Filed with the Securities and Exchange Commission on October 14, 1999
1933 Act Registration File No. 333-82833
1940 Act File No. 811-09445
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. 2 |X|
Post-Effective Amendment No. |_|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 2 |X|
INGENUITY CAPITAL TRUST
(Exact Name of Registrant as Specified in Charter)
26888 Almaden Court
Los Altos, CA 94022
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (888) 884-8482
Kendrick W. Kam
Ingenuity Capital Management LLC
26888 Almaden Court
Los Altos, CA 94022
(Name and Address of Agent for Service)
Copies of all communications to:
Roy W. Adams, Jr.
Attorney At Law
1024 Country Club Drive
Suite 135
Moraga, CA 94556
Approximate Date of Proposed Public Offering: As soon as practical after the
effective date of this Registration Statement.
It is proposed that this filing will become effective
___ 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)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on ____________ pursuant to paragraph (a)(2) of Rule 485.
INGENUITY CAPITAL TRUST
The Medical Specialists Fund
Prospectus
, 1999
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Ingenuity Capital Trust (the "Trust") currently offers one series of shares to
investors, The Medical Specialists Fund (the "Fund"). The Fund is
non-diversified and its investment objective is long-term growth of capital.
Current income is not a consideration when selecting the Fund's investments.
Table of Contents
Risk/Return Summary............................................................4
Investment Objective, Principal Investment Strategies and Related Risks........5
Operation of the Fund..........................................................7
How to Purchase Shares.........................................................8
How to Redeem Shares..........................................................10
Shareholder Services..........................................................12
Dividends and Distributions...................................................12
Taxes.........................................................................12
Calculation of Share Price....................................................13
Risk/Return Summary
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What is the Fund's investment objectives?
The Medical Specialists Fund's investment objective is long-term growth of
capital.
What is the Fund's principal investment strategies?
The Medical Specialists Fund seeks to achieve its objective by investing at
least 65% of its assets in common stock, of companies in the health and
biotechnology fields that the Investment Adviser considers to have a strong
earnings growth outlook and potential for capital appreciation. The health and
biotechnology fields include the cardiovascular medical device, minimally
invasive surgical tool, pharmaceutical, biotechnology, managed care provider and
generic drug segments of the technology industry.
What are the principal risks of investing in the Fund?
Health and Biotechnology Industry Specific Risks: The Fund will be subject to
greater risk because of its concentration of investments in the health and
biotechnology industry and within certain segments of the health and
biotechnology industry. The value of investments in the health and biotechnology
industry can and often does fluctuate dramatically and may expose you to greater
than average financial and market risk.
Stock Market Risks: The return on and value of an investment in the Fund will
fluctuate in response to stock market movements. Stocks and other equity
securities are subject to market risks and fluctuations in value due to
earnings, economic conditions and other factors beyond the control of the
Investment Adviser. As a result, there is a risk that you could lose money by
investing in the Fund.
Stock Selection Risk: The stocks selected by the Investment Adviser may decline
in value or not increase in value when the stock market in general is rising.
Non Diversification Risks: The Fund is a non-diversified fund. As such, the Fund
has added risk because it may invest a greater percentage of assets in a more
limited number of issues compared to other funds. Concentrating investments in a
single issuer or industry makes the value of the funds shares more susceptible
to adverse developments affecting a single issuer or industry. The Fund is also
susceptible to greater losses because of adverse developments than a more
diversified fund.
Performance Summary
No performance information is presented for the Fund, as the Fund has no
operating history as of the date of this Prospectus.
Expense Information
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Shareholder Fees (fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases None(1)
Maximum sales charge (load) imposed on reinvested dividends None
Maximum deferred sales charge (load) None
Exchange fee None
Redemption fee None(2)
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees 1.50%
Distribution (12b-1)Fees None
Other Expenses(3) 0.45%
Total Annual Fund Operating Expenses (4) 1.95%
(1) IRA Accounts are assessed a $12.50 annual fee.
