As filed with the Securities and Exchange Commission February 18, 2000
Securities Act File No. 333-80993
Investment Company Act File No. 811-9393
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 6 [X]
(Check appropriate box or boxes)
TRUST FOR INVESTMENT MANAGERS
(Exact Name of Registrant as Specified in Charter)
2020 E. Financial Way
Suite 100
Glendora, CA 91741
(Address of Principal Executive Offices, including Zip Code)
(626) 852-1033
(Registrant's Telephone Number, including Area Code)
Julie Allecta, Esq.
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, CA 94104
(Name and Address of Agent for Service)
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It is proposed that this filing will become effective (check appropriate box)
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On _________________ pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] On ___________ pursuant to paragraph (a)(2) of Rule 485
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED FEBRUARY 18, 2000
FIRST INTERNET FUND
A SERIES OF TRUST FOR INVESTMENT MANAGERS
The First Internet Fund seeks long-term growth of capital. The Fund will
pursue this objective by investing primarily in the common stocks of companies
principally engaged in the Internet sector.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _____________, 2000
<PAGE>
TABLE OF CONTENTS
Investment Goal, Principal Strategies and Risks............................ 3
Performance Information ................................................... 5
Fees and Expenses ......................................................... 5
Investment Advisor ........................................................ 6
Shareholder Information ................................................... 7
Pricing of Fund Shares .................................................... 10
Dividends and Distributions ............................................... 11
Tax Consequences .......................................................... 11
Rule 12b-1 Fees ........................................................... 11
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INVESTMENT GOAL, PRINCIPAL STRATEGIES AND RISKS
WHAT IS THE FUND'S INVESTMENT GOAL?
The Fund seeks long-term growth of capital.
Of course, there can be no guarantee that the Fund will achieve its investment
objective. This investment objective may be changed only by approval of the
Fund's shareholders. You will be notified of any other changes that are material
and, if such changes are made, you should consider whether the Fund remains an
appropriate investment for you.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The Fund primarily invests in the common stocks of companies that are
principally engaged in the Internet sector. Under normal market conditions, the
Fund will invest at least 65% of its total assets in the common stocks of
companies that facilitate the use of the Internet and the growth of electronic
commerce over the Internet. Companies that are considered part of the Internet
sector generally include those that provide services or products that facilitate
the use of the Internet. This includes companies that provide access to the
Internet and/or design, develop, manufacture or sell products and services
related to facilitating the growth of the Internet and electronic commerce over
the Internet.
There is no limit on the market capitalization of the companies the Fund may
invest in, or in the length of operating history for the companies. The Fund may
invest in initial public offerings ("IPOs").
The Advisor to the Fund has identified four groups that it considers to operate
within the Internet sector. These groups include:
* service providers;
* e-commerce merchants;
* equipment/network manufacturers; and
* software manufacturers
The Advisor will select a "core" position of 30 to 50 common stocks of companies
that are leaders, or emerging leaders, within the Internet sector. The Advisor
will seek to identify companies that are developing new or innovative products,
services or processes that will lead to future growth in earnings, have a major
or dominant share of their Internet sub-grouping and that have reported earnings
in their most recent fiscal year.
The Advisor will consider selling a stock in the Fund's portfolio when it
perceives there has been an adverse change in the fundamental outlook for the
stock's performance. An example of this would be if the company's product line
has been overcome by more advanced technology.
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The Advisor intends to hold the stocks in the Fund's portfolio for an extended
period of time, which would result in a low portfolio turnover rate. This means
that the Advisor will not, under normal circumstances, purchase and sell
securities held in the portfolio in order to realize short term gains. It also
means that the Fund is likely to have lower transaction costs than funds with
higher portfolio turnover rates.
Under normal market conditions, the Fund will stay fully invested in common
stocks. However, the Fund may temporarily depart from its principal investment
strategies by making short term investments in cash equivalents in response to
adverse market, economic, or political conditions. This may result in the Fund
not achieving its investment objective.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
As with all mutual funds, there is the risk that you could lose money on your
investment in the Fund. For example, the following risks could affect the value
of your investment:
MANAGEMENT RISK. Management risk means that your investment in the Fund varies
with the success and failure of the Advisor's investment strategies and the
Advisor's research, analysis and security selection decisions. If the Advisor's
investment strategies do not produce the expected results, your investment could
be diminished or even lost.
MARKET RISK. The value of a share of the Fund--its "net asset value" or "NAV"
depends upon the market value of all of the Fund's investments. The principal
risk of investing in the Fund is that the market value of securities held by the
Fund will move up and down. These up and down fluctuations, which can occur
rapidly and unpredictably, may cause the Fund's investments to be worth less
than the price originally paid, or less than it was worth at an earlier time;
this in turn will affect the Fund's net asset value per share. Market risk may
affect a single company, industry, sector of the economy or the market as a
whole.
SECTOR RISK. The Fund will invest primarily in companies engaged in providing
services and facilitating the growth of the Internet. These companies are
particularly vulnerable to rapidly changing technology, and relatively high
risks of obsolescence caused by rapid and significant scientific and
technological advances. In addition, companies that operate in this sector are
subject to extreme competition and may rapidly lose, or be unable to obtain,
market share. The value of the Fund's shares may be volatile and fluctuate more
than shares of a fund investing in a broader range of industries.
SMALL-SIZE COMPANY RISK. Although the Fund will invest in companies of all
sizes, the Internet sector includes many small companies. While smaller
companies generally have potential for rapid growth, they often involve higher
risks because they lack the management experience, financial resources, product
diversification and competitive strengths of larger corporations. The risk of
investing in securities of small-size companies may involve greater risk than
investing in larger companies because they can be subject to more abrupt or
erratic share price change than larger companies. As a result, the share price
of these companies can be extremely volatile.
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INITIAL PUBLIC OFFERINGS (IPOS). Because IPO shares frequently are volatile in
price, the Fund may decide to hold the IPO shares for only a very short period
of time. This may increase the turnover of the Fund's portfolio and may lead to
increased expenses to the Fund, such as commissions and transaction costs. By
selling shares, the Fund may realize taxable capital gains that it will
subsequently distribute to shareholders.
WHO MAY WANT TO INVEST IN THE FUND?
The Fund may be appropriate for investors who:
* Are pursuing a long-term investment horizon
* Can accept high volatility of share price
* Want to add an investment in Internet companies to diversify their
investment portfolio
* Can accept the greater risks of investing in a portfolio with significant
holdings in the Internet sector
The Fund may not be appropriate for investors who:
* Need regular income or stability of principal
* Are pursuing a short-term goal
* May not want an investment in a portfolio that concentrates is investments
in the Internet sector
PERFORMANCE INFORMATION
Because the Fund has been in operation for less than a full calendar year, its
total return bar chart and performance table have not been included.
FEES AND EXPENSES
The following tables describes the fees and expenses that a shareholder in the
Fund will pay.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum sales charge (load) imposed on purchases................... None
Maximum deferred sales charge (load)............................... None
ANNUAL OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management Fees ................................................... 0.95%
Distribution and Service (12b-1) Fees.............................. 0.25%
Other Expenses* ................................................... %
Total Annual Fund Operating Expenses .............................. %
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Fee Reduction and/or Expense Reimbursement........................ ( %)
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Net Expenses ...................................................... 2.50%
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* Other expenses are estimated for the first fiscal year of the Fund. The
Advisor has contractually agreed to reduce its fees and/or pay expenses of
the Fund for an indefinite period to ensure that Total Annual Fund
Operating Expenses will not exceed 2.50% per year. The Advisor may be
reimbursed for any waiver of its fees or expenses paid on behalf of the
Fund if the Fund's expenses are less than the limit agreed to by the Fund.
The Trustees may terminate this expense reimbursement arrangement at any
time.
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EXAMPLE
Use this example to compare the costs of investing in the Fund to those of
investing in other funds. Of course, your actual costs may be higher or lower.
This example assumes that you invest $10,000 in the Fund for the time periods
indicated. The Example also assumes that your investment has a 5% return each
year, that dividends and distributions are reinvested and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, under the assumptions, your costs would be:
One Year ......................... $
Three Years ...................... $
INVESTMENT ADVISOR
Astrop Research Corporation is the investment advisor to the Fund. The Advisor's
address is 3133 Maple Drive, N.E., Suite 200, Atlanta, GA 30305. The Advisor was
established this year by the principals of its affiliate, Astrop Advisory
Corporation, for the purpose of managing the Fund. Founded in 1982, Astrop
Advisory Corporation, provides investment advisory services to individual and
institutional clients with assets under management in excess of $100 million.
The Advisor provides the Fund with advice on buying and selling securities. The
Advisor also furnishes the Fund with office space and certain administrative
services and provides most of the personnel needed by the Fund. For its
services, the Fund pays the Advisor a monthly management fee which is calculated
at the annual rate of 0.95% of the Fund's average daily net assets.
The Fund is be managed by the Advisor's Investment Committee.
EXPENSE LIMITATION AGREEMENT
The Fund is responsible for its own operating expenses. The Advisor has
contractually agreed to reduce its fees and/or pay expenses of the Fund for an
indefinite period to ensure that Total Fund Operating Expenses will not exceed
2.50% of average daily net assets annually. Any reduction in advisory fees or
payment of expenses made by the Advisor are subject to reimbursement by the Fund
if requested by the Advisor in subsequent fiscal years. The Fund must pay its
current ordinary operating expenses before the Advisor is entitled to any
reimbursement of fees and/or expenses. Under the expense limitation provision of
the Investment Advisory Agreement, reimbursements made by the Advisor in the
Fund's first three years of operation remain eligible for reimbursement as
follows: reimbursements incurred in the first and second years of the Fund's
operation are eligible for reimbursement through the end of the Fund's sixth
fiscal year; reimbursements made in the third year of operation are eligible for
reimbursement through the end of the seventh fiscal year. Before the Advisor may
receive any such reimbursement, the Trustees must review and approve it. The
Trustees may terminate this expense reimbursement arrangement at any time.
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SHAREHOLDER INFORMATION
HOW TO BUY SHARES
You may open a Fund account with $2,500 and add to your account at any time with
$____ or more. You may open a retirement account with $____ and add to your
account at any time with $___ or more. After you have opened a Fund account, you
also may make automatic subsequent monthly investments with $____ or more
through the Automatic Investment Plan. The minimum investment requirements may
be waived from time to time by the Fund.
You may purchase shares of the Fund by check or wire. All purchases by check
must be in U.S. dollars. Third party checks and cash will not be accepted. A
charge may be imposed if your check does not clear. The Fund is not required to
issue share certificates. The Fund reserves the right to reject any purchase in
whole or in part.
BY CHECK
If you are making an initial investment in the Fund, simply complete the
Application Form included with this Prospectus and mail or overnight deliver
(such as FedEx) it with a check (made payable to "First Internet Fund") to:
First Internet Fund
c/o ICA Fund Services Corp.
4455 East Camelback Rd., Ste 261E
Phoenix, AZ 85018
If you are making a subsequent purchase, a stub is attached to the account
statement you will receive after each transaction. Detach the stub from the
statement and mail it together with a check made payable to "First Internet
Fund" to the Fund in the envelope provided with your statement or to the address
noted above. Your account number should be written on the check.
BY WIRE
If you are making an initial investment in the Fund, before you wire funds, the
Transfer Agent must have a completed Account Application. You can mail or
overnight deliver your Account Application to the Transfer Agent at the above
address. You may also fax the Account Application to the Transfer Agent at (602)
522-8172. Upon receipt of your completed Account Application, the Transfer Agent
will establish an account for you. Once your have faxed your new Account
Application, you may instruct your bank to send the wire. Your bank must include
both the name of the Fund you are purchasing and your name so that monies can be
correctly applied. Your bank should transmit immediately available funds by wire
to:
Firstar Bank, N.A. Cinti/Trust
ABA Routing #_______________
First Internet Fund
DDA #____________
Account name (shareholder name)
Shareholder account number
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If you are making a subsequent purchase, your bank should wire funds as
indicated above. IT IS ESSENTIAL THAT YOUR BANK INCLUDE COMPLETE INFORMATION
ABOUT YOUR ACCOUNT IN ALL WIRE INSTRUCTIONS. If you have questions about how to
invest by wire, you may call the Transfer Agent at (800) 576- 8229. Your bank
may charge you a fee for sending a wire to the Fund.
You may buy and sell shares of the Fund through certain brokers (and their
agents) that have made arrangements with the Fund to sell its shares. When you
place your order with such a broker or its authorized agent, your order is
treated as if you had placed it directly with the Fund's Transfer Agent, and you
will pay or receive the next price calculated by the Fund. The broker (or agent)
holds your shares in an omnibus account in the broker's (or agent's) name, and
the broker (or agent) maintains your individual ownership records. The Fund may
pay the broker (or its agent) for maintaining these records as well as providing
other shareholder services. The broker (or its agent) may charge you a fee for
handling your order. The broker (or agent) is responsible for processing your
order correctly and promptly, keeping you advised regarding the status of your
individual account, confirming your transactions and ensuring that you receive
copies of the Fund's prospectus.
AUTOMATIC INVESTMENT PLAN
For your convenience, the Fund offers an Automatic Investment Plan. Under this
Plan, after your initial investment, you authorize the Fund to withdraw from
your personal checking account each month an amount that you wish to invest,
which must be at least $____. If you wish to enroll in this Plan, complete the
appropriate section in the Account Application. The Fund may terminate or modify
this privilege at any time. You may terminate your participation in the Plan at
any time by notifying the Transfer Agent in writing.
RETIREMENT PLANS
The Fund offers an Individual Retirement Account ("IRA") plan. You may obtain
information about opening an IRA account by calling (800) 576-8229. If you wish
to open a Keogh, Section 403(b) or other retirement plan, please contact your
securities dealer.
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HOW TO SELL SHARES
You may sell (redeem) your Fund shares on any day the NYSE is open for business
either directly to the Fund or through your investment representative.
You may redeem your shares by simply sending a written request to the Transfer
Agent. You should give your account number and state whether you want all or
some of your shares redeemed. The letter should be signed by all of the
shareholders whose names appear on the account registration. Certain redemptions
require a signature guarantee. Call the Transfer Agent for details. You should
send your redemption request to:
First Internet Fund
c/o ICA Fund Services Corp.
4455 East Camelback Rd., Ste 261E
Phoenix, AZ 85018
If you complete the Redemption by Telephone portion of the Account Application,
you may redeem all or some of your shares by calling the Transfer Agent at (800)
576-8229 before the close of regular trading on the New York Stock Exchange
("NYSE"). This is normally 4:00 p.m., Eastern time. Redemption proceeds will be
mailed on the next business day to the address that appears on the Transfer
Agent's records. If you request, redemption proceeds will be wired on the next
business day to the bank account you designated on the Account Application. The
minimum amount that may be wired is $1,000. Wire charges, if any, will be
deducted from your redemption proceeds. Telephone redemptions cannot be made if
you notify the Transfer Agent of a change of address within 30 days before the
redemption request. If you have a retirement account, you may not redeem shares
by telephone.
When you establish telephone privileges, you are authorizing the Fund and its
Transfer Agent to act upon the telephone instructions of the person or persons
you have designated on your Account Application. Redemption proceeds will be
transferred to the bank account you have designated on your Account Application.
Before acting upon an instruction received by telephone, the Fund and the
Transfer Agent will use procedures to confirm that the telephone instructions
are genuine. These procedures will include recording the telephone call and
asking the caller for a form of personal identification. If the Fund and the
Transfer Agent follow these procedures, they will not be liable for any loss,
expense, or cost arising out of any telephone redemption request that is
reasonably believed to be genuine. This includes any fraudulent or unauthorized
request. The Fund may change, modify or terminate these privileges at any time
upon at least 60 days' notice to shareholders.
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You may request telephone redemption privileges after your account is opened by
calling the Transfer Agent at (800) 576-8229 for instructions.
You may have difficulties in making a telephone redemption during periods of
abnormal market activity. If this occurs, you may make your redemption request
in writing.
Payment of your redemption proceeds will be made promptly, but not later than
seven days after the receipt of your written request in proper form. If you made
your initial investment by wire, payment of your redemption proceeds for those
shares will not be made until one business day after your completed Account
Application is received by the Fund. If you did not purchase your shares with a
certified check or wire, the Fund may delay payment of your redemption proceeds
for up to 15 days from date of purchase or until your check has cleared,
whichever occurs first.
The Fund may redeem the shares in your account if the value of your account is
less than $_____ as a result of redemptions you have made. This does not apply
to retirement plan or Uniform Gifts or Transfers to Minors Act accounts. You
will be notified that the value of your account is less than $_____ before the
Fund makes an involuntary redemption. You will then have 30 days in which to
make an additional investment to bring the value of your account to at least
$_____ before the Fund takes any action.
The Fund has the right to pay redemption proceeds to you in whole or in part by
a distribution of securities from the Fund's portfolio. It is not expected that
the Fund would do so except in unusual circumstances.
PRICING OF FUND SHARES
The price of the Fund's shares is based on the Fund's net asset value. This is
done by dividing the Fund's assets, minus its liabilities, by the number of
shares outstanding. The Fund's assets are the market value of securities held in
its portfolio, plus any cash and other assets. The Fund's liabilities are fees
and expenses owed by the Fund. The number of Fund shares outstanding is the
amount of shares which have been issued to shareholders. The price you will pay
to buy Fund shares or the amount you will receive when you sell your Fund shares
is based on the net asset value next calculated after your order is received by
the Transfer Agent with complete information and meeting all the requirements
discussed in this Prospectus.
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The net asset value of the Fund's shares is determined as of the close of the
regular daily trading session on the NYSE. This is normally 4:00 p.m., Eastern
time. Fund shares will not be priced on days that the NYSE is closed for trading
(including certain U.S. holidays).
DIVIDENDS AND DISTRIBUTIONS
The Fund will make distributions of dividends and capital gains, if any, at
least annually, typically after year end. The Fund will make another
distribution of any additional undistributed capital gains earned during the
12-month period ended October 31 on or about December 31.
All distributions will be reinvested in Fund shares unless you choose one of the
following options: (1) receive dividends in cash while reinvesting capital gain
distributions in additional Fund shares; or (2) receive all distributions in
cash. If you wish to change your distribution option, write to the Transfer
Agent in advance of the payment for the distribution.
