic or
telecommunication means shall be valid.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.05 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
Section 11.06 Filing of Copies, References, Headings. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof" and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his", "he" and "him", shall be deemed to include the feminine
and neuter, as well as masculine, genders. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
Section 11.07 Applicable Law. The Trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust", and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
Section 11.08 Amendments. Except as specifically provided herein, the
Trustees may, without Shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated Trust Instrument. Shareholders shall have the right to vote
(a) on any amendment which would affect their right to vote granted in Section
7.01 of Article VII hereof, (b) on any amendment to this Section 11.08, (c) on
any amendment as may be required by law or by the Trust's registration statement
filed with the Commission, and (d) on any amendment submitted to them by the
Trustees. Any amendment required or permitted to be submitted to Shareholders
which, as the Trustees determine, shall affect the Shareholders of one or more
Series (or classes) shall be authorized by vote of the Shareholders of each
Series (or class) affected and no vote of Shareholders of a Series (or class)
not affected shall be required. Notwithstanding anything else herein, any
amendment to Article X hereof shall not limit the rights to indemnification or
insurance provided therein with respect to action or omission of Covered Persons
prior to such amendment.
Section 11.09 Fiscal Year. The fiscal year of the Trust shall end on a
specified date as set forth in the Bylaws, provided, however, that the Trustees
may, without Shareholder approval, change the fiscal year of the Trust.
Section 11.10 Provisions in Conflict With Law. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine, with the
advice of counsel, that any of such provisions is in conflict with the 1940 Act,
the regulated investment company provisions of the Internal Revenue Code or with
other applicable laws and regulations, the conflicting provision shall be deemed
never to have constituted a part of this Trust Instrument; provided, however,
that such determination shall not affect any of the remaining provisions of this
Trust Instrument or render invalid or improper any action taken or omitted prior
to such determination. If any provision of this Trust Instrument shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any matter affect such provisions in any other jurisdiction or any
other provision of this Trust Instrument in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being all of the initial
Trustees of the Trust, have executed this instrument as of date first written
above.
/s/ Julian G. Winters, as Trustee
______________________
and not individually
Exhibit (b): Bylaws of the Trust
BYLAWS
OF
WOODLAWN FUNDS TRUST
(a Delaware Business Trust)
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.........................................................1
ARTICLE II OFFICES............................................................1
Section 1. Resident Agent............................................1
Section 2. Offices...................................................1
ARTICLE III SHAREHOLDERS......................................................1
Section 1. Meetings..................................................1
Section 2. Notice of Meetings........................................2
Section 3. Record Date for Meetings and Other Purposes...............2
Section 4. Proxies...................................................2
Section 5. Action Without Meeting....................................3
ARTICLE IV TRUSTEES...........................................................4
Section 1. Meetings of the Trustees..................................4
Section 2. Quorum and Manner of Acting...............................5
ARTICLE V COMMITTEES..........................................................6
Section 1. Executive and Other Committees............................6
Section 2. Meetings, Quorum and Manner of Acting.....................6
ARTICLE VI OFFICERS...........................................................7
Section 1. General Provisions........................................7
Section 2. Term of Office and Qualifications.........................7
Section 3. Removal...................................................7
Section 4. Powers and Duties of the President........................8
Section 5. Powers and Duties of Vice Presidents......................8
Section 6. Powers and Duties of the Treasurer........................8
Section 7. Powers and Duties of the Secretary........................9
Section 8. Powers and Duties of Assistant Treasurers.................9
Section 9. Powers and Duties of Assistant Secretaries................9
Section 10. Compensation of Officers and Trustees
and Members of the Advisory Board.....................9
ARTICLE VII FISCAL YEAR......................................................11
ARTICLE VIII SEAL............................................................11
ARTICLE IX WAIVERS OF NOTICE.................................................11
ARTICLE X CUSTODY OF SECURITIES..............................................11
Section 1. Action Upon Termination of Custodian Agreement...........11
Section 2. Provisions of Custodian Agreement........................12
Section 3. Acceptance of Receipts in Lieu of Certificates...........13
ARTICLE XI AMENDMENTS........................................................13
ARTICLE XII INSPECTION OF BOOKS..............................................13
<PAGE>
BYLAWS
OF
WOODLAWN FUNDS TRUST
ARTICLE I
DEFINITIONS
Any terms defined in the Trust Instrument of Woodlawn Funds Trust as
dated May 19, 1999, as amended from time to time, shall have the same meaning
when used herein.
ARTICLE II
OFFICES
Section 1. Resident Agent. The Trust shall maintain a resident agent in
the State of Delaware, which agent shall initially be The Corporation Trust
Company, 1209 Orange Street, Wilmington, Delaware 19801. The Trustees may
designate a successor resident agent, provided, however, that such appointment
shall not become effective until written notice thereof is delivered to the
office of the Secretary of State.