(1) The fund's transfer agent charges a wire redemption fee of $12.
(2) The percentage in "Other Expenses" is based on estimated amounts for the
current fiscal year. The Investment Adviser receives an annual compensation of
0.45% of average daily net assets for Fund administration duties.
From this compensation, the Investment Advisor pays all expenses of the Fund.
(3) Under the Investment Advisory and Management Agreement dated _____, 1999,
the Investment Adviser has contractually agreed that the Fund's total annual
operating expenses will be 1.95% of the Fund's average daily net assets up to
$200 million, 1.90% of such assets from $200 million to $500 million, 1.85% of
such assets from $500 million to $1 billion, and 1.80% of such assets in excess
of $1 billion. This arrangement is indefinite as long as the Fund's Board of
Trustees annually renews the Investment Advisory and Management Agreement.
Example:
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in a Fund for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year, your dividends and distributions have been
reinvested, and that the Fund's operating expenses remain the same. Although
your actual cost may be higher or lower, based on these assumptions your costs
would be:
1 Year 3 Year
$ 198 $ 612
Investment Objective, Principal Investment Strategies and Related Risks
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Investment Objective
The investment objective of the Fund is long-term growth of capital.
Principal Investment Strategies
The Fund will invest primarily in the health and biotechnology fields. At any
point in time, however, the Fund may invest more than 25% of its assets in any
one industry segment within the health and biotechnology fields. This will
further increase the Fund's risk and will make the Fund more volatile. The
following list depicts some of the segments within the health and biotechnology
field in which the Fund may invest:
o Cardiovascular Medical Device
o Minimally Invasive Surgical Tool
o Pharmaceutical
o Biotechnology
o Managed Care Provider
o Generic Drug
To achieve its goal of long-term growth of capital, the Fund invests at least
65% of its assets in securities of companies in the health and biotechnology
fields as shown above. The Investment Adviser believes that investments by the
Fund in the health and biotechnology industry may offer greater opportunity for
growth than investments in other industries. Companies may be said to be in the
health and biotechnology fields of the medical industry if they are subject to
the same factors (economic, regulatory, etc.) that drive the medical industry as
a whole.
The equity securities in which the Fund may invest include common stock,
preferred stock, convertible preferred stock and warrants. The securities
selected will typically be traded on a national securities exchange, the NASDAQ
System or over-the-counter, and may include securities of both large (over $1
billion capitalized) companies as well as smaller (less than $1 billion
capitalized) companies. Although certain of the Fund's investments may produce
dividends, interest or other income, current income is not a consideration in
selecting the Fund's investments.
The Investment Adviser selects securities for the Fund's portfolio by valuing a
company and purchasing securities of the company when the Investment Adviser
believes that the company's value exceeds the market price. The Investment
Adviser values a company by focusing on the company's fundamental worth. A
company's fundamental worth is the value of the basic businesses of the company,
including products, technologies, customer relationships and other sustainable
competitive advantages.
The Investment Adviser considers the following factors when analyzing
fundamental worth of a company:
o assets and earning power,
o price-earnings ratios compared with sales,
o balance sheet strength,
o a strong competitive position
The Investment Adviser considers three factors when selling securities from the
Fund's portfolio:
(1) Whether the objective of the Fund has been met,
(2) Whether the security is no longer attractive, and
(3) Whether the Investment Adviser's outlook has changed about the
security.
Related Risks
Concentration of Investments in the Health and Biotechnology Industry
The Fund will invest primarily in companies within the health and biotechnology
fields. The Fund will be subject to greater risk because of its concentration of
investments in a single industry and within a certain segment of the industry.