TAX CONSEQUENCES
The Fund intends to make distributions of dividends and capital gains. Dividends
are taxable to you as ordinary income. The rate you pay on capital gain
distributions will depend on how long the Fund held the securities that
generated the gains, not on how long you owned your Fund shares. You will be
taxed in the same manner whether you receive your dividends and capital gain
distributions in cash or reinvest them in additional Fund shares.
If you sell your Fund shares, it is considered a taxable event for you.
Depending on the purchase price and the sale price of the shares you sell, you
may have a gain or a loss on the transaction. You are responsible for any tax
liabilities generated by your transaction.
RULE 12b-1 FEES
The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940. This rule allows the Fund to pay distribution
fees for the sale and distribution of its shares and for services provided to
shareholders. The plan provides for the payment of a distribution and service
fee at the annual rate of 0.25% of the Fund's average daily net assets which are
payable to the Advisor, as Distribution Coordinator. Because these fees are paid
out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment in Fund shares and may cost you more than
paying other types of shares charges.
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FIRST INTERNET FUND
A SERIES OF TRUST FOR INVESTMENT MANAGERS (THE "TRUST")
For investors who want more information about the Fund, the following document
is available free upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated by reference into this
Prospectus.
You can get free copies of the SAI, request other information and discuss your
questions about the Fund by contacting the Fund at:
__________________________________
__________________________________
Telephone: _______________________
You can review and copy information including the Fund's SAI at the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C. You
can obtain information on the operation of the Public Reference Room by calling
1-202-942-8090. Reports and other information about the Fund are also available:
* Free of charge from the Commission's EDGAR database on the Commission's
Internet website at http://www.sec.gov., or
* For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-0102, or
* For a fee, by electronic request at the following e-mail address:
[email protected].
(The Trust's SEC Investment Company Act
file number is 811-09393)
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.
STATEMENT OF ADDITIONAL INFORMATION SUBJECT TO COMPLETION,
DATED FEBRUARY 18, 2000
STATEMENT OF ADDITIONAL INFORMATION
________________, 2000
FIRST INTERNET FUND,
A SERIES OF TRUST FOR INVESTMENT MANAGERS
3133 MAPLE DRIVE, N.E., SUITE 200
ATLANTA, GA 30305
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This Statement of Additional Information ("SAI") is not a Prospectus and it
should be read in conjunction with the Prospectus dated__________, 2000, as may
be revised, of the First Internet Fund (the "Fund"), a series of Trust for
Investment Managers (the "Trust"). Astrop Research Corporation (the "Advisor")
is the advisor to the Fund. A copy of the Fund's Prospectus is available by
calling either of the numbers listed above.
TABLE OF CONTENTS
The Trust ................................................................ B-2
Investment Objective and Policies ........................................ B-2
Investment Restrictions .................................................. B-12
Distributions and Tax Information ........................................ B-13
Trustees and Executive Officers .......................................... B-15
The Fund's Investment Advisor ............................................ B-16
The Fund's Administrator ................................................. B-16
The Fund's Distributor ................................................... B-17
Execution of Portfolio Transactions ...................................... B-18
Portfolio Turnover ....................................................... B-19
Additional Purchase and Redemption Information ........................... B-19
Determination of Share Price ............................................. B-21
Performance Information .................................................. B-22
General Information ...................................................... B-23
Appendix ................................................................. B-24
B-1
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THE TRUST
The Trust for Investment Managers (the "Trust") is an open-end management
investment company organized as a Delaware business trust. The Trust may consist
of various series which represent separate investment portfolios. This SAI
relates only to the Fund.
The Trust is registered with the SEC as a management investment company. Such a
registration does not involve supervision of the management or policies of the
Fund. The Prospectus of the Fund and this SAI omit certain of the information
contained in the Registration Statement filed with the SEC. Copies of such
information may be obtained from the SEC upon payment of the prescribed fee.
INVESTMENT OBJECTIVE AND POLICIES
The Fund has the investment objective of seeking long-term growth of capital.
The Fund is diversified, which under the Investment Company Act of 1940 ("1940
Act") means that as to 75% of its total assets, no more than 5% may be invested
in the securities of a single issuer and that it may hold no more than 10% of
the voting securities of a single issuer. The following information supplements
the discussion of the Fund's investment objective and policies as set forth in
its Prospectus. There can be no guarantee that the Fund's objective will be
attained.
CONVERTIBLE SECURITIES AND WARRANTS. The Fund may invest in convertible
securities and warrants. A convertible security is a fixed-income security (a
debt instrument or a preferred stock) which may be converted at a stated price
within a specified period of time into a certain quantity of the common stock of
the same or a different issuer. Convertible securities are senior to common
stocks in an issuer's capital structure, but are usually subordinated to similar
non-convertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from common stock but lower than that
afforded by a similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation attendant upon a market price advance in
the convertible security's underlying common stock.
A warrant gives the holder a right to purchase at any time during a specified
period a predetermined number of shares of common stock at a fixed price. Unlike
convertible debt securities or preferred stock, warrants do not pay a fixed
dividend. Investments in warrants involve certain risks, including the possible
lack of a liquid market for resale of the warrants, potential price fluctuations
as a result of speculation or other factors, and failure of the price of the
underlying security to reach or have reasonable prospects of reaching a level at
which the warrant can be prudently exercised (in which event the warrant may
expire without being exercised, resulting in a loss of the Fund's entire
investment therein).
INVESTMENT COMPANIES. The Fund may invest in shares of other investment
companies in pursuit of its investment objective. This may include investment in
money market mutual funds in connection with the Fund's management of daily cash
positions. In addition to the advisory and operational fees the Fund bears
directly in connection with its own operation, the Fund and its shareholders
B-2
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will also bear the pro rata portion of each other investment company's advisory
and operational expenses.
BORROWING. The Fund is authorized to borrow money from time to time for
temporary, extraordinary or emergency purposes or for clearance of transactions
in amounts not to exceed 33-1/3% of the value of its total assets at the time of
such borrowings. The use of borrowing by the Fund involves special risk
considerations that may not be associated with other funds having similar
objectives and policies. Since substantially all of the Fund's assets fluctuate
in value, while the interest obligation resulting from a borrowing will be fixed
by the terms of the Fund's agreement with its lender, the net asset value per
share of the Fund will tend to increase more when its portfolio securities
increase in value and to decrease more when its portfolio assets decrease in
value than would otherwise be the case if the Fund did not borrow funds. In
addition, interest costs on borrowings may fluctuate with changing market rates
of interest and may partially offset or exceed the return earned on borrowed
funds. Under adverse market conditions, the Fund might have to sell portfolio
securities to meet interest or principal payments at a time when fundamental
investment considerations would not favor such sales.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities in an
amount not exceeding 33-1/3% of its total assets to financial institutions such
as banks and brokers if the loan is collateralized in accordance with applicable
regulations. Under the present regulatory requirements which govern loans of
portfolio securities, the loan collateral must, on each business day, at least
equal the value of the loaned securities and must consist of cash, letters of
credit of domestic banks or domestic branches of foreign banks, or securities of
the U.S. Government or its agencies. To be acceptable as collateral, letters of
credit must be irrevocable and obligate a bank to pay amounts demanded by the
Fund if the demand meets the terms of the letter. Such terms and the issuing
bank would have to be satisfactory to the Fund. Any loan might be secured by any
one or more of the three types of collateral. The terms of the Fund's loans must
permit the Fund to reacquire loaned securities on three days' notice or in time
to vote on any serious matter and must meet certain tests under the Internal
Revenue Code (the "Code").
SHORT SALES. The Fund is authorized to make short sales of securities. In a
short sale, the Fund sells a security which it does not own, in anticipation of
a decline in the market value of the security. To complete the sale, the Fund
must borrow the security (generally from the broker through which the short sale
is made) in order to make delivery to the buyer. The Fund is then obligated to
replace the security borrowed by purchasing it at the market price at the time
of replacement. The Fund is said to have a "short position" in the securities
sold until it delivers them to the broker. The period during which the Fund has
a short position can range from as little as one day to more than a year. Until
the security is replaced, the proceeds of the short sale are retained by the
broker, and the Fund is required to pay to the broker a negotiated portion of
any dividends or interest which accrue during the period of the loan. To meet
current margin requirements, the Fund is also required to deposit with the
broker additional cash or securities so that the total deposit with the broker
is maintained daily at 150% of the current market value of the securities sold
short (100% of the current market value if a security is held in the account
that is convertible or exchangeable into the security sold short within 90 days
without restriction other than the payment of money).
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Short sales by the Fund create opportunities to increase the Fund's return but,
at the same time, involve specific risk considerations and may be considered a
speculative technique. Since the Fund in effect profits from a decline in the
price of the securities sold short without the need to invest the full purchase
price of the securities on the date of the short sale, the Fund's net asset
value per share will tend to increase more when the securities it has sold short
decrease in value, and to decrease more when the securities it has sold short
increase in value, than would otherwise be the case if it had not engaged in
such short sales. The amount of any gain will be decreased, and the amount of
any loss increased, by the amount of any premium, dividends or interest the Fund
may be required to pay in connection with the short sale. Furthermore, under
adverse market conditions the Fund might have difficulty purchasing securities
to meet its short sale delivery obligations, and might have to sell portfolio
securities to raise the capital necessary to meet its short sale obligations at
a time when fundamental investment considerations would not favor such sales.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under such
agreements, the seller of the security agrees to repurchase it at a mutually
agreed upon time and price. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price on repurchase. In either case, the income to the Fund
is unrelated to the interest rate on the U.S. Government security itself. Such
repurchase agreements will be made only with banks with assets of $500 million
or more that are insured by the Federal Deposit Insurance Corporation or with
Government securities dealers recognized by the Federal Reserve Board and
registered as broker-dealers with the Securities and Exchange Commission ("SEC")
or exempt from such registration. The Fund will generally enter into repurchase
agreements of short durations, from overnight to one week, although the
underlying securities generally have longer maturities. The Fund may not enter
into a repurchase agreement with more than seven days to maturity if, as a
result, more than 15% of the value of its net assets would be invested in
illiquid securities including such repurchase agreements.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
the Fund to the seller of the U.S. Government security subject to the repurchase
agreement. It is not clear whether a court would consider the U.S. Government
security acquired by the Fund subject to a repurchase agreement as being owned
by the Fund or as being collateral for a loan by the Fund to the seller. In the
event of the commencement of bankruptcy or insolvency proceedings with respect
to the seller of the U.S. Government security before its repurchase under a
repurchase agreement, the Fund may encounter delays and incur costs before being
able to sell the security. Delays may involve loss of interest or a decline in
price of the U.S. Government security. If a court characterizes the transaction
as a loan and the Fund has not perfected a security interest in the U.S.
Government security, the Fund may be required to return the security to the
seller's estate and be treated as an unsecured creditor of the seller. As an
unsecured creditor, the Fund would be at the risk of losing some or all of the
principal and income involved in the transaction. As with any unsecured debt
instrument purchased for the Fund, the Advisor seeks to minimize the risk of
loss through repurchase agreements by analyzing the creditworthiness of the
other party, in this case the seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the security. However, the Fund will
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always receive as collateral for any repurchase agreement to which it is a party
securities acceptable to it, the market value of which is equal to at least 100%
of the amount invested by the Fund plus accrued interest, and the Fund will make
payment against such securities only upon physical delivery or evidence of book
entry transfer to the account of its Custodian. If the market value of the U.S.
Government security subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will direct the seller of the
U.S. Government security to deliver additional securities so that the market
value of all securities subject to the repurchase agreement will equal or exceed
the repurchase price. It is possible that the Fund will be unsuccessful in
seeking to impose on the seller a contractual obligation to deliver additional
securities.
ILLIQUID SECURITIES. The Fund may not invest more than 15% of the value of its
net assets in securities that at the time of purchase have legal or contractual
restrictions on resale or are otherwise illiquid. The Advisor will monitor the
amount of illiquid securities in the Fund's portfolio, under the supervision of
the Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to sell restricted or other illiquid securities promptly or at reasonable prices
and might thereby experience difficulty satisfying redemption requests within
seven days. The Fund might also have to register such restricted securities in
order to sell them, resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not reflect the actual liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the SEC under the Securities Act,
the Trust's Board of Trustees may determine that such securities are not
illiquid securities despite their legal or contractual restrictions on resale.
In all other cases, however, securities subject to restrictions on resale will
be deemed illiquid.
FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets the
securities of foreign issuers in the form of American Depositary Receipts
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(ADRs"). ADRs are depositary receipts for foreign securities denominated in U.S.
dollars and traded on U.S. securities markets. These are certificates evidencing
ownership of shares of a foreign-based issuer held in trust by a bank or similar
financial institution. Designed for use in U.S. securities markets, ADRs are
alternatives to the purchase of the underlying securities in their national
market and currencies. ADRs may be purchased through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the underlying security and a depositary, whereas a depositary may
establish an unsponsored facility without participation by the issuer of the
depositary security. Holders of unsponsored depositary receipts generally bear
all the costs of such facilities and the depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts of the deposited securities.
RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign securities
involve certain inherent risks, including the following:
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and diversification and balance of
payments position. The internal politics of some foreign countries may not be as
stable as those of the United States. Governments in some foreign countries also
continue to participate to a significant degree, through ownership interest or
regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are affected by the
trade policies and economic conditions of their trading partners. If these
trading partners enacted protectionist trade legislation, it could have a
significant adverse effect upon the securities markets of such countries.
CURRENCY FLUCTUATIONS. The Fund will invest only in securities denominated in
U.S. dollars. For this reason, the value of the Fund's assets may not be subject
to risks associated with variations in the value of foreign currencies relative
to the U.S. dollar to the same extent as might otherwise be the case. Changes in
the value of foreign currencies against the U.S. dollar may, however, affect the
value of the assets and/or income of foreign companies whose U.S. dollar
denominated securities are held by the Fund. Such companies may also be affected
significantly by currency restrictions and exchange control regulations enacted
from time to time.
LEGAL AND REGULATORY MATTERS. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
TAXES. The interest and dividends payable on some of the Fund's foreign
portfolio securities may be subject to foreign withholding taxes, thus reducing
the net amount of income available for distribution to Fund shareholders.
OPTIONS ON SECURITIES. The Fund may write (sell) covered call options to a
limited extent on its portfolio securities ("covered options") in an attempt to
enhance gain.
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When the Fund writes a covered call option, it gives the purchaser of the option
the right, upon exercise of the option, to buy the underlying security at the
price specified in the option (the "exercise price") at any time during the
option period, generally ranging up to nine months. If the option expires
unexercised, the Fund will realize income to the extent of the amount received
for the option (the "premium"). If the call option is exercised, a decision over
which the Fund has no control, the Fund must sell the underlying security to the
option holder at the exercise price. By writing a covered option, the Fund
forgoes, in exchange for the premium less the commission ("net premium") the
opportunity to profit during the option period from an increase in the market
value of the underlying security above the exercise price.
The Fund may terminate its obligation as writer of a call option by purchasing
an option with the same exercise price and expiration date as the option
previously written. This transaction is called a "closing purchase transaction."
Closing sale transactions enable the Fund immediately to realize gains or
minimize losses on its options positions. There is no assurance that a liquid
secondary market on an options exchange will exist for any particular option, or
at any particular time, and for some options no secondary market may exist. If
the Fund is unable to effect a closing purchase transaction with respect to
options it has written, it will not be able to terminate its obligations or
minimize its losses under such options prior to their expiration. If the Fund is
unable to effect a closing sale transaction with respect to options that it has
purchased, it would have to exercise the option in order to realize any profit.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements may take place in the underlying markets that cannot be reflected in
the options markets. The purchase of options is a highly specialized activity
which involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions.
OPTIONS ON SECURITIES INDICES. The Fund may write (sell) covered call options on
securities indices in an attempt to increase gain. A securities index option
written by the Fund would obligate it, upon exercise of the options, to pay a
cash settlement, rather than to deliver actual securities, to the option holder.
Although the Fund will not ordinarily own all of the securities comprising the
stock indices on which it writes call options, such options will usually be
written on those indices which correspond most closely to the composition of the
Fund's portfolio. As with the writing of covered call options on securities, the
Fund will realize a gain in the amount of the premium received upon writing an
option if the value of the underlying index increases above the exercise price
and the option is exercised, the Fund will be required to pay a cash settlement
that may exceed the amount of the premium received by the Fund. The Fund may
purchase call options in order to terminate its obligations under call options
it has written.
The Fund may purchase call and put options on securities indices for the purpose
of hedging against the risk of unfavorable price movements adversely affecting
the value of the Fund's securities or securities the Fund intends to buy.
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Securities index options will not be purchased for speculative purposes. Unlike
an option on securities, which gives the holder the right to purchase or sell
specified securities at a specified price, an option on a securities index gives
the holder the right, upon the exercise of the option, 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 securities 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
included in the index. For example, some securities index options are based on a
broad market index such as the Standard & Poor's 500 or the Value Line Composite
Index, or a narrower market index such as the Standard & Poor's 100. Indices may
also be based on industry or market segments.
The Fund may purchase put options in order to hedge against an anticipated
decline in stock market prices that might adversely affect the value of the
Fund's portfolio securities. If the Fund purchases a put option on a stock
index, the amount of payment it receives on exercising the option depends on the
extent of any decline in the level of the stock index below the exercise price.
Such payments would tend to offset a decline in the value of the Fund's
portfolio securities. If, however, the level of the stock index increases and
remains above the exercise price while the put option is outstanding, the Fund
will not be able to profitably exercise the option and will lose the amount of
the premium and any transaction costs. Such loss may be partially offset by an
increase in the value of the Fund's portfolio securities. The Fund may write put
options on stock indices in order to close out positions in stock index put
options which it has purchased.