Section 2. Offices. The Trust may have its principal office and other
offices in such places within as well as without the State of Delaware as the
Trustees may from time to time determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders shall be held as
provided in the Trust Instrument at such place within or without the State of
Delaware as the Trustees shall designate.
Section 2. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his address as recorded on
the register of the Trust mailed at least ten (10) days and not more than sixty
(60) days before the meeting. Only the business stated in the notice of the
meeting shall be considered at such meeting. Any adjourned meeting may be held
as adjourned without further notice. No notice need be given to any Shareholder
who shall have failed to inform the Trust of his current address or if a written
waiver of notice, executed before or after the meeting by the Shareholder or
his/her attorney thereunto authorized, is filed with the records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the purpose
of determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding sixty (60) days, as the Trustees may determine; or without
closing the transfer books the Trustees may fix a date not more than sixty (60)
days prior to the date of any meeting of Shareholders or distribution or other
action as a record date for the determinations of the persons to be treated as
Shareholders of record for such purposes, subject to the provisions of the Trust
Instrument.
Section 4. Proxies. At any meeting of Shareholders, any holder of
Shares entitled to vote may vote by proxy, provided that no proxy shall be voted
at any meeting unless it shall have been placed on file with the Secretary, or
with such other officer or agent of the Trust as the Secretary may direct, for
verification prior to the time at which such vote shall be taken. Proxies may be
solicited in the name of one or more Trustees or one or more of the officers of
the Trust. Only Shareholders of record as of the record date shall be entitled
to vote. Each whole share shall be entitled to one vote as to any matter on
which it is entitled by the Trust Instrument to vote, and each fractional Share
shall be entitled to a proportionate fractional vote. When any Share is held
jointly by two or more persons, any one of them may vote at any meeting in
person or by proxy in respect of such Share, but if more than one of them shall
be present at such meeting in person or by proxy, and such joint owners or their
proxies so present disagree as to any vote to be cast, such vote shall not be
received in respect of such Share. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless challenged at or prior to
its exercise, and the burden of proving invalidity shall rest on the challenger.
If the holder of any such Share is a minor or legally incompetent, and subject
to guardianship or the legal control of any other person as regards the charge
or management of such Share, the person may vote by his or her guardian or such
other person appointed or having such control, and such vote may be given in
person or by proxy. For purposes of this Section, a proxy granted by telephone,
telegram, telex, telecopy, internet, computer interface or other electronic
method of document transfer shall be deemed "executed by or on behalf of a
Shareholder."
Section 5. Action Without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of Shareholders. Such consents shall be
treated for all purposes as a vote taken at a meeting of Shareholders.
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the President,
or by any one of the Trustees, at the time being in office. Notice of the time
and place of each meeting other than regular or stated meetings shall be given
by the Secretary or an Assistant Secretary or by the officer or Trustee calling
the meeting and shall be mailed to each Trustee at least two days before the
meeting, or shall be sent by facsimile, telegraphed, cabled, or sent by
internet, computer interface or other electronic method of document transfer to
each Trustee at his business address, or personally delivered to him or her at
least one day before the meeting. Such notice may, however, be waived by any
Trustee. Notice of a meeting need not be given to any Trustee if a written
waiver of notice, executed by him or her before or after the meeting, is filed
with the records of the meeting, or to any Trustee who attends the meeting
without protesting prior thereto or at its commencement the lack of notice to
him or her. A notice or waiver of notice need not specify the purpose of any
meeting. The Trustees may meet by means of a telephone conference circuit or
similar communications equipment by means of which all persons participating in
the meeting can hear one another. Participation in a telephone conference
meeting shall constitute presence in person at such meeting. Any action required
or permitted to be taken at any meeting of the Trustees may be taken by the
Trustees without a meeting if all the Trustees consent to the action in writing
and the written consents are filed with the records of the Trustees' meetings.
Such consents shall be treated as a vote for all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Trust Instrument or these Bylaws) the
act of a majority of the Trustees present at any such meeting, at which a quorum
is present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers which by law, the Trust Instrument or these Bylaws they are prohibited
from delegating. The Trustees may also elect from their own number other
Committees from time to time, the number composing such Committees, the powers
conferred upon the same (subject to the same limitations as with respect to the
Executive Committee) and the term of membership on such Committees to be
determined by the Trustees. The Trustees may designate a chairman of any such
Committee. In the absence of such designation, the Committee may elect its own
Chairman.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committee, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be kept with the
records of the Trust.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Executive Vice Presidents, one
or more Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. The Trustees may delegate to any officer or Committee the
power to appoint any subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Trust Instrument or these Bylaws, the President, the
Treasurer and the Secretary shall each hold office until his or her successor
shall have been duly elected and qualified, and all other officers shall hold
office at the pleasure of the Trustees. The Secretary and Treasurer may be the
same person. A Vice President and the Treasurer or Assistant Treasurer or a Vice
President and the Secretary or Assistant Secretary may be the same person, but
the offices of Vice President and Secretary and Treasurer shall not be held by
the same person. The President shall hold no other office. Except as above
provided, any two offices may be held by the same person. Any officer may be,
but none need be, a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause, by a vote of a
majority of the Trustees then in office. Any officer or agent appointed by an
officer or Committee may be removed with or without cause by such appointing
officer or Committee.