Investments in the health and biotechnology fields include the risk that the
economic prospects, and the share prices, of health and biotechnology companies
can fluctuate dramatically due to changes in the regulatory or competitive
environments. Additionally, health and biotechnology field products and services
are subject to risk of rapid obsolescence caused by scientific developments and
technological advances. Also, the health and biotechnology industry is generally
more susceptible to effects caused by changes in the economic climate, broad
market swings, moves in a dominant industry stock or regulatory changes.
Although the Investment Adviser currently believes that investments by the Fund
in certain health and biotechnology companies may offer greater opportunities
for growth of capital than investments in other industries, such investments may
also expose investors to greater than average financial and market risk.
Equity Securities
The Fund invests primarily in equity securities, which by definition entail risk
of loss of capital. Investments in equity securities are subject to inherent
market risks and fluctuation in value due to earnings, economic conditions and
other factors beyond the control of the Investment Adviser. Securities in the
Fund's portfolio may not increase as much as the market as a whole and some
undervalued securities may continue to be undervalued for long periods of time.
Some securities may be inactively traded, and thus may not be readily bought or
sold. Although profits in some Fund holdings may be realized quickly, it is not
expected that most investments will appreciate rapidly. The Fund may invest up
to 15% of its net assets in illiquid securities.
Small Capitalization or Unseasoned Companies
The Fund may, from time to time, invest a substantial portion of its assets in
small capitalization or unseasoned companies. While small and unseasoned
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. In addition,
in many instances the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of small and unseasoned companies may be
subject to wider price fluctuations. When making large sales, the Fund may have
to sell portfolio holdings at discounts from quoted prices or may have to make a
series of small sales over an extended period of time.
Temporary Defensive Measures
For defensive purposes, the Fund may temporarily hold all or a portion of its
assets in money market instruments. Such action may help the Fund minimize or
avoid losses during adverse market, economic or political conditions. During
such a period, the Fund may not achieve its investment objective. For example,
should the market advance during this period, the Fund may not participate as
much as it would have if it had been more fully invested.
Year 2000 Problem
The Fund and its service providers depend upon the smooth functioning of their
computer systems. Unfortunately, because of the way dates are encoded and
calculated, many computer systems in use today cannot recognize the year 2000,
but revert to 1900 or another incorrect date. Computer failures due to the year
2000 problem could negatively impact the handling of securities trades and
pricing and account services.
The Fund's software vendors and service providers have assured the Fund that
their systems will be adapted in sufficient time to avoid serious problems. In
fact, the Fund has received representation from some of its service providers
that their systems have been adapted for a successful conversion into the Year
2000. There can be no guarantee, however, that all of their computer systems
will be adapted in time. The Fund does not expect year 2000 conversion costs to
be substantial for the Fund because those costs are borne by the Fund's vendors
and service providers and not directly by the Fund. Brokers and other
intermediaries that hold shareholder accounts may still experience
incompatibility problems. It is also important to keep in mind that year 2000
issues may negatively impact the companies in which the Fund invests and, by
extension, the value of those companies' shares held by the Fund.
Operation of the Fund
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Investment Adviser
The Trust retains Ingenuity Capital Management LLC (the "Investment Adviser"),
to manage the investments of the Fund. The Investment Adviser is located at
26888 Almaden Court, Los Altos, California, 94022. Kendrick W. Kam is the
President of the Investment Adviser and also serves as a Trustee of the Trust.
The Investment Adviser has no other assets under management besides the Funds.
The Investment Adviser receives a management fee at the annual rate of 1.50% of
its average daily net assets from the Fund. The Investment Advisory and
Management Agreement requires the Investment Adviser to waive its management
fees and, if necessary, reimburse expenses of the Fund to the extent necessary
to limit each Fund's total operating expenses to 1.95% of its average net assets
up to $200 million, 1.90% of such assets from $200 million to $500 million,
1.85% of such assets from $500 million to $1 billion, and 1.80% of such assets
in excess of $1 billion.