The Fund may purchase call options on stock indices in order to participate in
an anticipated increase in stock market prices or to lock in a favorable price
on securities that it intends to buy in the future. If the Fund purchases a call
option on a stock index, the amount of the payment it receives upon exercising
the option depends on the extent of any increase in the level of the stock index
above the exercise price. Such payments would in effect allow the Fund to
benefit from stock market appreciation even though it may not have had
sufficient cash to purchase the underlying stocks. Such payments may also offset
increases in the price of stocks that the Fund intends to purchase. If, however,
the level of the stock index declines and remains below the exercise price while
the call option is outstanding, the Fund will not be able to exercise the option
profitably and will lose the amount of the premium and transaction costs. Such
loss may be partially offset by a reduction in the price the Fund pays to buy
additional securities for its portfolio. The Fund may write call options on
stock indices in order to close out positions in stock index call options which
it has purchased.
The effectiveness of hedging through the purchase of options on securities
indices will depend upon the extent to which price movements in the portion of
the securities portfolio being hedged correlate with price movements in the
selected stock index. Perfect correlation is not possible because the securities
held or to be acquired by the Fund will not exactly match the composition of the
stock indices on which the options are available. In addition, the purchase of
stock index options involves the risk that the premium and transaction costs
paid by the Fund in purchasing an option will be lost as a result of
unanticipated movements in prices of the securities comprising the stock index
on which the option is based.
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FUTURES. The Fund may buy and sell interest rate and stock index futures
contracts. A futures contract is an agreement between two parties to buy and
sell a security or an index for a set price on a future date. Futures contracts
are traded on designated "contract markets" which, through their clearing
corporations, guarantee performance of the contracts.
Entering into a futures contract for the sale of securities has an effect
similar to the actual sale of securities, although sale of the futures contract
might be accomplished more easily and quickly. Entering into futures contracts
for the purchase of securities has an effect similar to the actual purchase of
the underlying securities, but permits the continued holding of securities other
than the underlying securities.
A stock index futures contract may be used as a hedge by the Fund with regard to
market risk as distinguished from risk relating to a specific security. A stock
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. Changes in the market value of
a particular stock index futures contract reflects changes in the specified
index of equity securities on which the future is based.
There are several risks in connection with the use of futures contracts. In the
event of an imperfect correlation between the futures contract and the portfolio
position which is intended to be protected, the desired protection may not be
obtained and the Fund may be exposed to risk of loss. Further, unanticipated
changes in interest rates or stock price movements may result in a poorer
overall performance for the Fund than if it had not entered into any futures on
stock indices.
In addition, the market prices of futures contracts may be affected by certain
factors. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the securities
and futures markets. Second, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. There is no
assurance that a liquid secondary market on an exchange or board of trade will
exist for any particular contract or at any particular time.
CORPORATE DEBT SECURITIES. The Fund may invest in debt securities, including
debt securities rated below investment grade. Bonds rated below BBB by S&P or
Baa by Moody's, commonly referred to "junk bonds," typically carry higher coupon
rates than investment grade bonds, but also are described as speculative by both
S&P and Moody's and may be subject to greater market price fluctuations, less
liquidity and greater risk of income or principal including greater possibility
of default and bankruptcy of the issuer of such securities than more highly
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rated bonds. Lower rated bonds also are more likely to be sensitive to adverse
economic or company developments and more subject to price fluctuations in
response to changes in interest rates. The market for lower-rated debt issues
generally is thinner and less active than that for higher quality securities,
which may limit the Fund's ability to sell such securities at fair value in
response to changes in the economy or financial markets. During periods of
economic downturn or rising interest rates, highly leveraged issuers of lower
rated securities may experience financial stress which could adversely affect
their ability to make payments of interest and principal and increase the
possibility of default.
Ratings of debt securities represent the rating agencies' opinions regarding
their quality, are not a guarantee of quality and may be reduced after the Fund
has acquired the security. If a security's rating is reduced while it held by
the Fund, the Advisor will consider whether the Fund should continue to hold the
security but is not required to dispose of it. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings in response to subsequent events, so that an
issuer's current financial conditions may be better or worse than the rating
indicates. The ratings for corporate debt securities are described in Appendix
A.
MORTGAGE-RELATED SECURITIES
The Fund may invest in mortgage-related securities. These securities include
mortgage pass-through securities, which represent interests in pools of
mortgages in which payments of both interest and principal on the securities are
generally made monthly, in effect "passing through" monthly payments made by the
individual borrowers on the residential mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the securities).
Early repayment of principal on mortgage pass-through securities (arising from
prepayments of principal due to the sale of underlying property, refinancing, or
foreclosure, net of fees and costs which may be incurred) may expose a Portfolio
to a lower rate of return upon reinvestment of principal. Also, if a security
subject to repayment has been purchased at a premium, in the event of prepayment
the value of the premium would be lost.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the full
faith and credit of the U. S. Government (in the case of securities guaranteed
by GNMA), or by agencies and instrumentalities of the U.S. Government (in the
case of securities guaranteed by FNMA or the Federal Home Loan Mortgage
Corporation ("FHLMC"), which are supported only by the discretionary authority
of the U.S. Government to purchase the agency's obligations). Mortgage
pass-through securities created by non-governmental issuers (such as commercial
banks, savings and loan institutions, private mortgage insurance companies,
mortgage bankers and other secondary market issuers) may be supported by various
forms of insurance or guarantees, including individual loan, title, pool and
hazard insurance, and letters of credit, which may be issued by governmental
entities, private insurers or the mortgage poolers.
Collateralized mortgage obligations ("CMO's") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
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in most cases, semi-annually. CMO's may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage pass-
through securities guaranteed by GNMA, FHLMC, or FNMA. CMO's are structured into
multiple classes, with each class bearing a different stated maturity. Monthly
payments of principal, including prepayments, are first returned to investors
holding the shortest maturity class. Investors holding the longer maturity
classes receive principal only after the first class has been retired. Other
mortgage related securities include those that directly or indirectly represent
a participation in or are secured by and payable from mortgage loans on real
property, such as CMO residuals or stripped mortgage-backed securities, and may
be structured in classes with rights to receive varying proportions of principal
and interest. Certain of these government interest-only and principal-only fixed
mortgage-backed securities may be considered liquid under guidelines to be
established by the Board of Trustees, if, under such procedures, they can be
disposed of promptly in the ordinary course of business at a value reasonably
close to that used in the calculation of net asset value per share. Any
interest-only and principal-only securities not determined to be liquid under
these guidelines will be subject to the Fund's limitations on illiquid
securities as set forth under "Illiquid Securities," above.
SHORT-TERM INVESTMENTS. The Fund may invest in any of the following securities
and instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. The Fund may
acquire certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar- denominated obligations of domestic banks, savings and loan associations
or financial institutions which, at the time of purchase, have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less than
$100 million if the principal amount of such bank obligations are fully insured
by the U.S. Government.
In addition to purchasing certificates of deposit and bankers' acceptances, to
the extent permitted under its investment objective and policies stated above
and in its prospectus, the Fund may make interest-bearing time or other
interest-bearing deposits in commercial or savings banks. Time deposits are
non-negotiable deposits maintained at a banking institution for a specified
period of time at a specified interest rate.
COMMERCIAL PAPER AND SHORT-TERM NOTES. The Fund may invest a portion of its
assets in commercial paper and short-term notes. Commercial paper consists of
unsecured promissory notes issued by corporations. Issues of commercial paper
and short-term notes will normally have maturities of less than nine months and
fixed rates of return, although such instruments may have maturities of up to
one year.
Commercial paper and short-term notes will consist of issues rated at the time
of purchase "A-2" or higher by Standard & Poor's Ratings Group, "Prime-1" or
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"Prime-2" by Moody's Investors Service, Inc., or similarly rated by another
nationally recognized statistical rating organization or, if unrated, will be
determined by the Adviser to be of comparable quality. These rating symbols are
described in Appendix B.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by the Fund
and (unless otherwise noted) are fundamental and cannot be changed without the
affirmative vote of a majority of the Fund's outstanding voting securities as
defined in the 1940 Act. The Fund may not:
1. Make loans to others, except (a) through the purchase of debt securities in
accordance with its investment objectives and policies, (b) to the extent the
entry into a repurchase agreement is deemed to be a loan.
2. (a) Borrow money, except as stated in the Prospectus and this SAI. Any such
borrowing will be made only if immediately thereafter there is an asset coverage
of at least 300% of all borrowings.
(b) Mortgage, pledge or hypothecate any of its assets except in connection
with any such borrowings.
3. Purchase securities on margin, participate on a joint or joint and several
basis in any securities trading account, or underwrite securities. (Does not
preclude the Fund from obtaining such short- term credit as may be necessary for
the clearance of purchases and sales of its portfolio securities).
4. Purchase or sell real estate, commodities or commodity contracts. (As a
matter of operating policy, the Board of Trustees may authorize the Fund in the
future to engage in certain activities regarding futures contracts for bona fide
hedging purposes; any such authorization will be accompanied by appropriate
notification to shareholders).
5. Invest 25% or more of the market value of its assets in the securities of
companies engaged in any one industry. (Does not apply to investment in the
securities of the U.S. Government, its agencies or instrumentalities.)
6. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into options,
futures, forward or repurchase transactions.
7. With respect to 75% of its total assets, invest more than 5% of its total
assets in securities of a single issuer or hold more than 10% of the voting
securities of such issuer. (Does not apply to investment in the securities of
the U.S. Government, its agencies or instrumentalities.)
The Fund observes the following policies, which are not deemed fundamental and
which may be changed without shareholder vote. The Fund may not:
8. Invest in any issuer for purposes of exercising control or management.
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9. Invest in securities of other investment companies except as permitted under
the 1940 Act.
10. Invest, in the aggregate, more than 15% of its net assets in securities with
legal or contractual restrictions on resale, securities which are not readily
marketable and repurchase agreements with more than seven days to maturity.
11. With respect to fundamental investment restriction 2(a) above, the Fund will
not purchase portfolio securities while outstanding borrowings exceed 5% of its
assets.
If a percentage restriction described in the Prospectus or in this SAI is
adhered to at the time of investment, a subsequent increase or decrease in a
percentage resulting from a change in the values of assets will not constitute a
violation of that restriction, except with respect to borrowing or the purchase
of restricted or illiquid securities.
DISTRIBUTIONS AND TAX INFORMATION
DISTRIBUTIONS. Dividends from net investment income and distributions from net
profits from the sale of securities are generally made annually. Also, the Fund
expects to distribute any undistributed net investment income on or about
December 31 of each year. Any net capital gains realized through the period
ended October 31 of each year will also be distributed by December 31 of each
year.
Each distribution by the Fund is accompanied by a brief explanation of the form
and character of the distribution. In January of each year the Fund will issue
to each shareholder a statement of the federal income tax status of all
distributions.
TAX INFORMATION. Each series of the Trust is treated as a separate entity for
federal income tax purposes. The Fund intends to continue to qualify and elect
to be treated as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986 (the "Code"), provided that it complies with all
applicable requirements regarding the source of its income, diversification of
its assets and timing of distributions. It is the Fund's policy to distribute to
its shareholders all of its investment company taxable income and any net
realized capital gains for each fiscal year in a manner that complies with the
distribution requirements of the Code, so that the Fund will not be subject to
any federal income tax or excise taxes based on net income. To avoid the excise
tax, the Fund must also distribute (or be deemed to have distributed) by
December 31 of each calendar year (i) at least 98% of its ordinary income for
such year, (ii) at least 98% of the excess of its realized capital gains over
its realized capital losses for the one-year period ending on October 31 during
such year and (iii) any amounts from the prior calendar year that were not
distributed and on which the Fund paid no federal excise tax.
The Fund's ordinary income generally consists of interest and dividend income,
less expenses. Net realized capital gains for a fiscal period are computed by
taking into account any capital loss carryforward of the Fund.
Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. In the case of corporate
B-13
<PAGE>
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Portfolio designates the amount
distributed as a qualifying dividend. This designated amount cannot, however,
exceed the aggregate amount of qualifying dividends received by the Portfolio
for its taxable year. The deduction, if any, may be reduced or eliminated if
Portfolio shares held by a corporate investor are treated as debt-financed or
are held for fewer than 46 days.
Any long-term capital gain distributions are taxable to shareholders as
long-term capital gains regardless of the length of time they have held their
shares. Capital gains distributions are not eligible for the dividends-received
deduction referred to in the previous paragraph. Distributions of any ordinary
income and net realized capital gains will be taxable as described above,
whether received in shares or in cash. Shareholders who choose to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share on the reinvestment date. Distributions are generally taxable
when received. However, distributions declared in October, November or December
to shareholders of record on a date in such a month and paid the following
January are taxable as if received on December 31. Distributions are includable
in alternative minimum taxable income in computing a shareholder's liability for
the alternative minimum tax.
Under the Code, the Fund will be required to report to the Internal Revenue
Service all distributions of ordinary income and capital gains as well as gross
proceeds from the redemption of Portfolio shares, except in the case of exempt
shareholders, which includes most corporations. Pursuant to the backup
withholding provisions of the Code, distributions of any taxable income and
capital gains and proceeds from the redemption of Fund shares may be subject to
withholding of federal income tax at the current maximum federal tax rate of 31
percent in the case of non-exempt shareholders who fail to furnish the Fund with
their taxpayer identification numbers and with required certifications regarding
their status under the federal income tax law. If the backup withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld. Corporate and other exempt shareholders should provide the Fund
with their taxpayer identification numbers or certify their exempt status in
order to avoid possible erroneous application of backup withholding. The Fund
reserves the right to refuse to open an account for any person failing to
certify the person's taxpayer identification number.
The Fund will not be subject to corporate income tax in the State of Delaware as
long as its qualifies as regulated investment companies for federal income tax
purposes. Distributions and the transactions referred to in the preceding
paragraphs may be subject to state and local income taxes, and the tax treatment
thereof may differ from the federal income tax treatment.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
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<PAGE>
In addition, the foregoing discussion of tax law is based on existing provisions
of the Code, existing and proposed regulations thereunder, and current
administrative rulings and court decisions, all of which are subject to change.
Any such charges could affect the validity of this discussion. The discussion
also represents only a general summary of tax law and practice currently
applicable to the Fund and certain shareholders therein, and, as such, is
subject to change. In particular, the consequences of an investment in shares of
the Fund under the laws of any state, local or foreign taxing jurisdictions are
not discussed herein. Each prospective investor should consult his or her own
tax advisor to determine the application of the tax law and practice in his or
her own particular circumstances.
TRUSTEES AND EXECUTIVE OFFICERS
The Trustees of the Trust, who were elected for an indefinite term by the
initial shareholders of the Trust, are responsible for the overall management of
the Trust, including general supervision and review of the investment activities
of the Fund. The Trustees, in turn, elect the officers of the Trust, who are
responsible for administering the day-to-day operations of the Trust and its
separate series. The current Trustees and officers, their affiliations, dates of
birth and principal occupations for the past five years are set forth below.
Unless noted otherwise, each person has held the position listed for a minimum
of five years.
<TABLE>
<CAPTION>
Name, Address Position(s) Held Principal Occupation(s)
and Age With Trust During Past Five Years
------- ---------- ----------------------
<S> <C> <C>
George J. Rebhan, 7/10/34 Trustee Retired. Formerly, President Hotchkis
1920 Mission St. and Wiley Fund (mutual funds) from
South Pasadena, CA 91030 1985 to 1993.
Ashley T. Rabun 5/10/52 Trustee Founder and Chief Executive Officer,
2161 India St. InvestorReach, Inc. (financial services
San Diego, CA 92101 and marketing and distribution
Consulting). Formerly, Partner and
Director, Nicholas-Applegate Capital
Management (investment management)
from 1992 to 1996.
James Clayburn LaForce 12/28/28 Trustee Dean Emeritus, John E. Anderson
P.O. Box 1595 Graduate School of Management,
San Diego, CA 92101 University of California, Los Angeles.
Robert H. Wadsworth* 1/25/40 Trustee and President of Investment Company
4455 Camelback Rd. President Administration, LLC ("ICA") (mutual
Phoenix, AZ 85018 fund administrator and the Trust's
Administrator) and First Fund
Distributors, Inc. (registered broker-
dealer and the Trust's Distributor).
</TABLE>
B-15
<PAGE>
<TABLE>
<CAPTION>
Name, Address Position(s) Held Principal Occupation(s)
and Age With Trust During Past Five Years
------- ---------- ----------------------
<S> <C> <C>
Robert M. Slotky* 6/16/47 Treasurer Senior Vice President, ICA since May 1997.
2020 E. Financial Way Formerly, instructor of accounting at
Glendora, CA 91741 California State University-Northridge
(1997); Chief Financial Officer, Wanger
Asset Management L.P. and Treasurer of
Acorn Investment Trust (1992-1996).
</TABLE>
- ----------
* Indicates an "interested person" of the Trust as defined in the 1940 Act.
Set forth below is the rate of compensation received by the following Trustees
from all portfolios of the Trust. This total amount is allocated among the
portfolios. Disinterested Trustees receive an annual retainer of $7,500. The
Trustees also receive a fee of $750 for any special meeting or committee meeting
attended on a date other than that of a regularly scheduled meeting.
Disinterested trustees are also reimbursed for expenses in connection with each
Board meeting attended. No other compensation or retirement benefits were
received by any Trustee or officer from the portfolios of the Trust.
Name of Trustee Total Annual Compensation
- --------------- -------------------------
George J. Rebhan $7,500
Ashley T. Rabun $7,500
James Clayburn LaForce $7,500
As of the date of this SAI, the Trustees and officers of the Trust as a group
did not own more than 1% of the outstanding shares of the Fund.
THE FUND'S INVESTMENT ADVISOR
As stated in the Prospectus, investment advisory services are provided to the
Fund by Astrop Research Corporation, the Advisor, pursuant to an Investment
Advisory Agreement. (the "Advisory Agreement"). As compensation, the Fund pays
the Advisor a monthly management fee (accrued daily) based upon the average
daily net assets of the Fund at the annual rate of 0.95%.
The Advisory Agreement continues in effect for successive annual periods so long
as such continuation is approved at least annually by the vote of (1) the Board
of Trustees of the Trust (or a majority of the outstanding shares of the Fund,
and (2) a majority of the Trustees who are not interested persons of any party
to the Advisory Agreement, in each case cast in person at a meeting called for
the purpose of voting on such approval. The Advisory Agreement may be terminated
at any time, without penalty, by either party to the Advisory Agreement upon
sixty days' written notice and is automatically terminated in the event of its
"assignment," as defined in the 1940 Act.