Section 4. Powers and Duties of the President. The President may call
meetings of the Trustees and of any Committee thereof when he or she deems it
necessary and shall preside at all meetings of the Shareholders. Subject to the
control of the Trustees and to the control of any Committees of the Trustees,
within their respective spheres, as provided by the Trustees, he or she shall at
all times exercise a general supervision and direction over the affairs of the
Trust. He or she shall have the power to employ attorneys and counsel for the
Trust and to employ such subordinate officers, agents, clerks and employees as
he may find necessary to transact the business of the Trust. He or she shall
also have the power to grant, issue, execute or sign such powers of attorney,
proxies or other documents as may be deemed advisable or necessary in
furtherance of the interests of the Trust. The President shall have such other
powers and duties as from time to time may be conferred upon or assigned to him
or her by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, any Vice President designated by the Trustees shall
perform all the duties and may exercise any of the powers of the President,
subject to the control of the Trustees. Each Vice President shall perform such
other duties as may be assigned to him or her from time to time by the Trustees
and the President.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. He or she shall
deliver all funds of the Trust which may come into his or her hands to such
Custodian as the Trustees may employ pursuant to Article X of these Bylaws. He
or she shall in general perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him or
her by the Trustees.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Trustees and of the Shareholders among the
Trust records; he or she shall have custody of the seal of the Trust; he or she
shall have charge of the Share transfer books, lists and records unless the same
are in the charge of the Transfer Agent. He or she shall attend to the giving
and serving of all notices by the Trust in accordance with the provisions of
these Bylaws and as required by law; and subject to these Bylaws, he or she
shall in general perform all duties incident to the office of Secretary and such
other duties as from time to time may be assigned to him or her by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him or her by the Trustees.
Section 9. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him or her by the Trustees.
Section 10. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Trust Instrument,
the compensation of the officers and Trustees and members of any Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any Committee or officer upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he or she is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of June in
each year and shall end on the 31st day of May in each year, provided, however,
that the Trustees may from time to time change the fiscal year.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Trust
Instrument or these Bylaws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or sent by Internet, computer interface or other
electronic method of document transfer for the purposes of these Bylaws when it
has been delivered to a representative of the Trust or any telegraph or cable
company with instructions that it be telegraphed, cabled or sent by other
electronic method of document transfer.
ARTICLE X
CUSTODY OF SECURITIES
Section 1. Action Upon Termination of Custodian Agreement. Upon
termination of a Custodian Agreement or inability of the Custodian to continue
to serve, the Trustees shall promptly appoint a successor custodian, but in the
event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Trust
shall function without a custodian or shall be liquidated. If so directed by
vote of the holders of a majority of the outstanding voting securities, the
Custodian shall deliver and pay over all Trust Property held by it as specified
in such vote.
Section 2. Provisions of Custodian Agreement. The following provisions
shall apply to the employment of a Custodian and to any contract entered into
with the Custodian so employed:
The Trustees shall cause to be delivered to the Custodian all
securities included in the Trust Property or to which the Trust may become
entitled, and shall order the same to be delivered by the Custodian only in
completion of a sale, exchange, transfer, pledge, loan of portfolio securities
to another person, or other disposition thereof, all as the Trustees may
generally or from time to time require or approve or to a successor Custodian;
and the Trustees shall cause all funds included in the Trust Property or to
which it may become entitled to be paid to the Custodian, and shall order the
same disbursed only for investment against delivery of the securities acquired,
or the return of cash held as collateral for loans of portfolio securities, or
in payment of expenses, including management compensation, and liabilities of
the Trust, including distributions to shareholders, or to a successor Custodian.
In connection with the Trust's purchase or sale of futures contracts, the
Custodian shall transmit, prior to receipt on behalf of the Trust of any
securities or other property, funds from the Trust's custodian account in order
to furnish to and maintain funds with brokers as margin to guarantee the
performance of the Trust's futures obligations in accordance with the applicable
requirements of commodities exchanges and brokers.
Section 3. Acceptance of Receipts in Lieu of Certificates. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These Bylaws, or any of them, may be altered, amended or repealed, or
new Bylaws may be adopted by (a) a vote of a majority of the Shares outstanding
and entitled to vote or (b) the Trustees, provided, however, that no Bylaw may
be amended, adopted or repealed by the Trustees if such amendment, adoption or
repeal requires, pursuant to law, the Trust Instrument or these Bylaws, a vote
of the Shareholders.
ARTICLE XII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what times and places, and under what conditions and regulations
the accounts and books of the Trust, or any of them, shall be open to the
inspection of the shareholders; and no shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
law or authorized by the Trustees or by resolution of the Shareholders.