Portfolio Manager
Kendrick W. Kam has served as portfolio manager of the Fund ever since its
inception. From 1994 until 1999, prior to becoming President of the Investment
Advisor, Mr. Kam served as portfolio manager for three Firsthand Funds, which
were all technology and medical-related mutual funds. Prior to 1994, Mr. Kam was
co-founder and Vice President of Marketing and Finance for Novoste Corporation,
a medical device company headquartered in Aguadilla, Puerto Rico. Mr. Kam has a
Bachelor of Science Degree in ________ from __________ University.
Fund Administration, Transfer Agent, and Custody Services
Ingenuity Capital Management LLC provides administrative services to the Fund.
Firstar Mutual Fund Services, LLC provides transfer agent services to the Fund
and is located in Milwaukee, Wisconsin. Firstar Bank, N.A., serves as custodian
for the Fund.
Distributor
Rafferty Capital Markets, Inc. (the "Underwriter"), serves as principal
underwriter for the Fund and as such, is the exclusive agent for the
distribution of shares of the Fund.
How to Purchase Shares
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Opening an Account - $10,000 Minimum
You may open an account directly through the Fund's Transfer Agent or through a
brokerage firm or financial institution that has agreed to sell the Fund's
shares.
Your initial investment in the Fund ordinarily must be at least $10,000.
Lower minimums are available if you are purchasing shares of the Fund through
certain brokerage firms. If you are investing for an IRA, the minimum initial
investment is $2,000.
Additional Investments - $50 Minimum
You may purchase and add shares to your account through the Fund's Transfer
Agent or through a brokerage firm or financial institution that has agreed to
sell the Fund's shares. The minimum additional investment is $50. Each
additional purchase request must contain the account name and number to permit
proper crediting.
Purchasing Shares Through Your Broker
Any order placed with a brokerage firm is treated as if it were placed directly
with the Trust. Your shares will be held in a pooled account in the broker's
name, and the broker will maintain your individual ownership information. In
addition, your brokerage firm may charge you a fee for handling your order. Your
brokerage firm is responsible for processing your order correctly and promptly,
keeping you advised of the status of your individual account, confirming your
transactions and ensuring that you receive copies of the Trust's Prospectus.
Purchase orders given to such agents must be received by the Transfer Agent
prior to 4:00 p.m., eastern time, on any business day to be confirmed at the net
asset value determined as of the close of the regular session of trading on the
New York Stock Exchange on that day. It is the responsibility of agents to
transmit properly completed orders promptly. Agents may charge a fee (separately
negotiated with their customer) for effecting purchase orders.
Purchasing Shares By Mail
You may also open an account and make an initial investment in the Fund by
sending a check and a completed account application form to:
By Regular Mail: By Overnight Mail:
Ingenuity Capital Trust Ingenuity Capital Trust
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 East Michigan Street
Milwaukee, Wisconsin 53201-0701. Milwaukee, Wisconsin 53202.
NOTE: The Fund does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposits in the mail or with such
services, or receipt at Firstar Mutual Fund Services, LLC's post office box of
purchase applications or redemption requests do not constitute receipt by
Firstar Mutual Fund Services, LLC or the Fund.
Checks should be made payable to "Ingenuity Capital Trust." Third party checks
will not be accepted.
Purchasing Shares by Wire
Provided the Trust has received a completed account application form, you may
also purchase shares of the Funds by bank wire. Please telephone the Transfer
Agent (Nationwide call toll-free 1-888-884-8482) for instructions. You should be
prepared to give the name of the Fund in which you wish to purchase shares, the
name in which the account is to be established, the address, telephone number
and taxpayer identification number for the account, and the name of the bank
which will wire the money. Your investment will be made at the next determined
net asset value after your wire is received together with the account
information indicated above. If the Transfer Agent does not timely receive and
complete account information, there may be a delay in the investment of your
money and any accrual of dividends. To make your initial wire purchase, you must
mail a completed account application to the Transfer Agent. Your bank may impose
a charge for sending your wire. There is presently no fee for receipt of wired
funds, but the Transfer Agent reserves the right to charge shareholders for this
service upon thirty days' prior notice to shareholders. You may use the
following wire instructions:
Firstar Bank, N.A.