THE FUND'S ADMINISTRATOR
The Fund has an Administration Agreement with Investment Company Administration,
LLC (the "Administrator"), a corporation owned and controlled in part by Mr.
Wadsworth with offices at 4455 E. Camelback Rd., Ste. 261-E, Phoenix, AZ 85018.
B-16
<PAGE>
The Administration Agreement provides that the Administrator will prepare and
coordinate reports and other materials supplied to the Trustees; prepare and/or
supervise the preparation and filing of all securities filings, periodic
financial reports, prospectuses, statements of additional information, marketing
materials, tax returns, shareholder reports and other regulatory reports or
filings required of the Fund; prepare all required notice filings necessary to
maintain the Fund's ability to sell shares in all states where the Fund
currently does, or intends to do business; coordinate the preparation, printing
and mailing of all materials (e.g., Annual Reports) required to be sent to
shareholders; coordinate the preparation and payment of Fund related expenses;
monitor and oversee the activities of the Fund's servicing agents (i.e.,
transfer agent, custodian, fund accountants, etc.); review and adjust as
necessary the Fund's daily expense accruals; and perform such additional
services as may be agreed upon by the Fund and the Administrator. For its
services, the Administrator receives a monthly fee at the following annual rate:
Average Net Assets Fee or Fee Rate
- ------------------ ---------------
Less than $22.5 million $45,000
$22.5 to $50 million 0.20%
$50 to $100 million 0.15%
$100 to $150 million 0.10%
Over $150 million 0.05%
THE FUND'S DISTRIBUTOR
First Fund Distributors, Inc., (the "Distributor"), a corporation partially
owned by Mr. Paggioli and Mr. Wadsworth, acts as the Fund's principal
underwriter in a continuous public offering of the Fund's shares. After its
initial two year term, the Distribution Agreement between the Fund and the
Distributor continues in effect for periods not exceeding one year if approved
at least annually by (I) the Board of Trustees or the vote of a majority of the
outstanding shares of the Fund (as defined in the 1940 Act) and (ii) a majority
of the Trustees who are not interested persons of any such party, in each case
cast in person at a meeting called for the purpose of voting on such approval.
The Distribution Agreement may be terminated without penalty by the parties
thereto upon sixty days' written notice, and is automatically terminated in the
event of its assignment as defined in the 1940 Act.
The Trust, on behalf of the Fund, has adopted a Distribution Plan in accordance
with Rule 12b-1 (the "Plan") under the 1940 Act that permits the Fund to pay
distribution fees for the sale and distribution of its shares. The Plan provides
that the Fund will pay a fee to the Adviser as Distribution Coordinator at an
annual rate of up to 0.25% of the Fund's average daily net assets. The fee is
paid to the Adviser as reimbursement for, or in anticipation of, expenses
incurred for distribution related activity.
Under the Plan, the Trustees will be furnished quarterly with information
detailing the amount of expenses paid under the Plan and the purposes for which
payments were made. The Plan may be terminated at any time by vote of a majority
of the Trustees of the Trust who are not interested persons. Continuation of the
Plan is considered by such Trustees no less frequently than annually.
B-17
<PAGE>
EXECUTION OF PORTFOLIO TRANSACTIONS
Pursuant to the Advisory Agreement, the Advisor determines which securities are
to be purchased and sold by the Fund and which broker-dealers are eligible to
execute the Fund's portfolio transactions. Purchases and sales of securities in
the over-the-counter market will generally be executed directly with a
"market-maker" unless, in the opinion of the Advisor, a better price and
execution can otherwise be obtained by using a broker for the transaction.
Purchases of portfolio securities for the Fund also may be made directly from
issuers or from underwriters. Where possible, purchase and sale transactions
will be effected through dealers (including banks) which specialize in the types
of securities which the Fund will be holding, unless better executions are
available elsewhere. Dealers and underwriters usually act as principal for their
own accounts. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by more
than one dealer or underwriter are comparable, the order may be allocated to a
dealer or underwriter that has provided research or other services as discussed
below.
In placing portfolio transactions, the Advisor will use its reasonable efforts
to choose broker-dealers capable of providing the services necessary to obtain
the most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker-dealer can offer the services needed to obtain the most
favorable price and execution available, consideration may be given to those
broker-dealers which furnish or supply research and statistical information to
the Advisor that it may lawfully and appropriately use in its investment
advisory capacities, as well as provide other services in addition to execution
services. The Advisor considers such information, which is in addition to and
not in lieu of the services required to be performed by it under its Agreement
with the Fund, to be useful in varying degrees, but of indeterminable value.
Portfolio transactions may be placed with broker-dealers who sell shares of the
Fund subject to rules adopted by the National Association of Securities Dealers,
Inc.
While it is the Fund's general policy to seek first to obtain the most favorable
price and execution available in selecting a broker-dealer to execute portfolio
transactions for the Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Advisor, even if the specific services are not directly useful to the Fund and
may be useful to the Advisor in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, the
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Advisor's overall responsibilities to the
Fund.
Investment decisions for the Fund are made independently from those of other
client accounts or mutual funds ("Funds") managed or advised by the Advisor.
B-18
<PAGE>
Nevertheless, it is possible that at times identical securities will be
acceptable for both the Fund and one or more of such client accounts or Funds.
In such event, the position of the Fund and such client account(s) or Funds in
the same issuer may vary and the length of time that each may choose to hold its
investment in the same issuer may likewise vary. However, to the extent any of
these client accounts or Funds seeks to acquire the same security as the Fund at
the same time, the Fund may not be able to acquire as large a portion of such
security as it desires, or it may have to pay a higher price or obtain a lower
yield for such security. Similarly, the Fund may not be able to obtain as high a
price for, or as large an execution of, an order to sell any particular security
at the same time. If one or more of such client accounts or Funds simultaneously
purchases or sells the same security that the Fund is purchasing or selling,
each day's transactions in such security will be allocated between the Fund and
all such client accounts or Funds in a manner deemed equitable by the Advisor,
taking into account the respective sizes of the accounts and the amount being
purchased or sold. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as the Fund is
concerned. In other cases, however, it is believed that the ability of the Fund
to participate in volume transactions may produce better executions for the
Fund.
The Fund does not effect securities transactions through brokers in accordance
with any formula, nor does it effect securities transactions through brokers
solely for selling shares of the Fund, although the Fund may consider the sale
of shares as a factor in allocating brokerage. However, as stated above,
broker-dealers who execute brokerage transactions may effect purchase of shares
of the Fund for their customers.
PORTFOLIO TURNOVER
Although the Fund generally will not invest for short-term trading purposes,
portfolio securities may be sold without regard to the length of time they have
been held when, in the opinion of the Advisor, investment considerations warrant
such action. Portfolio turnover rate is calculated by dividing (1) the lesser of
purchases or sales of portfolio securities for the fiscal year by (2) the
monthly average of the value of portfolio securities owned during the fiscal
year. A 100% turnover rate would occur if all the securities in the Fund's
portfolio, with the exception of securities whose maturities at the time of
acquisition were one year or less, were sold and either repurchased or replaced
within one year. A high rate of portfolio turnover (100% or more) generally
leads to transaction costs and may result in a greater number of taxable
transactions. See "Execution of Portfolio Transactions."
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The information provided below supplements the information contained in the
Fund's Prospectus regarding the purchase and redemption of Fund shares.
HOW TO BUY SHARES. The public offering price of Fund shares is the net asset
value. The Fund receives the net asset value. Shares are purchased at the public
offering price next determined after the Transfer Agent receives your order in
proper form. In most cases, in order to receive that day's public offering
price, the Transfer Agent must receive your order in proper form before the
close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00
p.m., Eastern time.
B-19
<PAGE>
The NYSE annually announces the days on which it will not be open for trading.
The most recent announcement indicates that it will not be open on the following
days: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
However, the NYSE may close on days not included in that announcement.
The Trust reserves the right in its sole discretion (i) to suspend the continued
offering of the Fund's shares, (ii) to reject purchase orders in whole or in
part when in the judgment of the Advisor or the Distributor such rejection is in
the best interest of the Fund, and (iii) to reduce or waive the minimum for
initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economies can be achieved in sales of the Fund's
shares.
How to Sell Shares. You can sell your Fund shares any day the NYSE is open for
regular trading. The Fund may require documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Transfer Agent for details.
SIGNATURE GUARANTEES. If you sell shares having a net asset value of $10,000 a
signature guarantee is required. Certain other transactions, including
redemptions, also require a signature guarantee. Signature guarantees may be
obtained from a bank, broker-dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency or savings
institution. A notary public cannot provide a signature guarantee.
DELIVERY OF REDEMPTION PROCEEDS. Payments to shareholders for shares of the Fund
redeemed directly from the Fund will be made as promptly as possible but no
later than seven days after receipt by the Fund's Transfer Agent of the written
request in proper form, with the appropriate documentation as stated in the
Prospectus, except that the Fund may suspend the right of redemption or postpone
the date of payment during any period when (a) trading on the NYSE is restricted
as determined by the SEC or the NYSE is closed for other than weekends and
holidays; (b) an emergency exists as determined by the SEC making disposal of
portfolio securities or valuation of net assets of the Fund not reasonably
practicable; or (c) for such other period as the SEC may permit for the
protection of the Fund's shareholders. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, but only as
authorized by SEC rules.
The value of shares on redemption or repurchase may be more or less than the
investor's cost, depending upon the market value of the Fund's portfolio
securities at the time of redemption or repurchase.
TELEPHONE REDEMPTIONS. Shareholders must have selected telephone transactions
privileges on the Account Application when opening a Fund account. Upon receipt
of any instructions or inquiries by telephone from a shareholder or, if held in
a joint account, from either party, or from any person claiming to be the
shareholder, the Fund or its agent is authorized, without notifying the
shareholder or joint account parties, to carry out the instructions or to
respond to the inquiries, consistent with the service options chosen by the
shareholder or joint shareholders in his or their latest Account Application or
other written request for services, including purchasing or redeeming shares of
the Fund and depositing and withdrawing monies from the bank account specified
B-20
<PAGE>
in the Bank Account Registration section of the shareholder's latest Account
Application or as otherwise properly specified to the Fund in writing.
The Transfer Agent will employ these and other reasonable procedures to confirm
that instructions communicated by telephone are genuine; if it fails to employ
reasonable procedures, the Fund and the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. If these procedures are
followed, an investor agrees, however, that to the extent permitted by
applicable law, neither the Fund nor its agents will be liable for any loss,
liability, cost or expense arising out of any redemption request, including any
fraudulent or unauthorized request. For information, consult the Transfer Agent.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Transfer Agent by telephone. In this event,
you may wish to submit a written redemption request, as described in the
Prospectus. The Telephone Redemption Privilege may be modified or terminated
without notice.
REDEMPTIONS-IN-KIND. The Trust has filed an election under SEC Rule 18f-1
committing to pay in cash all redemptions by a shareholder of record up to
amounts specified by the rule (in excess of the lesser of (i) $250,000 or (ii)
1% of the Fund's assets). The Fund has reserved the right to pay the redemption
price of its shares in excess of the amounts specified by the rule, either
totally or partially, by a distribution in kind of portfolio securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares being
sold. If a shareholder receives a distribution in kind, the shareholder could
incur brokerage or other charges in converting the securities to cash.
AUTOMATIC INVESTMENT PLAN. As discussed in the Prospectus, the Fund provides an
Automatic Investment Plan for the convenience of investors who wish to purchase
shares of the Fund on a regular basis. All record keeping and custodial costs of
the Automatic Investment Plan are paid by the Fund. The market value of the
Fund's shares is subject to fluctuation, so before undertaking any plan for
systematic investment, the investor should keep in mind that this plan does not
assure a profit nor protect against depreciation in declining markets.
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value and offering price of shares of
the Fund will be determined once daily as of the close of public trading on the
NYSE (normally 4:00 p.m., Eastern time) on each day that the NYSE is open for
trading. The Fund does not expect to determine the net asset value of its shares
on any day when the NYSE is not open for trading even if there is sufficient
trading in its portfolio securities on such days to materially affect the net
asset value per share. However, the net asset value of the Fund's shares may be
determined on days the NYSE is closed or at times other than 4:00 p.m. if the
Board of Trustees decides it is necessary.
In valuing the Fund's assets for calculating net asset value, readily marketable
portfolio securities listed on a national securities exchange or on NASDAQ are
valued at the last sale price on the business day as of which such value is
being determined. If there has been no sale on such exchange or on NASDAQ on
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<PAGE>
such day, the security is valued at the closing bid price on such day. Readily
marketable securities traded only in the over-the-counter market and not on
NASDAQ are valued at the current or last bid price. If no bid is quoted on such
day, the security is valued by such method as the Board of Trustees of the Trust
shall determine in good faith to reflect the security's fair value. All other
assets of the Fund are valued in such manner as the Board of Trustees in good
faith deems appropriate to reflect their fair value.
The net asset value per share of the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
will be accompanied by information on the Fund's average annual compounded rate
of return for the most recent one, five and ten year periods, or shorter periods
from inception, through the most recent calendar quarter. The Fund may also
advertise aggregate and average total return information over different periods
of time.
The Fund's total return may be compared to relevant indices, including Standard
& Poor's 500 Composite Stock Index and indices published by Lipper Analytical
Services, Inc. From time to time, evaluations of the Fund's performance by
independent sources may also be used in advertisements and in information
furnished to present or prospective investors in the Fund.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any period should
not be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
The Fund's average annual compounded rate of return is determined by reference
to a hypothetical $1,000 investment that includes capital appreciation and
depreciation for the stated period, according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at the
end of the period
Aggregate total return is calculated in a similar manner, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
B-22
<PAGE>
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through periodic
reports. Financial statements certified by independent public accountants will
be submitted to shareholders at least annually.
Firstar Institutional Custody Services, located at 425 Walnut St., Cincinnati,
Ohio 45201 acts as Custodian of the securities and other assets of the Fund. ICA
Fund Services Corp., 4455 East Camelback Rd., Ste. 261-E, Phoenix, AZ 85018,
acts as the Fund's transfer and shareholder service agent. The Custodian and
Transfer Agent do not participate in decisions relating to the purchase and sale
of securities by the Fund.
____________________________ are the independent auditors for the Fund.
Paul, Hastings, Janofsky & Walker LLP, 345 California Street, 29th Floor, San
Francisco, California 94104, are legal counsel to the Fund.
The Trust was organized as a Delaware business trust on April 27, 1999. The
Agreement and Declaration of Trust permits the Board of Trustees to issue an
limited number of full and fractional shares of beneficial interest, without par
value, which may be issued in any number of series. The Board of Trustees may
from time to time issue other series, the assets and liabilities of which will
be separate and distinct from any other series.
Shares issued by the Fund have no preemptive, conversion, or subscription
rights. Shareholders have equal and exclusive rights as to dividends and
distributions as declared by the Fund and to the net assets of the Fund upon
liquidation or dissolution. The Fund, as a separate series of the Trust, votes
separately on matters affecting only the Fund (e.g., approval of the Advisory
Agreement); all series of the Trust vote as a single class on matters affecting
all series jointly or the Trust as a whole (e.g., election or removal of
Trustees). Voting rights are not cumulative, so that the holders of more than
50% of the shares voting in any election of Trustees can, if they so choose,
elect all of the Trustees. While the Trust is not required and does not intend
to hold annual meetings of shareholders, such meetings may be called by the
Trustees in their discretion, or upon demand by the holders of 10% or more of
the outstanding shares of the Trust, for the purpose of electing or removing
Trustees.
B-23
<PAGE>
APPENDIX A
CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which 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 by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which 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 fluctuations or protective elements
may be of greater amplitude or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospectus of ever attaining any
real investment standing.
B-24
<PAGE>
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modified 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
STANDARD & POOR'S RATINGS GROUP
AAA: Bonds rated AAA are highest grade debt obligations. This rating indicates
an extremely strong capacity to pay principal and interest.
AA: Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A: Bonds rated A have a strong capacity to pay principal and interest, although
they are more susceptible to the adverse effects of changes in circumstances and
economic conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded on balance as
predominantly speculative with respect to capacity to pay interest and repay
principal BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
BB: Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Bonds rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC: Bonds rated CCC have a currently identifiable vulnerability to default and
are dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC: The rating CC typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI: The rating CI is reserved for income bonds on which no interest is being
paid.
D: Bonds rated D are in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
additional of a plus or minus sign to show relative standing with the major
categories.
B-25
<PAGE>
APPENDIX B
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have a
superior ability for repayment of senior short-term debt 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 earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
B-26
<PAGE>
TRUST FOR INVESTMENT MANAGERS
PART C
ITEM 23. EXHIBITS.
(1) Agreement and Declaration of Trust (1)
(2) By-Laws (1)
(3) Specimen Share Certificate (2)
(4) Form of Investment Advisory Agreement
(5) Form of Distribution Agreement
(6) Not applicable
(7) Form of Custodian Agreement (2)
(8) (a) Form of Administration Agreement (2)
(b) Form of Fund Accounting Service Agreement
(c) Form of Transfer Agency and Service Agreement
(d) Expense Reimbursement Agreement
(9) Form of opinion of Counsel
(10) Powers of Attorney (3)
(11) Not applicable
(12) Not applicable
(13) Distribution Plan
(14) Not applicable
(15) Not applicable
- ----------
(1) Incorporated by reference from Registrant's initial Registration Statement
on Form N-1A (File No. 333-80993) filed on June 18, 1999.
(2) Incorporated by reference from Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 333-80993) filed
on September 17, 1999.
(3) Incorporated by reference from Post-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A (File No. 333-80993) filed
on October 13, 1999.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION
Article VI of Registrant's By-Laws states as follows:
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
<PAGE>
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed:
(a) in the case of conduct in his official capacity as a Trustee of the
Trust, that his conduct was in the Trust's best interests, and
(b) in all other cases, that his conduct was at least not opposed to the
Trust's best interests, and
(c) in the case of a criminal proceeding, that he had no reasonable cause
to believe the conduct of that person was unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of this Trust to procure a judgment in
its favor by reason of the fact that that person is or was an agent of this
Trust, against expenses actually and reasonably incurred by that person in
connection with the defense or settlement of that action if that person acted in
good faith, in a manner that person believed to be in the best interests of this
Trust and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue, or matter as to which that person
shall have been adjudged to be liable on the basis that personal
benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity; or
<PAGE>
(b) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's
duty to this Trust, unless and only to the extent that the court in
which that action was brought shall determine upon application that in
view of all the circumstances of the case, that person was not liable
by reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity for the
expenses which the court shall determine; or
(c) of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses
incurred in defending a threatened or pending action which is settled
or otherwise disposed of without court approval, unless the required
approval set forth in Section 6 of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of this
Trust has been successful on the merits in defense of any proceeding referred to
in Sections 2 or 3 of this Article or in defense of any claim, issue or matter
therein, before the court or other body before whom the proceeding was brought,
the agent shall be indemnified against expenses actually and reasonably incurred
by the agent in connection therewith, provided that the Board of Trustees,
including a majority who are disinterested, non-party Trustees, also determines
that based upon a review of the facts, the agent was not liable by reason of the
disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not parties
to the proceeding and are not interested persons of the Trust (as
defined in the Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i)security for the undertaking; or (ii) the existence
of insurance protecting the Trust against losses arising by reason of any lawful
advances; or (iii) a determination by a majority of a quorum of Trustees who are
not parties to the proceeding and are not interested persons of the Trust, or by
an independent legal counsel in a written opinion, based on a review of readily
available facts that there is reason to believe that the agent ultimately will
<PAGE>
be found entitled to indemnification. Determinations and authorizations of
payments under this Section must be made in the manner specified in Section 6 of
this Article for determining that the indemnification is permissible.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Sections 5 or 6 in any circumstances where
it appears:
(a) that it would be inconsistent with a provision of the Agreement and
Declaration of Trust of the Trust, a resolution of the shareholders,
or an agreement in effect at the time of accrual of the alleged cause
of action asserted in the proceeding in which the expenses were
incurred or other amounts were paid which prohibits or otherwise
limits indemnification; or
(b) that it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Agreement and Declaration of Trust of the
Trust.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in connection with the successful defense
of any action, suit or proceeding) is asserted against the Registrant by such
director, officer or controlling person 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
<PAGE>
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
With respect to the Investment Adviser, the response to this item is
incorporated by reference to the Adviser's Form ADV, as amended, File No.
801-702.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The Registrant's principal underwriter also acts as principal
underwriter for the following investment companies:
Advisors Series Trust
Brandes Investment Trust
Fleming Mutual Fund Group
Fremont Mutual Funds
Guinness Flight Investment Funds
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Purisima Funds
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group
Professionally Managed Portfolios
(b) The following information is furnished with respect to the officers and
directors of First Fund Distributors, Inc.:
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ---------------- ----------- ----------
Robert H. Wadsworth President and Trustee
4455 E. Camelback Road Treasurer
Suite 261E
Phoenix, AZ 85018
Eric M. Banhazl Vice President None
2020 E. Financial Way
Glendora, CA 91741
Steven J. Paggioli Vice President and None
915 Broadway Secretary
New York, New York 10010
(c) Not applicable.
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession the Registrant's
custodian and transfer agent, except those records relating to portfolio
transactions and the basic organizational and Trust documents of the Registrant
(see Subsections (2) (iii). (4), (5), (6), (7), (9), (10) and (11) of Rule
31a-1(b)), which, with respect to portfolio transactions are kept by the Fund's
Advisor at its address set forth in the prospectus and statement of additional
information and with respect to trust documents by its administrator at 2020 E.
Financial Way, Suite 100, Glendora, CA 91741.
ITEM 29. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Parts A
and B.
ITEM 30. UNDERTAKINGS
The registrant undertakes:
(a) To furnish each person to whom a Prospectus is delivered a copy of
Registrant's latest annual report to shareholders, upon request and
without charge.
(b) If requested to do so by the holders of at least 10% of the Trust's
outstanding shares, to call a meeting of shareholders for the purposes
of voting upon the question of removal of a director and assist in
communications with other shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant has duly caused this amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Phoenix in the State of Arizona on
February 16, 2000.
TRUST FOR INVESTMENT MANAGERS
By /s/ Robert H. Wadsworth
---------------------------------
Robert H. Wadsworth
President
Pursuant to the requirements of the Securities Act of 1933, this amendment
to this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated.
/s/ Robert H. Wadsworth Trustee February 16, 2000
- ---------------------------
Robert H. Wadsworth
/s/ Robert M. Slotky Principal February 16, 2000
- ---------------------------
Robert M. Slotky Financial
Officer
George J. Rebhan* Trustee February 16, 2000
- ---------------------------
George T. Rebhan
Ashley T. Rabun* Trustee February 16, 2000
- ---------------------------
Ashley T. Rabun
James Clayburn Laforce* Trustee February 16, 2000
- ---------------------------
James Clayburn LaForce
* By: /s/ Robert H. Wadsworth
--------------------------
Robert H. Wadsworth, Attorney-in-Fact under powers of
attorney as filed with Post-Effective Amendment No. 1
to the Registration Statement filed on October 13, 1999
<PAGE>
EXHIBITS
Exhibit No. Description
- ----------- -----------
99B.4 Form of Advisory Agreement
99B.5 Form of Distribution Agreement
99B.8.B Form of Fund Accounting Service Agreement
99B.8.C Form of Transfer Agency and Service Agreement
99B.8.D Form of Expense Reimbursement Agreement
99B.9 Form of opinion letter
99B.13 12b-1 Plan
TRUST FOR INVESTMENT MANAGERS
INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made as of the___ day of ________,
2000, by and between Trust for Investment Managers, a Delaware business trust
(hereinafter called the "Trust"), on behalf of the following series of the
Trust, First Internet Fund (the "Fund") and Astrop Research Corporation, a
Georgia corporation (hereinafter called the "Advisor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company, registered
as such under the Investment Company Act of 1940 (the "Investment Company Act");
and
WHEREAS, the Fund is a series of the Trust having separate assets and
liabilities; and
WHEREAS, the Advisor is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act") and is engaged in the
business of supplying investment advice as an independent contractor; and
WHEREAS, the Trust desires to retain the Advisor to render advice and
services to the Fund pursuant to the terms and provisions of this Agreement, and
the Advisor desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties to this Agreement, intending to be legally
bound hereby, mutually agree as follows:
1. APPOINTMENT OF ADVISOR. The Trust hereby employs the Advisor and the
Advisor hereby accepts such employment, to render investment advice and related
services with respect to the assets of the Fund for the period and on the terms
set forth in this Agreement, subject to the supervision and direction of the
Trust's Board of Trustees.
2. DUTIES OF ADVISOR.
(a) GENERAL DUTIES. The Advisor shall act as investment adviser to the
Fund and shall supervise investments of the Fund on behalf of the Fund in
accordance with the investment objectives, policies and restrictions of the Fund
as set forth in the Fund's and Trust's governing documents, including, without
limitation, the Trust's Agreement and Declaration of Trust and By-Laws; the
Fund's prospectus, statement of additional information and undertakings; and
such other limitations, policies and procedures as the Trustees may impose from
-1-
<PAGE>
time to time in writing to the Advisor. In providing such services, the Advisor
shall at all times adhere to the provisions and restrictions contained in the
federal securities laws, applicable state securities laws, the Internal Revenue
Code, the Uniform Commercial Code and other applicable law.
Without limiting the generality of the foregoing, the Advisor shall:
(i) furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of portfolio
securities for the Fund, including the taking of such steps as may be necessary
to implement such advice and recommendations (E.G., placing the orders); (ii)
manage and oversee the investments of the Fund, subject to the ultimate
supervision and direction of the Trust's Board of Trustees; (iii) vote proxies
for the Fund, file ownership reports under Section 13 of the Securities Exchange
Act of 1934 for the Fund, and take other actions on behalf of the Fund; (iv)
maintain the books and records required to be maintained by the Fund except to
the extent arrangements have been made for such books and records to be
maintained by the administrator or another agent of the Fund; (v) furnish
reports, statements and other data on securities, economic conditions and other
matters related to the investment of the Fund's assets which the Fund's
administrator or distributor or the officers of the Trust may reasonably
request; and (vi) render to the Trust's Board of Trustees such periodic and
special reports with respect to the Fund's investment activities as the Board
may reasonably request, including at least one in-person appearance annually
before the Board of Trustees.
(b) BROKERAGE. The Advisor shall be responsible for decisions to buy
and sell securities for the Fund, for broker-dealer selection, and for
negotiation of brokerage commission rates, provided that the Advisor shall not
direct order to an affiliated person of the Advisor without general prior
authorization to use such affiliated broker or dealer for the Trust's Board of
Trustees. The Advisor's primary consideration in effecting a securities
transaction will be execution at the most favorable price. In selecting a
broker-dealer to execute each particular transaction, the Advisor may take the
following into consideration: the best net price available; the reliability,
integrity and financial condition of the broker-dealer; the size of and
difficulty in executing the order; and the value of the expected contribution of
the broker-dealer to the investment performance of the Fund on a continuing
basis. The price to the Fund in any transaction may be less favorable than that
available from another broker-dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees of the Trust may
determine, the Advisor shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides (directly or
indirectly) brokerage or research services to the Advisor an amount of
commission for effecting a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
the Trust. The Advisor is further authorized to allocate the orders placed by it
on behalf of the Fund to such brokers or dealers who also provide research or
-2-
<PAGE>
statistical material, or other services, to the Trust, the Advisor, or any
affiliate of either. Such allocation shall be in such amounts and proportions as
the Advisor shall determine, and the Advisor shall report on such allocations
regularly to the Trust, indicating the broker-dealers to whom such allocations
have been made and the basis therefor. The Advisor is also authorized to
consider sales of shares as a factor in the selection of brokers or dealers to
execute portfolio transactions, subject to the requirements of best execution,
I.E., that such brokers or dealers are able to execute the order promptly and at
the best obtainable securities price.
On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of the Fund as well as of other clients, the Advisor,
to the extent permitted by applicable laws and regulations, may aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and the most efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
3. Representations of the Advisor.
(a) The Advisor shall use its best judgment and efforts in rendering
the advice and services to the Fund as contemplated by this Agreement.
(b) The Advisor shall maintain all licenses and registrations
necessary to perform its duties hereunder in good order.
(c) The Advisor shall conduct its operations at all times in
conformance with the Advisers Act, the Investment Company Act , and any other
applicable state and/or self-regulatory organization regulations.
(d) The Advisor shall maintain errors and omissions insurance in an
amount at least equal to that disclosed to the Board of Trustees in connection
with their approval of this Agreement.
4. INDEPENDENT CONTRACTOR. The Advisor shall, for all purposes herein, be
deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized to do so, have no authority to act for or represent the
Trust or the Fund in any way, or in any way be deemed an agent for the Trust or
for the Fund. It is expressly understood and agreed that the services to be
rendered by the Advisor to the Fund under the provisions of this Agreement are
not to be deemed exclusive, and the Advisor shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
5. ADVISOR'S PERSONNEL. The Advisor shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
-3-
<PAGE>
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Advisor shall be
deemed to include persons employed or retained by the Advisor to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Advisor or the Trust's Board of Trustees may desire and reasonably request.
6. EXPENSES.
(a) With respect to the operation of the Fund, the Advisor shall be
responsible for (i) providing the personnel, office space and equipment
reasonably necessary for the operation of the Fund, (ii) the expenses of
printing and distributing extra copies of the Fund's prospectus, statement of
additional information, and sales and advertising materials (but not the legal,
auditing or accounting fees attendant thereto) to prospective investors (but not
to existing shareholders), and (iii) the costs of any special Board of Trustees
meetings or shareholder meetings convened for the primary benefit of the
Advisor. If the Advisor has agreed to limit the operating expenses of the Fund,
the Advisor shall also be responsible on a monthly basis for any operating
expenses that exceed the agreed upon expense limit.
(b) The Fund is responsible for and has assumed the obligation for payment
of all of its expenses, other than as stated in Subparagraph 6(a) above,
including but not limited to: fees and expenses incurred in connection with the
issuance, registration and transfer of its shares; brokerage and commission
expenses; all expenses of transfer, receipt, safekeeping, servicing and
accounting for the cash, securities and other property of the Trust for the
benefit of the Fund including all fees and expenses of its custodian,
shareholder services agent and accounting services agent; interest charges on
any borrowings; costs and expenses of pricing and calculating its daily net
asset value and of maintaining its books of account required under the
Investment Company Act; taxes, if any; a pro rata portion of expenditures in
connection with meetings of the Fund's shareholders and the Trust's Board of
Trustees that are properly payable by the Fund; salaries and expenses of
officers and fees and expenses of members of the Trust's Board of Trustees or
members of any advisory board or committee who are not members of, affiliated
with or interested persons of the Advisor; insurance premiums on property or
personnel of the Fund which inure to its benefit, including liability and
fidelity bond insurance; the cost of preparing and printing reports, proxy
statements, prospectuses and statements of additional information of the Fund or
other communications for distribution to existing shareholders; legal, auditing
and accounting fees; trade association dues; fees and expenses (including legal
fees) of registering and maintaining registration of its shares for sale under
federal and applicable state and foreign securities laws; all expenses of
maintaining and servicing shareholder accounts, including all charges for
transfer, shareholder recordkeeping, dividend disbursing, redemption, and other
agents for the benefit of the Fund, if any; and all other charges and costs of
its operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed.
(c) The Advisor may voluntarily absorb certain Fund expenses or waive the
Advisor's own advisory fee.
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(d) To the extent the Advisor incurs any costs by assuming expenses which
are an obligation of the Fund as set forth herein, the Fund shall promptly
reimburse the Advisor for such costs and expenses, except to the extent the
Advisor has otherwise agreed to bear such expenses. To the extent the services
for which the Fund is obligated to pay are performed by the Advisor, the Advisor
shall be entitled to recover from the Fund to the extent of the Advisor's actual
costs for providing such services. In determining the Advisor's actual costs,
the Advisor may take into account an allocated portion of the salaries and
overhead of personnel performing such services.
7. INVESTMENT ADVISORY FEE.
(a) The Fund shall pay to the Advisor, and the Advisor agrees to accept, as
full compensation for all investment management and advisory services furnished
or provided to the Fund pursuant to this Agreement, an annual management fee at
the annual rate of 0.95%.
(b) The management fee shall be accrued daily by the Fund and paid to the
Advisor on the first business day of the succeeding month.
(c) The initial fee under this Agreement shall be payable on the first
business day of the first month following the effective date of this Agreement
and shall be prorated as set forth below. If this Agreement is terminated prior
to the end of any month, the fee to the Advisor shall be prorated for the
portion of any month in which this Agreement is in effect which is not a
complete month according to the proportion which the number of calendar days in
the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.
(d) The fee payable to the Advisor under this Agreement will be reduced to
the extent of any amount owed by the Advisor to the Fund and as required under
any expense limitation applicable to the Fund.
(e) The Advisor voluntarily may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement and may agree to
make payments to limit the expenses which are the responsibility of the Fund
under this Agreement. Any such reduction or payment shall be applicable only to
such specific reduction or payment and shall not constitute an agreement to
reduce any future compensation or reimbursement due to the Advisor hereunder or
to continue future payments. Any such reduction will be agreed to prior to
accrual of the related expense or fee and will be estimated daily and reconciled
and paid on a monthly basis.
(f) Any fee withheld or voluntarily reduced and/or any Fund expense
absorbed by the Advisor voluntarily or pursuant to an agreed upon expense cap
(collectively "subsidies") shall be reimbursed by the Fund to the Advisor, if so
requested by the Advisor, any time before the end of the third fiscal year
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following the year to which the subsidy relates, provided the aggregate amount
of the Fund's current operating expenses for such fiscal year (taking into
account the reimbursement) does not exceed the applicable limitation on Fund
expenses. In the case of a new Fund, subsidies incurred by the Advisor in the
Fund's first three years of operation remain eligible for reimbursement for an
extended number of years, as follows: subsidies incurred in the first and second
years of the Fund's operation are eligible for reimbursement through the end of
the Fund's sixth fiscal year; subsidies incurred by the Advisor in the third
year of operation are eligible for reimbursement through the end of the seventh
fiscal year. The Fund must pay its current ordinary operating expenses before
the Advisor is entitled to any reimbursement of fees and/or expenses. Any such
reimbursement is also contingent upon Board of Trustees review and approval
prior to the time the reimbursement is initiated.
(g) The Advisor may agree not to require payment of any portion of the
compensation or reimbursement of expenses otherwise due to it pursuant to this
Agreement. Any such agreement shall be applicable only with respect to the
specific items covered thereby and shall not constitute an agreement not to
require payment of any future compensation or reimbursement due to the Advisor
hereunder.
8. NO SHORTING; NO BORROWING. The Advisor agrees that neither it nor any of
its officers or employees shall take any short position in the shares of the
Fund. This prohibition shall not prevent the purchase of such shares by any of
the officers or employees of the Advisor or any trust, pension, profit-sharing
or other benefit plan for such persons or affiliates thereof, at a price not
less than the net asset value thereof at the time of purchase, as allowed
pursuant to rules promulgated under the Investment Company Act. The Advisor
agrees that neither it nor any of its officers or employees shall borrow from
the Fund or pledge or use the Fund's assets in connection with any borrowing not
directly for the Fund's benefit. For this purpose, failure to pay any amount due
and payable to the Fund for a period of more than thirty (30) days shall
constitute a borrowing.
9. CONFLICTS WITH TRUST'S GOVERNING DOCUMENTS AND APPLICABLE LAWS. Nothing
herein contained shall be deemed to require the Trust or the Fund to take any
action contrary to the Trust's Agreement and Declaration of Trust, By-Laws, or
any applicable statute or regulation, or to relieve or deprive the Board of
Trustees of the Trust of its responsibility for and control of the conduct of
the affairs of the Trust and Fund. In this connection, the Advisor acknowledges
that the Trustees retain ultimate plenary authority over the Fund and may take
any and all actions necessary and reasonable to protect the interests of
shareholders.