Milwaukee, WI 53202
ABA #: 075000022
Credit: Firstar Mutual Fund Services, LLC
Account #: 112-952-137
Further Credit: (name of fund, share class)
(name/title on the account)
(account #)
When Purchase Orders are Received
Shares of the Fund are sold on a continuous basis at the net asset value next
determined after the Trust or an agent has received your purchase order. An
account application is included with this Prospectus. Purchase orders received
by the Transfer Agent prior to 4:00 p.m., eastern time, on any business day are
confirmed at the net asset value determined as of the close of the regular
session of trading on the New York Stock Exchange on that day.
The Transfer Agent (or your broker) mails you confirmations of all purchases or
redemptions of Fund shares. Certificates representing shares are not issued. The
Trust reserves the rights to limit the amount of investments and to refuse to
sell to any person. If an order to purchase shares is cancelled because your
check does not clear, you will be responsible for any resulting losses or fees
incurred by the Trust or the Transfer Agent in the transaction.
How to Redeem Shares
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You may redeem shares of the Fund on any day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of your redemption request in the form described
below. Payment is normally made within three business days after tender in such
form, provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares of
the Fund by certified check or wire.
Redeeming By Telephone
You may redeem shares having a value of less than $50,000 by telephone. The
proceeds will be sent by mail to the address designated on your account or wired
directly to your existing account in any commercial bank or brokerage firm in
the United States as designated on your application. To redeem by telephone,
call the Transfer Agent (Nationwide call toll-free 1-888-884-8482). The
redemption proceeds will normally be sent by mail or by wire within three
business days after receipt of your telephone instructions. IRA accounts are not
redeemable by telephone.
The telephone redemption privilege is automatically available to all new
accounts. If you do not want the telephone redemption privilege, you must
indicate this in the appropriate area on your account application or you must
write to the Transfer Agent and instruct them to remove this privilege from your
account.
You may change the bank or brokerage account which you have designated at any
time by writing to the Transfer Agent with your signature guaranteed by any
eligible guarantor institution (including banks, brokers and dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations) or by completing a supplemental
telephone redemption authorization form. Contact the Transfer Agent to obtain
this form. Further documentation will be required to change the designated
account if shares are held by a corporation, fiduciary or other organization.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account has been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expenses in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
Redeeming By Mail
You may redeem any number of shares from your account by sending a written
request to the Transfer Agent. The request must state the number of shares or
the dollar amount to be redeemed and your account number. The request must be
signed exactly as your name appears on the Trust's account records. If the
shares to be redeemed have a value of $50,000 or more, your signature must be
guaranteed by any of the eligible guarantor institutions outlined above. If the
name(s) or the address on your account has been changed within 30 days of your
redemption request, you will be required to request the redemption in writing
with your signature guaranteed, regardless of the value of the shares being
redeemed. Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions. Proceeds of redemptions requested
by mail are normally mailed within three business days following receipt of
instructions in proper form.
Redeeming Through Broker-Dealers
You may also redeem shares of the Fund by placing a wire redemption request
through a securities broker or dealer. Unaffiliated broker-dealers may charge
you a fee for this service. You will receive the net asset value per share next
determined after receipt by the Trust or its agent of your wire redemption
request. It is the responsibility of broker-dealers to promptly transmit wire
redemption orders.