10. REPORTS AND ACCESS. The Advisor agrees to supply such information to
the Fund's administrator and to permit such compliance inspections by the Fund's
administrator as shall be reasonably necessary to permit the administrator to
satisfy its obligations and respond to the reasonable requests of the Trustees.
11. ADVISOR'S LIABILITIES AND INDEMNIFICATION.
(a) The Advisor shall have responsibility for the accuracy and
completeness (and liability for the lack thereof) of the statements in the
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Fund's offering materials (including the prospectus, the statement of additional
information, advertising and sales materials), except for information supplied
by the administrator or the Trust or another third party for inclusion therein.
(b) The Advisor shall be liable to the Fund for any loss (including
brokerage charges) incurred by the Fund as a result of any improper investment
made by the Advisor.
(c) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the obligations or duties hereunder on the
part of the Advisor, the Advisor shall not be subject to liability to the Trust
or the Fund or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security by the
Fund.
(d) Each party to this Agreement shall indemnify and hold harmless the
other party and the shareholders, directors, trustees, officers and employees of
the other party (any such person, an "Indemnified Party") against any loss,
liability, claim, damage or expense (including the reasonable cost of
investigating and defending any alleged loss, liability, claim, damage or
expenses and reasonable counsel fees incurred in connection therewith) arising
out of the Indemnified Party's performance or non-performance of any duties
under this Agreement provided, however, that nothing herein shall be deemed to
protect any Indemnified Party against any liability to which such Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties under this Agreement.
(e) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or officer of the Advisor, from liability in
violation of Sections 17(h) and (i) of the Investment Company Act.
12. NON-EXCLUSIVITY; TRADING FOR ADVISOR'S OWN ACCOUNT. The Trust's
employment of the Advisor is not an exclusive arrangement. The Trust may from
time to time employ other individuals or entities to furnish it with the
services provided for herein. Likewise, the Advisor may act as investment
adviser for any other person, and shall not in any way be limited or restricted
from buying, selling or trading any securities for its or their own accounts or
the accounts of others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake no activities which
will adversely affect the performance of its obligations to the Fund under this
Agreement; and provided further that the Advisor will adhere to a code of ethics
governing employee trading and trading for proprietary accounts that conforms to
the requirements of the Investment Company Act and the Advisers Act and has been
approved by the Trust's Board of Trustees.
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<PAGE>
13. TERM.
(a) This Agreement shall become effective at the time the Fund
commences operations pursuant to the Trust's Registration Statement under the
Securities Act of 1933 and shall remain in effect for a period of two (2) years,
unless sooner terminated as hereinafter provided. This Agreement shall continue
in effect thereafter for additional periods not exceeding one (l) year so long
as such continuation is approved for the Fund at least annually by (i) the Board
of Trustees of the Trust or by the vote of a majority of the outstanding voting
securities of the Fund and (ii) the vote of a majority of the Trustees of the
Trust who are not parties to this Agreement nor interested persons thereof, cast
in person at a meeting called for the purpose of voting on such approval. The
terms "majority of the outstanding voting securities" and "interested persons"
shall have the meanings as set forth in the Investment Company Act.
(b) The Fund may use the name First Internet Fund or any name derived
from or using the name First Internet Fund only for so long as this Agreement or
any extension, renewal or amendment hereof remains in effect. Within sixty (60)
days from such time as this Agreement shall no longer be in effect, the Fund
shall cease to use such a name.
14. TERMINATION; NO ASSIGNMENT.
(a) This Agreement may be terminated by the Trust on behalf of the
Fund at any time without payment of any penalty, by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund,
upon sixty (60) days' written notice to the Advisor, and by the Advisor upon
sixty (60) days' written notice to the Fund. In the event of a termination, the
Advisor shall cooperate in the orderly transfer of the Fund's affairs and, at
the request of the Board of Trustees, transfer any and all books and records of
the Fund maintained by the Advisor on behalf of the Fund.
(b) This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the Investment Company Act.
15. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise rendered
invalid, the remainder of this Agreement shall not be affected thereby.
16. CAPTIONS. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
17. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the Investment Company Act and the Advisers Act and any rules
and regulations promulgated thereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
TRUST FOR INVESTMENT MANAGERS ASTROP RESEARCH
on behalf of the CORPORATION,
First Internet Fund a Georgia corporation
By: By:
---------------------------- ----------------------------
Name: Robert H. Wadsworth Name: William B. Astrop
Title: President Title: Chairman
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DISTRIBUTION AGREEMENT
This Agreement made as of the day of _____________ __, 2000, by and between
TRUST FOR INVESTMENT MANAGEMENT, a Delaware business trust, (the "Trust"), and
FIRST FUND DISTRIBUTORS, INC., a Delaware corporation (the "Distributor").
WITNESSETH:
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"); and it is in
the interest of the Trust to offer its series of shares identified as First
Internet Fund (the "Fund") for sale continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Trust and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the shares of beneficial
interest of the Fund (the "Shares"), to commence after the effectiveness of the
amendment to the registration statement filed pursuant to the Securities Act of
1933 (the "1933 Act") and the 1940 Act relating to the Fund.
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT OF DISTRIBUTOR. The Trust hereby appoints the Distributor as
exclusive agent to sell and to arrange for the sale of the Shares, on the terms
and for the period set forth in this Agreement, and the Distributor hereby
accepts such appointment and agrees to act hereunder directly and/or through the
Trust's transfer agent in the manner set forth in the Prospectuses (as defined
below). It is understood and agreed that the services of the Distributor
hereunder are not exclusive, and the Distributor may act as principal
underwriter for the shares of any other registered investment company.
2. SERVICES AND DUTIES OF THE DISTRIBUTOR.
(a) The Distributor agrees to sell the Shares, as agent for the Trust,
from time to time during the term of this Agreement upon the terms described in
the Fund's Prospectus. As used in this Agreement, the term "Prospectus" shall
mean a prospectus and statement of additional information of the Fund included
as part of the Trust's Registration Statement, as such prospectus and statement
of additional information may be amended or supplemented from time to time, and
the term "Registration Statement" shall mean the Registration Statement filed
from time to time by the Trust with the Securities and Exchange Commission
("SEC") and currently effective under the 933 Act and the 1940 Act, as such
Registration Statement is amended by any amendments thereto at the time in
effect. The Distributor shall not be obligated to sell any certain number of
Shares.
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<PAGE>
(b) Upon commencement of the Fund's operations, the Distributor will
hold itself available to receive orders, satisfactory to the Distributor, for
the purchase of the Shares and will accept such orders and will transmit such
orders and funds received by it in payment for such Shares as are so accepted to
the Trust's transfer agent or custodian, as appropriate, as promptly as
practicable. Purchase orders shall be deemed accepted and shall be effective at
the time and in the manner set forth in the Prospectuses. The Distributor shall
not make any short sales of Shares.
(c) The offering price of the Shares shall be the net asset value per
share of the Shares, plus the sales charge, if any, (determined as set forth in
the Prospectuses). The Trust shall furnish the Distributor, with all possible
promptness, an advice of each computation of net asset value and offering price.
(d) The Distributor shall have the right to enter into selected dealer
agreements with securities dealers of its choice ("selected dealers") for the
sale of Shares. Shares sold to selected dealers shall be for resale by such
dealers only at the offering price of the Shares as set forth in the
Prospectuses. The Distributor shall offer and sell Shares only to such selected
dealers as are members in good standing of the NASD, unless such dealers are not
eligible for membership in the NASD.
3. DUTIES OF THE TRUST.
(a) MAINTENANCE OF FEDERAL REGISTRATION. The Trust shall, at its
expense, take, from time to time, all necessary action and such steps, including
payment of the related filing fees, as may be necessary to register and maintain
registration of a sufficient number of Shares under the 1933 Act. The Trust
agrees to file from time to time such amendments, reports and other documents as
may be necessary in order that there may be no untrue statement of a material
fact in a Registration Statement or Prospectus, or necessary in order that there
may be no omission to state a material fact in the Registration Statement or
Prospectus which omission would make the statements therein misleading.
(b) MAINTENANCE OF "BLUE SKY" QUALIFICATIONS. The Trust shall, at its
expense, use its best efforts to qualify and maintain the qualification of an
appropriate number of Shares for sale under the securities laws of such states
as the Distributor and the Trust may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Trust
as a broker or dealer in such states; provided that the Trust shall not be
required to amend its Agreement and Declaration of Trust or By-Laws to comply
with the laws of any state, to maintain an office in any state, to change the
terms of the offering of the Shares in any state, to change the terms of the
offering of the Shares in any state from the terms set forth in Prospectuses, to
qualify as a foreign trust in any state or to consent to service of process in
any state other than with respect to claims arising out of the offering and sale
of the Shares. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Trust or its
series in connection with such qualifications.
(c) COPIES OF REPORTS AND PROSPECTUSES. The Trust shall, at its
expense, keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
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request for use in connection with the distribution of Shares, including such
reasonable number of copies of Prospectuses and annual and interim reports as
the Distributor may request and shall cooperate fully in the efforts of the
Distributor to sell and arrange for the sale of the Shares and in the
performance of the Distributor under this Agreement.
4. CONFORMITY WITH APPLICABLE LAW AND RULES. The Distributor agrees that in
selling Shares hereunder it shall conform in all respects with the laws of the
United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
5. INDEPENDENT CONTRACTOR. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Trust in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
6. INDEMNIFICATION.
(a) INDEMNIFICATION OF TRUST. The Distributor agrees to indemnify and
hold harmless the Trust and each of its present or former Trustees, officers,
employees, representatives and each person, if any, who controls or previously
controlled the Trust within the meaning of Section 15 of the 1933 Act against
any and all losses, liabilities, damages, claims or expenses (including the
reasonable costs of investigating or defending any alleged loss, liability,
damage, claims or expense and reasonable legal counsel fees incurred in
connection therewith) to which the Trust or any such person may become subject
under the 1933 Act, under any other statute, at common law, or otherwise,
arising out of the acquisition of any Shares by any person which (i) may be
based upon any wrongful act by the Distributor or any of the Distributor's
directors, officers, employees or representatives, or (ii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
Registration Statement, Prospectus, shareholder report or other information
covering Shares filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made in reliance upon
and in conformity with information furnished to the Trust by the Distributor. In
no case (i) is the Distributor's indemnity in favor of the Trust, or any person
indemnified to be deemed to protect the Trust or such indemnified person against
any liability to which the Trust or such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of the Trust's or such person's duties or by reason of reckless disregard of the
Trust's or such person's obligations and duties under this Agreement or (ii) is
the Distributor to be liable under its indemnity agreement contained in this
Paragraph with respect to any claim made against the Trust or any person
indemnified unless the Trust or such person, as the case may be, shall have
notified the Distributor in writing of the claim within a reasonable time after
the summons or other first written notification giving information of the nature
of the claim shall have been served upon the Trust or upon such person (or after
the Trust or such person shall have received notice of such service on any
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<PAGE>
designated agent). However, failure to notify the Distributor of any such claim
shall not relieve the Distributor from any liability which the Distributor may
have to the Trust or any person against whom such action is brought otherwise
than on account of the Distributor's indemnity agreement contained in this
Paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense, or, if the Distributor so elects, to assume the defense of any
suit brought to enforce any such claim, but, if the Distributor elects to assume
the defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the Trust, and to the persons indemnified as
defendant or defendants, in the suit. In the event that the Distributor elects
to assume the defense of any such suit and retain such legal counsel, the Trust,
and the persons indemnified as defendant or defendants in the suit, shall bear
the fees and expenses of any additional legal counsel retained by them. If the
Distributor does not elect to assume the defense of any such suit, the
Distributor will reimburse the Trust and the persons indemnified defendant or
defendants in such suit for the reasonable fees and expenses of any legal
counsel retained by them. The Distributor agrees to promptly notify the Trust of
the commencement of any litigation of proceedings against it or any of its
officers, employees or representatives in connection with the issue or sale of
any Shares.
(b) INDEMNIFICATION OF THE DISTRIBUTOR. The Trust agrees to indemnify
and hold harmless the Distributor and each of its present or former directors,
officers, employees, representatives and each person, if any, who controls or
previously controlled the Distributor within the meaning of Section 15 of the
1933 Act against any and all losses, liabilities, damages, claims or expenses
(including the reasonable costs of investigating or defending any alleged loss,
liability, damage, claim or expense and reasonable legal counsel fees incurred
in connection therewith) to which the Distributor or any such person may become
subject under the 1933 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person which (i)
may be based upon any wrongful act by the Trust or any of the Trust's Trustees,
officers, employees or representatives, or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement, Prospectus, shareholder report or other information
covering Shares filed or made public by the Trust or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading unless such statement or omission was made in reliance
upon and in conformity with information furnished to the Trust by the
Distributor. In no case (i) is the Trust's indemnity in favor of the
Distributor, or any person indemnified to be deemed to protect the Distributor
or such indemnified person against any liability to which the Distributor or
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of such person's duties or by
reason of reckless disregard of such person's obligations and duties under this
Agreement or (ii) is the Trust to be liable under their indemnity agreement
contained in this Paragraph with respect to any claim made against Distributor,
or person indemnified unless the Distributor, or such person, as the case may
be, shall have notified the Trust in writing of the claim within a reasonable
time after the summons or other first written notification giving information of
the nature of the claim shall have been served upon the Distributor or upon such
person (or after the Distributor or such person shall have received notice of
such service on any designated agent). However, failure to notify the Trust of
any such claim shall not relieve the Trust from any liability which the Trust
may have to the Distributor or any person against whom such action is brought
otherwise than on account of the Trust's indemnity agreement contained in this
Paragraph.
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<PAGE>
The Trust shall be entitled to participate, at its own expense, in the
defense, or, if the Trust so elects, to assume the defense of any suit brought
to enforce any such claim, but if the Trust elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Trust and satisfactory
to the Distributor and to the persons indemnified as defendant or defendants, in
the suit. In the event that the Trust elects to assume the defense of any such
suit and retain such legal counsel, the Distributor, the persons indemnified as
defendant or defendants in the suit, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Trust does not elect to assume
the defense of any such suit, the Trust will reimburse the Distributor and the
persons indemnified as defendant or defendants in such suit for the reasonable
fees and expenses of any legal counsel retained by them. The Trust agrees to
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its Trustees, officers, employees or
representatives in connection with the issue or sale of any Shares.
7. AUTHORIZED REPRESENTATIONS. The Distributor is not authorized by the
Trust to give on behalf of the Trust any information or to make any
representations in connection with the sale of Shares other than the information
and representations contained in a Registration Statement or Prospectus filed
with the SEC under the 1933 Act and/or the 1940 Act, covering Shares, as such
Registration Statement and Prospectus may be amended or supplemented from time
to time, or contained in shareholder reports or other material that may be
prepared by or on behalf of the Trust for the Distributor's use. This shall not
be construed to prevent the Distributor from preparing and distributing
tombstone ads and sales literature or other material as it may deem appropriate.
No person other than the Distributor is authorized to act as principal
underwriter (as such term is defined in the 1940 Act) for the Fund.
8. TERM OF AGREEMENT. The term of this Agreement shall begin on the date
first above written, and unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect for a period of two years from the date first
above written. Thereafter, this Agreement shall continue in effect from year to
year, subject to the termination provisions and all other terms and conditions
thereof, so long as such continuation shall be specifically approved at least
annually by (i) the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund and, (ii) by the vote, cast in person
at a meeting called for the purpose of voting on such approval, of a majority of
the Trustees of the Trust who are not parties to this Agreement or interested
persons of any such party. The Distributor shall furnish to the Trust, promptly
upon its request, such information as may reasonably be necessary to evaluate
the terms of this Agreement or any extension, renewal or amendment hereof.
9. AMENDMENT OR ASSIGNMENT OF AGREEMENT. This Agreement may not be amended
or assigned except as permitted by the 1940 Act, and this Agreement shall
automatically and immediately terminate in the event of its assignment.
10. TERMINATION OF AGREEMENT. This Agreement may be terminated by either
party hereto, without the payment of any penalty, on not more than upon 60 days'
nor less than 30 days' prior notice in writing to the other party; provided,
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<PAGE>
that in the case of termination by the Trust such action shall have been
authorized by resolution of a majority of the Trustees of the Trust who are not
parties to this Agreement or interested persons of any such party, or by vote of
a majority of the outstanding voting securities of the Fund.
11. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Agreement and Declaration of Trust or By-Laws, or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees of the Trust
of responsibility for and control of the conduct of the affairs of the Trust.
12. DEFINITION OF TERMS. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to the 1940
Act. Specifically, the terms "vote of a majority of the outstanding voting
securities", "interested persons," "assignment," and "affiliated person," as
used in Paragraphs 8, 9 and 10 hereof, shall have the meanings assigned to them
by Section 2(a) of the 1940 Act. In addition, where the effect of a requirement
of the 1940 Act reflected in any provision of this Agreement is relaxed by a
rule, regulation or order of the SEC, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
13. COMPLIANCE WITH SECURITIES LAWS. The Trust represents that it is
registered as an open-end management investment company under the 1940 Act, and
agrees that it will comply with all the provisions of the 1940 Act and of the
rules and regulations thereunder. The Trust and the Distributor each agree to
comply with all of the applicable terms and provisions of the 1940 Act, the 1933
Act and, subject to the provisions of Section 4(d), all applicable "Blue Sky"
laws. The Distributor agrees to comply with all of the applicable terms and
provisions of the 1934 Act.
14. NOTICES. Any notice required to be given pursuant to this Agreement
shall be deemed duly given if delivered or mailed by registered mail, postage
prepaid, to the Distributor at 4455 E. Camelback Road, Suite 261E, Phoenix, AZ
85018 and the Funds on behalf of the Trust at 2020 E. Financial Way, Suite 100,
Glendora, California 91741.
15. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the date first written above.
TRUST FOR INVESTMENT MANAGERS
By:
----------------------------------------
Name: Robert H. Wadsworth
Title: President
FIRST FUND DISTRIBUTORS, INC.
By:
----------------------------------------
Name:
Title:
FUND ACCOUNTING SERVICE AGREEMENT
AGREEMENT made as of the _____ day of _________, 2000 by and between TRUST
FOR INVESTMENT MANAGERS (the "Trust"), a Delaware business trust, on behalf of
the First Internet Fund (the "Fund"), a series of the Trust, and ICA FUND
SERVICES CORP., a Delaware corporation ("ICA").
WHEREAS, the Trust is an open-end management series investment company
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 (the "1940 Act"); and
WHEREAS, the Trust desires to have ICA perform for the Trust certain
services appropriate to the operations of the Fund, and ICA is willing to
furnish such services in accordance with the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Trust and ICA hereby agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF ICA
1.01. Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints ICA, and ICA agrees to act, as accounting
agent for the Fund.
1.02. ICA will perform the following services for the Fund:
(a) Timely calculate and transmit to the Fund and, if applicable, to
NASDAQ the Fund's daily net asset value and communicate such value to the
Fund and its transfer agent. All portfolio securities will be valued in
accordance with the methods that are specified by the Board of Trustees of
the Trust;
(b) Maintain and keep current all books and records of the Fund as
required by Rule 31a-1 under the 1940 Act, as such rule or any successor
rule may be amended from time to time, that are applicable to the
fulfillment of ICA's duties hereunder, as well as any other documents
necessary or advisable for compliance with applicable regulations as may be
mutually agreed to between the Trust and ICA.
1.03. In the performance of these services, ICA agrees that it shall
exercise the care and adhere to the standards that are usual and customary for
mutual fund accounting services agents.
1.04. ICA shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided or authorized, have no
authority to act for or represent the Fund or the Trust in any way or otherwise
be deemed an agent of the Fund or the Trust.
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<PAGE>
2. COMPENSATION OF ICA
In consideration of the services to be performed by ICA as set forth
herein, ICA shall be entitled to receive, and the Trust agrees to pay, the fees
as set forth in the fee schedule attached hereto as Schedule A as well as
reimbursement for all reasonable out-of-pocket expenses. ICA agrees that it
shall look only to the assets of the Fund to satisfy fees earned and expenses
incurred by ICA.
3. LIMITATION OF LIABILITY OF ICA AND INDEMNIFICATION
3.01. ICA may rely upon the advice of the Trust, or of counsel for the
Trust and upon statements of the Trust's independent accountants, brokers and
other persons reasonably believed by it in good faith to be expert in the
matters upon which they are consulted, and for any actions reasonably taken in
good faith reliance upon such statements and without negligence or misconduct,
ICA shall not be liable to anyone.
3.02. ICA shall be liable to the Trust for any losses arising out of any
act or omission in the course of its duties, arising out of its gross
negligence, misfeasance, bad faith of ICA or breach of the agreement by ICA or
disregard of ICA's obligations and duties under this agreement or the willful
violation of any applicable law or inaccurate information supplied by pricing
agents selected by ICA.
3.03. ICA and the Trust (each an "Indemnifying Party") agree to the
following indemnifications:
(a) Except as may otherwise be provided by applicable law, no
Indemnified Party (an "Indemnified Party" shall mean ICA, the Trust and
their respective shareholders, officers, directors, trustees, employees and
agents) shall be subject to, and the Indemnifying Party shall indemnify and
hold such Indemnified Party harmless from and against, any liability for
and any damages, expenses or losses incurred by reason of the inaccuracy of
information furnished to such Indemnified Party, provided that the Trust
shall not have any indemnification obligations with respect to inaccurate
information supplied by affiliates or pricing agents selected by ICA and
ICA shall not have any indemnification obligations with respect to
inaccurate information supplied by pricing agents selected by the Trust or
in circumstances where ICA has acted in accordance with the standard of
care established in Sections 1.03 or 3.02 of this Agreement.
(b) An Indemnified Party shall promptly notify the Indemnifying Party
of the assertion of a claim for which the Indemnifying Party may be
required to indemnify the Indemnified Party and shall keep the Indemnifying
Party advised with respect to all developments regarding such claim. The
Indemnifying Party shall have the option to participate in the defense of
such claim. An Indemnified Party in no case shall confess any claim or make
any compromise in any case in which the Indemnifying Party may be required
to indemnify the Indemnified Party except with the Indemnifying Party's
prior written consent.
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<PAGE>
4. ACTIVITIES OF ICA
The services of ICA under this Agreement are not to be deemed exclusive,
and ICA shall be free to render similar services to others so long as its
services hereunder are not impaired thereby.
5. ACCOUNTS AND RECORDS
The accounts and records maintained by ICA shall be the property of the
Trust, and shall be surrendered to the Trust promptly upon request by the Trust
in the form in which such accounts and records have been maintained or preserved
(including the electronic or computerized format in which such accounts and
records have been maintained). ICA shall assist the Trust's independent
auditors, or, upon approval of the Trust, any regulatory body, in any requested
review of the Trust's accounts and records. ICA shall preserve the accounts and
records as they are required to be maintained and preserved by Rule 31a-2 under
the1940 Act.
6. CONFIDENTIALITY
ICA agrees that it will, on behalf of itself and its officers and
employees, treat all information obtained pursuant to, and all transactions
contemplated by this Agreement, and all other information germane thereto, as
confidential and not to be disclosed to any person except as may be authorized
by the Trust.
7. DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date hereof and shall
remain in force for an indefinite period, provided that both parties to this
Agreement have the option to terminate the Agreement, without penalty, upon
thirty (30) days' prior written notice.
Should the Trust exercise its right to terminate, all expenses incurred by
ICA associated with the movement of records and material will be borne by the
Trust. Such expenses will include all out-of-pocket expenses and the reasonable
cost of all time incurred to train or consult with the successor fund accounting
agent with regard to the transfer of fund accounting responsibilities.
8. AMENDMENTS TO THIS AGREEMENT
This Agreement may be amended by the parties hereto only if such amendment
is in writing and signed by both parties.
9. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof
whether oral or written.
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<PAGE>
10. NOTICES
All notices and other communications hereunder shall be in writing, shall
be deemed to have been given when received or when sent by telex or facsimile,
and shall be given to the following addresses (or such other addresses as to
which notice is given):
To the Trust: To ICA:
Trust for Investment Managers ICA Fund Services Corp.
2020 E. Financial Way, Suite 100 4455 E. Camelback Road, Suite 261E
Glendora, CA 91741 Phoenix, AZ 85018
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRUST FOR INVESTMENT MANAGERS ICA FUND SERVICES CORP.
on behalf of the First Internet Fund
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------- ------------------------------
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TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as the___ day of _______, 2000 by and between TRUST FOR
INVESTMENT MANAGERS (the "Trust"), a Delaware business trust, on behalf of the
First Internet Fund (the "Fund"), a series of the Trust, and ICA FUND SERVICES
CORP., a Delaware corporation ("ICA").
WHEREAS, the Trust is an open-end management series investment company
registered with the Securities and Exchange Commission under the Investment
Company Act of 1940 (the "1940 Act"); and
WHEREAS, ICA is registered as a transfer agent under the Securities
Exchange Act of 1934 (the "1934 Act");
WHEREAS, the Trust desires to appoint ICA as the transfer agent, dividend
disbursing agent and agent of the Fund in connection with certain other
activities, and ICA desires to accept such appointment;
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Trust and ICA hereby agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF ICA
1.01. Subject to the terms and conditions set forth in this agreement, the
Trust hereby employs and appoints ICA, and ICA agrees, to act as the transfer
agent for the Fund's authorized and issued shares of beneficial interest
("Shares") and the dividend disbursing agent and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
Fund ("Shareholders").
1.02. ICA agrees that it will perform the following services:
(a) In accordance with the Trust's Registration Statement with respect
to the Fund, which describes how sales and redemptions of Shares shall be
made, ICA shall:
(i) Receive for acceptance orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
Custodian of the Fund authorized by the Board of Trustees of the Trust
(the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
full and fractional Shares and hold such Shares in the appropriate
Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
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<PAGE>
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund, and effect dividend and capital
gains distribution reinvestments in accordance with Shareholder
instructions;
(vii) Serve as a record keeping transfer agent for the Fund, and
maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(viii) Record the issuance of Shares and maintain pursuant to
Rule 17Ad-10(e) under the 1934 Act a record of the total number of
Shares which are authorized, based upon data provided to it by the
Fund, and issued and outstanding.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), ICA shall:
(i) Perform all of the customary services of a transfer agent,
dividend disbursing agent, including but not limited to: maintaining
all Shareholder accounts, preparing Shareholder meeting lists, mailing
proxies, receiving and tabulating proxies, mailing Shareholder reports
and prospectuses to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required
with respect to dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts as prescribed in the federal securities laws or
as described in the Trust's Registration Statement, preparing and
mailing activity statements for Shareholders, and providing
Shareholder account information; and
(ii) provide a system and reports which will enable the Fund to
monitor the total number of Shares sold in each State. The
responsibility of ICA pursuant to this Agreement for the Fund's blue
sky State registration status is solely limited to the initial
establishment of transactions subject to blue sky compliance by the
Fund and the reporting of such transactions to the Fund as provided
above.
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<PAGE>
Procedures applicable to certain of these services may be established from
time to time by agreement between the Trust and ICA.
1.03. The Fund agrees that it will:
(i) identify to ICA in writing those transactions and shares to
be treated as exempt from blue sky reporting for each State; and
(ii) monitor the daily activity for each State, as provided by
ICA.
1.04. In the performance of these services, ICA agrees that it shall
exercise the care and adhere to the standards that are usual and customary for
mutual fund transfer agents.
2. FEES AND EXPENSES
2.01. For performance by ICA pursuant to this Agreement, the Trust agrees
to pay ICA fees as set out in the fee schedule attached hereto. Such fees and
out-of pocket expenses and advances identified under Section 2.02 below may be
changed from time to time subject to mutual written agreement between the Trust
and ICA.
2.02. In addition to the fee paid under Section 2.01 above, the Trust
agrees to reimburse ICA for out-of-pocket expenses or advances incurred by ICA
in connection with its duties under this Agreement. In addition, any other
expenses incurred by ICA at the request or with the consent of the Trust, will
be reimbursed by the Trust.
2.03. Unless otherwise stated, ICA shall look only to the assets of the
Fund to satisfy the fees earned and expenses incurred by ICA.
3. INDEMNIFICATION
3.01. ICA shall not be responsible for, and the Trust shall indemnify and
hold ICA harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions of ICA or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence, willful misconduct, or in reckless
disregard of its duties under this Agreement.
(b) The Trust's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's lack of good faith, negligence
or willful misconduct or which arise out of the breach of any
representation or warranty of the Trust hereunder.
-3-
<PAGE>
(c) The reliance on or use by ICA or its agents or subcontractors of
information, records and documents which (i) are received by ICA or its
agents or subcontractors and furnished to it by or on behalf of the Trust,
and (ii) have been prepared and/or maintained by the Trust or any other
person or firm on behalf of the Trust.
(d) The reliance on, or the carrying out by ICA or its agents or
subcontractors of any written instruction signed by an officer of the
Trust, or any legal opinion of counsel to the Trust.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in
such state.
(f) The content, adequacy or completeness of any prospectus, proxy
statement, financial report or other document required or requested by the
Trust to be transmitted to Shareholders.
3.02. ICA shall indemnify and hold the Trust harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission to
act by ICA as a result of ICA's lack of good faith, gross negligence or willful
misconduct or the breach of any warranty or representation of ICA hereunder.
3.03. At any time ICA may apply to any officer of the Trust for
instructions, and may consult with the Trust's legal counsel with respect to any
matter arising in connection with the services to be performed by ICA under this
Agreement, and ICA and its agents or subcontractors shall not be liable and
shall be indemnified by the Trust for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. ICA, its
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Trust, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided ICA or its agents
or subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Trust, and shall not be held to have notice of
any change of authority of any person, until receipt of written notice thereof
from the Trust. ICA, its agents and subcontractors shall also be protected and
indemnified in recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers of the Trust, and
the proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
3.04. In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
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<PAGE>
3.05. Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
3.06. In order that the indemnification provisions contained in this
Article 3 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
4. COVENANTS OF THE TRUST AND ICA
4.01. ICA shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable, provided such form
and manner of recordkeeping conforms to the applicable provisions of the 1934
Act and the 1940 Act. To the extent required by Section 31 of the 1940 Act and
the Rules thereunder, ICA agrees that all such records prepared or maintained by
ICA relating to the services to be performed by ICA hereunder are the property
of the Trust and will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to the Trust on
and in accordance with its request.
4.02. ICA and the Trust agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person, except
as may be required by law.
4.03. In case of any requests or demands for the inspection of the
Shareholder records of the Fund, ICA will endeavor to notify the Trust and to
secure instructions from an authorized officer of the Trust as to such
inspection. ICA reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person, and shall
promptly notify the Trust of any unusual request to inspect or copy the
shareholder records of the Fund or the receipt of any other unusual request to
inspect, copy or produce the records of the Trust.
4.04. The Trust covenants that it shall keep its Registration Statement
with respect to the Fund current and in effect; that such Registration Statement
shall contain all the information required by Form N-1A under the 1940 Act; that
such Registration Statement shall contain no material misstatements of fact or
fail to state any facts the omission of which would render the facts stated
misleading; and that the Trust shall be responsible for the payment of all
registration fees applicable to the Shares. The Trust agrees to notify ICA of
all states in which the Fund's Shares are registered for sale, any limitations
on the amount of Shares that can be sold in any state and any changes in the
status of a state registration.
-5-
<PAGE>
5. TERMINATION OF AGREEMENT
5.01. This Agreement shall become effective as of the date hereof and shall
remain in force for an indefinite period, provided however, that both parties to
this Agreement have the option to terminate the Agreement, without penalty, upon
thirty (30) days' prior written notice.
5.02. Should the Trust exercise its right to terminate, all expenses
incurred by ICA associated with the movement of records and material will be
borne by the Trust. Such expenses will include all out-of-pocket expenses and
the reasonable cost of all time incurred to train or consult with the successor
transfer agent with regard to the transfer of shareholder accounting and stock
transfer responsibilities.
6. AMENDMENTS TO THIS AGREEMENT
This Agreement may be amended by the parties hereto only if such amendment
is in writing and signed by both parties.
7. MERGER OF AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject matter hereof
whether oral or written.
8. NOTICES.
All notices and other communications hereunder shall be in writing, shall
be deemed to have been given when received or when sent by telex or facsimile,
and shall be given to the following addresses (or such other addresses as to
which notice is given):
To the Trust: To ICA:
Trust for Investment Managers ICA Fund Services Corp.
2020 E. Financial Way, Suite 100 4455 E. Camelback Road, Suite 261E
Glendora, CA 91741 Phoenix, AZ 85018
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRUST FOR INVESTMENT MANAGERS ICA FUND SERVICES CORP.
on behalf of the First Internet Fund
By: By:
--------------------------------- ---------------------------------
Title: Title:
------------------------------- ------------------------------
-7-
TRUST FOR INVESTMENT MANAGERS
OPERATING EXPENSES LIMITATION AGREEMENT
THIS OPERATING EXPENSES LIMITATION AGREEMENT (the "Agreement") is effective
as of ______________ __, 2000, by and between TRUST FOR INVESTMENT MANAGERS, a
Delaware business trust (the "Trust"), on behalf of the First Internet Fund (the
"Fund"), a series of the Trust, and the Advisor of such Fund, ASTROP RESEARCH
CORPORATION, a Georgia corporation (the "Advisor").
WITNESSETH:
WHEREAS, the Advisor renders advice and services to the Fund pursuant to
the terms and provisions of an Investment Advisory Agreement between the Trust
and the Advisor dated , 2000 (the "Investment Advisory Agreement"); and
WHEREAS, the Fund, is responsible for, and has assumed the obligation for,
payment of certain expenses pursuant to the Investment Advisory Agreement that
have not been assumed by the Advisor; and
WHEREAS, the Advisor desires to limit the Fund's Operating Expenses (as
that term is defined in Paragraph 2 of this Agreement) pursuant to the terms and
provisions of this Agreement, and the Trust (on behalf of the Fund) desires to
allow the Advisor to implement those limits;
NOW THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties, intending to be legally bound hereby,
mutually agree as follows:
1. LIMIT ON OPERATING EXPENSES. The Advisor hereby agrees to limit the
Fund's current Operating Expenses to an annual rate, expressed as a percentage
of the Fund's average annual net assets, of 2.50% (the "Annual Limit"). In the
event that the current Operating Expenses of the Fund, as accrued each month,
exceed its Annual Limit, the Advisor will pay to the Fund, on a monthly basis,
the excess expense within 30 days of being notified that an excess expense
payment is due.
2. DEFINITION. For purposes of this Agreement, the term "Operating
Expenses" with respect to the Fund is defined to include all expenses necessary
or appropriate for the operation of the Fund, including the Advisor's investment
advisory or management fee detailed in the Investment Advisory Agreement, any
Rule 12b-1 fees and other expenses described in the Investment Advisory
Agreement, but does not include any front-end or contingent deferred loads,
taxes, leverage interest, brokerage commissions, expenses incurred in connection
with any merger or reorganization, or extraordinary expenses such as litigation.
3. REIMBURSEMENT OF FEES AND EXPENSES. The Advisor retains its right to
receive reimbursement of any excess expense payments paid by it pursuant to this
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<PAGE>
Agreement under the same terms and conditions as it is permitted to receive
reimbursement of reductions of its investment management fee under the
Investment Advisory Agreement.
4. TERM. This Agreement shall become effective on the date specified herein
and shall remain in effect indefinitely and for a period of not less than one
year, unless sooner terminated as provided in Paragraph 5 of this Agreement.
5. TERMINATION. This Agreement may be terminated at any time, and without
payment of any penalty, by the Board of Trustees of the Trust, on behalf of the
Fund, upon sixty (60) days' written notice to the Advisor. This Agreement may
not be terminated by the Advisor without the consent of the Board of Trustees of
the Trust, which consent will not be unreasonably withheld. This Agreement will
automatically terminate if the Investment Advisory Agreement is terminated, with
such termination effective upon the effective date of the Investment Advisory
Agreement's termination.
6. ASSIGNMENT. This Agreement and all rights and obligations hereunder may
not be assigned without the written consent of the other party.
7. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise rendered
invalid, the remainder of this Agreement shall not be affected thereby.
8. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the Investment Company Act of 1940, and the Investment Advisers
Act of 1940, and any rules and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested by their duly authorized officers, all on the day and
year first above written.
TRUST FOR INVESTMENT MANAGERS ASTROP RESEARCH
on behalf of the First Internet Fund CORPORATION
By: By:
------------------------------------ -------------------------------
Print name: Robert H. Wadsworth Print name: William B. Astrop
Title: President Title: Chairman
-2-
FORM OF OPINION LETTER
Law Offices of
Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 94104-2635
Telephone (415) 835-1600
Facsimile (415) 217-5333
Internet WWW.PHJW.COM
______________, 2000
Trust for Investment Managers
2020 East Financial Way, Suite 100
Glendora, CA 91741
RE: TRUST FOR INVESTMENT MANAGERS: FIRST INTERNET FUND
Ladies and Gentlemen:
We have acted as legal counsel to Trust for Investment Managers, a Delaware
business trust (the "Trust"), in connection with Post-Effective Amendment No. 3,
and the Trust's Registration Statement on Form N-1A filed with the Securities
and Exchange Commission (the "Registration Statement") relating to the issuance
by the Trust of an indefinite number of no par value shares of beneficial
interest (the "Shares") of the First Internet Fund (the "Fund").
In connection with this opinion, we have assumed the authenticity of all
records, documents and instruments submitted to us as originals, the genuineness
of all signatures, the legal capacity of all natural persons, and the conformity
to the originals of all records, documents, and instruments submitted to us as
copies. We have based our opinion on the following:
(a) the Trust's Agreement and Declaration of Trust dated April 27, 1999 (the
"Declaration of Trust"), and the Trust's Certificate of Trust as originally
filed with the Secretary of State of Delaware on April 28, 1999, certified
to us by an officer of the Trust as being true and complete and in effect
on the date hereof;
(b) the By-laws of the Trust certified to us by an officer of the Trust as
being true and complete and in effect on the date hereof ;
(c) resolutions of the Trustees of the Trust adopted at a meeting on _________,
2000, authorizing the establishment of the Fund and the issuance of the
Shares;
(d) a certificate of an officer of the Trust as to certain factual matters
relevant to this opinion.
Our opinion below is limited to the federal law of the United States of
America and the business trust law of the State of Delaware. We are not licensed
to practice law in the State of Delaware, and we have based our opinion below
<PAGE>
To: Trust for Investment Managers
_______________, 2000
Page 2
solely on our review of Chapter 38 of Title 120 of the Delaware Code and the
case law interpreting such Chapter as reported in Delaware Code Annotated. We
have not undertaken a review of other Delaware law or of any administrative or
court decisions in connection with rendering this opinion. We disclaim any
opinion as to any law other than that of the United States of America and the
business trust law of the State of Delaware as described above, and we disclaim
any opinion as to any statute, rule, regulation, ordinance, order or other
promulgation of any regional or local governmental authority.
Based on the foregoing and our examination of such questions of law as we
have deemed necessary and appropriate for the purpose of this opinion, and
assuming that (i) all of the Shares will be issued and sold for cash at the
per-share public offering price on the date of their issuance in accordance with
statements in the Fund's Prospectus included in the Post-Effective Amendment and
in accordance with the Declaration of Trust, (ii) all consideration for the
Shares will be actually received by the Fund, and (iii) all applicable
securities laws will be complied with, it is our opinion that, when issued and
sold by the Fund, the Shares will be legally issued, fully paid and
nonassessable.
This opinion is rendered to you in connection with the filing of the
registration statement on Form N-1A with respect to the above Fund of the Trust
and is solely for your benefit. This opinion may not be relied upon by you for
any other purpose or relied upon by any other person, firm, corporation or other
entity for any purpose, without our prior written consent. We disclaim any
obligation to advise you of any developments in areas covered by this opinion
that occur after the date of this opinion.
We hereby consent to (i) the reference to our firm as Legal Counsel in the
Prospectus included in the Registration Statement on Form N-1A; and (ii) the
filing of this opinion as an exhibit to the Registration Statement on Form N-1A.
Very truly yours,
/s/ PAUL, HASTINGS, JANOFSKY & WALKER LLP
TRUST FOR INVESTMENT MANAGERS
SHARE MARKETING PLAN
(Rule 12b-1 Plan)
(Fixed Compensation Plan in which Advisor
Acts as Distribution Coordinator)
FIRST INTERNET FUND
This Share Marketing Plan (the "Plan") is adopted in accordance with Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, (the "Company
Act"), by Trust for Investment Managers (the "Trust") with respect to the
following series: First Internet Fund (the "Fund"). The Plan has been approved
by a majority of the Trust's Board of Trustees, including a majority of the
Trustees who are not interested persons of the Trust and who have no direct or
indirect financial interest in the operation of the Plan (the "independent
Trustees"), cast in person at a meeting called for the purpose of voting on the
Plan and by a majority of the shareholders of the Fund, as required by the
Company Act.
In reviewing the Plan, the Board of Trustees considered the proposed range
and nature of payments and terms of the investment advisory agreement between
the Trust on behalf of the Fund and Astrop Research Corporation (the "Advisor")
and the nature and amount of other payments, fees and commissions that may be
paid to the Advisor, its affiliates and other agents of the Trust. The Board of
Trustees, including the independent Trustees, concluded that the proposed
overall compensation of the Advisor and its affiliates was fair and not
excessive.
In its considerations, the Board of Trustees also recognized that
uncertainty may exist from time to time with respect to whether payments to be
made by the Fund to the Advisor, as the initial "distribution coordinator," or
other firms under agreements with respect to the Fund may be deemed to
constitute impermissible distribution expenses. As a general rule, an investment
company may not finance any activity primarily intended to result in the sale of
its shares, except pursuant to the Rule. Accordingly, the Board of Trustees
determined that the Plan also should provide that payments by the Fund and
expenditures made by others out of monies received from the Fund which are later
deemed to be for the financing of any activity primarily intended to result in
the sale of Fund shares shall be deemed to have been made pursuant to the Plan.
The approval of the Board of Trustees included a determination that in the
exercise of the Trustees' reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Fund to which the Plan applies and its shareholders.
<PAGE>
The provisions of the Plan are:
1. ANNUAL FEE. The Fund will pay to the Advisor as the Fund's distribution
coordinator, an annual fee for the Advisor's services in connection with the
promotion and distribution of the Fund's shares and related shareholder
servicing (collectively, "Distribution Expenses"). The annual fee paid to the
Advisor under the Plan will be calculated daily and paid monthly by the Fund
based on the average daily net assets of the Fund, at an annual rate of up to
0.25%.
This fee is not tied exclusively to actual distribution and service
expenses, and the fee may exceed the expenses actually incurred.
2. DISTRIBUTION EXPENSES IN EXCESS OF AMOUNT OF FEE. Excess Distribution
Expenses may be carried forward by the Advisor and resubmitted in a subsequent
fiscal year provided that (i) Distribution Expenses cannot be carried forward
for more than three (3) years following initial submission; (ii) the Trust's
Board of Trustees has made a determination at the time of initial submission
that the Distribution Expenses are appropriate to be carried forward; and (iii)
the Trust's Board of Trustees makes a further determination, at the time any
Distributions Expenses which have been carried forward are resubmitted for
payment, to the effect that payment at the time is appropriate, consistent with
the objectives of the Plan and in the current best interest of shareholders.
3. SERVICES COVERED BY THE PLAN. The fee paid under Section 1 of the Plan
is intended to compensate the Advisor for performing the following kinds of
services (but this list should not be viewed as exclusive of other similar
services): services primarily intended to result in the sale of the Fund's
shares ("distribution services"), including, but not limited to: (a) making
payments, including incentive compensation, to agents for and consultants to the
Advisor, any affiliate of the Advisor or the Trust, including pension
administration firms that provide distribution and shareholder related services
and broker-dealers that engage in the distribution of the Fund's shares; (b)
making payments to persons who provide support services in connection with the
distribution of the Fund's shares and related servicing of the Fund's
shareholders, including, but not limited to, personnel of the Advisor, office
space and equipment, telephone facilities, answering routine inquiries regarding
the Fund, processing shareholder transactions and providing any other
shareholder services not otherwise provided by the Trust's transfer agency or
other servicing arrangements; (c) formulating and implementing marketing and
promotional activities, including, but not limited to, direct mail promotions
and television, radio, newspaper, magazine and other mass media advertising; (d)
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective shareholders of the Fund; (e) preparing,
printing and distributing sales literature pertaining to the Fund; and (f)
obtaining whatever information, analyses and reports with respect to marketing
and promotional activities that the Trust may, from time to time, deem
advisable. Such services and activities shall be deemed to be covered by this
Plan whether performed directly by the Advisor or by a third party.
4. WRITTEN REPORTS. The Advisor (or Fund administrator) shall furnish to
the Board of Trustees of the Trust, for its review, on a quarterly basis, a
written report of the monies paid to the Advisor under the Plan with respect to
2
<PAGE>
the Fund, and shall furnish the Board of Trustees of the Trust with such other
information as the Board of Trustees may reasonably request in connection with
the payments made under the Plan in order to enable the Board of Trustees to
make an informed determination of whether the Plan should be continued as to the
Fund.
5. TERMINATION. The Plan may be terminated as to the Fund at any time,
without penalty, by a vote of a majority of the independent Trustees or by vote
of a majority of the outstanding voting securities of the Fund, and the
Distribution Coordination Agreement under the Plan may be likewise terminated on
sixty (60) days' written notice. Failure to renew the Plan on an annual basis
within 15 months of its last prior renewal (or approval date) shall also
constitute termination of the Plan. Assignment of the Distribution Coordination
Agreement will automatically terminate it. Once either the Plan or the
Distribution Coordination Agreement is terminated, no further payments shall be
made under the Plan with respect to services performed or costs incurred after
the date of termination or with respect to unreimbursed current or carried
forward Distribution Expenses as of the date of termination.
6. AMENDMENTS. The Plan and the Distribution Coordination Agreement may be
amended with the approval of the Board of Trustees of the Trust provided that
neither the Plan nor the Distribution Coordination Agreement may be amended to
increase materially the amount to be spent for distribution and related
servicing of shares without approval by a majority of the outstanding voting
securities. All material amendments to the Plan and the Distribution
Coordination Agreement shall also be approved by the independent Trustees cast
in person at a meeting called for the purpose of voting on any such amendment.
7. SELECTION OF INDEPENDENT TRUSTEES. So long as the Plan is in effect, the
selection and nomination of the Trust's independent Trustees shall be committed
to the discretion of such independent Trustees.
8. EFFECTIVE DATE OF PLAN. The Plan shall take effect at such time as it
has received requisite Trustee and shareholder approval and, unless sooner
terminated, shall continue in effect for a period of more than one year from the
date of its execution only so long as such continuance is specifically approved
at least annually by the Board of Trustees of the Trust, including the
independent Trustees, cast in person at a meeting called for the purpose of
voting on such continuance.
9. PRESERVATION OF MATERIALS. The Trust will preserve copies of the Plan,
any agreements relating to the Plan and any report made pursuant to Section 6
above, for a period of not less than six years (the first two years in an easily
accessible place) from the date of the Plan, agreement or report.
10. MEANINGS OF CERTAIN TERMS. As used in the Plan, the terms "interested
person" and "majority of the outstanding voting securities" will be deemed to
have the same meaning that those terms have under the Company Act and the rules
and regulations under the Company Act, subject to any exemption that may be
granted to the Trust under the Company Act by the Securities and Exchange
Commission.
3
<PAGE>
TRUST FOR INVESTMENT MANAGERS
Distribution Coordination Agreement
EXHIBIT ONLY
Astrop Research Corporation
Ladies and Gentlemen:
This Distribution Coordination Agreement ("Agreement") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Company
Act") by Trust for Investment Managers (the "Trust"), on behalf of following
series of the Trust: First Internet Fund (the "Fund"), and is governed by the
terms of the Trust's Share Marketing Plan pursuant to Rule 12b-1 (the "Plan").
The Plan has been approved by a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan (the "independent Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
included a determination that in the exercise of the reasonable business
judgment of the Board of Trustees and in light of the Trustees' fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Fund and
its shareholders. The Plan also has been approved by a vote of at least a
majority of the outstanding voting securities of the Fund, as defined by the
Company Act.
I. To the extent you, in your capacity as the Distribution Coordinator
pursuant to this Agreement, provide eligible shareholder services of the type
identified in the Plan to the Fund, we shall pay you a monthly fee based on the
average net asset value of the Fund.
II. In no event may the aggregate annual fee paid to you pursuant to the
Plan exceed 0.25% of the value of the net assets of the Fund (determined in the
same manner as the Fund uses to compute its net assets as set forth in its
then-effective Prospectus), without approval by a majority of the outstanding
shares of the Fund.
III. You shall furnish to the Board of Trustees of the Trust, for its
review, on a quarterly basis, a written report of the amounts expended under the
Plan by you with respect to the Fund and the purposes for which such
expenditures were made.
4
<PAGE>
IV. All communications to the Fund shall be sent to you, as Distribution
Coordinator for the Fund, at the following address:
Astrop Research Corporation
3133 Maple Drive, N.E.
Suite 200
Atlanta, GA 30305
Any notice to you shall be duly given if mailed or telegraphed to you at
your address as indicated in this Agreement.
V. This Agreement may be terminated by us or by you, by the vote of a
majority of the Trustees of the Trust who are independent Trustees, or by a vote
of a majority of the outstanding shares of the Fund, on sixty (60) days' written
notice, all without payment of any penalty. This Agreement shall also be
terminated automatically in the event of its assignment by you or by any act
that terminates the Plan. If this Agreement is terminated your ability to
receive fees under the Plan shall be limited as provided for in the Plan.
VI. The provisions of the Plan between the Trust and the Fund, insofar as
they relate to you, are incorporated herein by reference.
This Agreement shall take effect on the date indicated below, and the terms
and provisions thereof are hereby accepted and agreed to by us as evidenced by
our execution hereof.
TRUST FOR INVESTMENT MANAGERS
By:
---------------------------------------
Authorized Officer
Dated:
------------------------------------
Agreed and Accepted:
Astrop Research Corporation
(Distribution Coordinator)
By:
-----------------------------
Authorized Officer
5
<PAGE>
TRUST FOR INVESTMENT MANAGERS
Share Marketing Agreement
EXHIBIT ONLY
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
Ladies and Gentlemen:
This Share Marketing Agreement has been adopted pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended (the "Company Act"), by
Trust for Investment Managers, a Delaware business Trust (the "Trust"), on
behalf of the following series of the Trust: First Internet Fund (the "Fund"),
as governed by the terms of a Share Marketing Plan (Rule 12b-1 Plan) (the
"Plan").
The Plan has been approved by a majority of the Trustees who are not
interested persons of the Trust or the Fund and who have no direct or indirect
financial interest in the operation of the Plan (the "independent Trustees"),
cast in person at a meeting called for the purpose of voting on such Plan. Such
approval included a determination that in the exercise of the reasonable
business judgment of the Board of Trustees and in light of the Trustees'
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders.
1. To the extent you provide eligible shareholder services of the type
identified in the Plan to the Fund, we shall pay you a monthly fee based on the
average net asset value of Fund shares during any month which are attributable
to customers of your firm, at the rate of 0.25%.
2. In no event may the aggregate annual fee paid to you pursuant paragraph
1 exceed 0.25% of the value of the net assets of the Fund held in your
customers' accounts which are eligible for payment pursuant to this Agreement
(determined in the same manner as the Fund uses to compute its net assets as set
forth in its then effective Prospectus), without approval by a majority of the
outstanding shares of the Fund.
3. You shall furnish us and the Trust with such information as shall
reasonably be requested by the Trust's Board of Trustees with respect to the
services performed by you and the fees paid to you pursuant to paragraph 1.
6
<PAGE>
4. We shall furnish to the Board of Trustees of the Trust, for its review,
on a quarterly basis, a written report of the amounts expended under the Plan by
us with respect to the Fund and the purposes for which such expenditures were
made.
5. You agree to make shares of the Fund available only (a) to your
customers or entities that you service at the net asset value per share next
determined after receipt of the relevant purchase instruction or (b) to the Fund
itself at the redemption price for shares, as described in the Fund's
then-effective Prospectus.
6. No person is authorized to make any representations concerning the Fund
or shares of the Fund except those contained in the Fund's then-effective
Prospectus or Statement of Additional Information and any such information as
may be released by the Fund as information supplemental to such Prospectus or
Statement of Additional Information.
7. Additional copies of each such Prospectus or Statement of Additional
Information and any printed information issued as supplemental to each such
Prospectus or Statement of Additional Information will be supplied by the Fund
to you in reasonable quantities upon request.
8. In no transaction shall you have any authority whatever to act as agent
of the Fund and nothing in this Agreement shall constitute you or the Fund the
agent of the other. You are not authorized to act as an underwriter of shares of
the Fund or as a dealer in shares of the Fund.
9. All communications to the Fund shall be sent to: Astrop Research
Corporation, 3133 Maple Drive, N.W., Suite 200, Atlanta, GA 30305. Any notice to
you shall be duly given if mailed or telegraphed to you at your address as
indicated in this Agreement.
10. This Agreement may be terminated by us or by you, by the vote of a
majority of the Trustees of the Trust who are independent Trustees, or by a vote
of a majority of the outstanding shares of the Fund, on sixty (60) days' written
notice, all without payment of any penalty. It shall also be terminated
automatically by any act that terminates the Plan.
11. The provisions of the Plan between the Trust and us, insofar as they
relate to you, are incorporated herein by reference.
7
<PAGE>
This Agreement shall take effect on the date indicated below, and the terms
and provisions thereof are hereby accepted and agreed to by us as evidenced by
our execution hereof.
ASTROP RESEARCH CORPORATION
Advisor and Distribution Coordinator
By:
---------------------------------------
Authorized Officer
Dated:
-------------------------
Agreed and Accepted:
- --------------------------------
(Name)
By:
----------------------------
(Authorized Officer)