Additional Redemption Information
If your instructions request a redemption by wire, the proceeds will be wired
directly to your existing account in any commercial bank or brokerage firm in
the United States as designated on your application and you will be charged a
$12 processing fee by the Fund's Transfer Agent. The Trust reserves the right,
upon thirty days' written notice, to change the processing fee. All charges will
be deducted from you account by redemption of shares in your account. Your bank
or brokerage firm may also impose a charge for processing the wire. In the event
that wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution by way of an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account, other than an IRA account, if at any
time the value of your shares is less than $10,000 (based on actual amounts
invested, unaffected by market fluctuations), or such other minimum amount as
the Trust may determine from time to time. After notification to you of the
Trust's intention to close your account, you will be given sixty days to
increase the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission. Under
unusual circumstances, when the Board of Trustees deems it appropriate, the Fund
may make payment for shares redeemed in portfolio securities of the Fund taken
at current value.
Shareholder Services
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Contact the Transfer Agent (nationwide call toll-free 1-888-884-8482) for
additional information about the shareholder services described below.
Retirement Plans
You may purchase shares of the Fund for your individual retirement plans. Please
call the Transfer Agent at the above number for the most current listing and
appropriate disclosure documentation on how to open a retirement account.
Direct Deposit Plans
Shares of the Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder to
have all or a portion of his or her payroll or Social Security checks
transferred automatically to purchase shares of the Fund.
Automatic Investment Plan
By completing the Automatic Investment Plan section of the account application,
you may make automatic monthly investments in the Fund from your bank, savings
and loan or other depository institution account. The minimum investment must be
$50 under the plan. The Transfer Agent pays the costs associated with these
transfers, but reserves the right, upon thirty days' written notice, to make
reasonable charges for this service. Your depository institution may impose its
own charge for debiting your account, which would reduce your return from an
investment in the Fund. You may change the amount of the investment or
discontinue the plan at any time by writing to the Transfer Agent.
Dividends and Distributions
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The Fund expects to distribute substantially all of its net investment income
and net realized gains, if any, at least annually. Unless you provide a written
request to receive payments in cash, your dividends and distributions will
automatically be reinvested in additional shares of the Fund. You may indicate
on your application whether or not you wish to have your dividends distributed
in cash payments. All distributions will be based on the net asset value in
effect on the payable date.
If you elect to receive dividends in cash and the U.S. Postal Service cannot
deliver your checks or if your checks remain uncashed for six months, your
dividends may be reinvested in your account at the then-current net asset value.
All future distributions will automatically be reinvested in shares of the Fund.
No interest will accrue on amounts represented by uncashed distribution checks.
Taxes
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The Fund intends to continue to qualify and to be treated as a "regulated
investment company" under Subchapter M of the Code by annually distributing
substantially all of its net investment company taxable income, net tax-exempt
income and net capital gains in dividends to its shareholders and by satisfying
certain other requirements related to the sources of its income and the
diversification of its assets. By so qualifying, the Fund will not be subject to
federal income tax or excise tax on that part of its investment company taxable
income and net realized short-term and long-term capital gains which it
distributes to its shareholders in accordance with the Code's timing
requirements.
Dividends and distributions paid to shareholders (whether received in cash or
reinvested in additional shares) are generally subject to federal income tax and
may be subject to state and local income tax. Dividends from net investment
income and distributions from any excess of net realized short-term capital
gains over net realized capital losses are taxable to shareholders (other than
tax-exempt entities that have not borrowed to purchase or carry their shares of
the Fund) as ordinary income.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) by the Fund to its shareholders are taxable
to you as capital gains, without regard to the length of time you have held your
Fund shares. Capital gains distributions may be taxable at different rates
depending on the length of time the Fund holds its assets.
Redemptions of shares of the Fund are taxable events on which you may realize a
gain or loss.
An exchange is not a tax-free transaction. An exchange of shares pursuant to the
Fund's exchange privilege is treated the same as an ordinary sale and purchase
for federal income tax purposes and you will realize a capital gain or loss.
The Trust will mail a statement to you annually indicating the amount and
federal income tax status of all distributions made during the year. The Fund's
distributions may be subject to federal income tax whether received in cash or
reinvested in additional shares. In addition to federal taxes, you may be
subject to state and local taxes on distributions.
Calculation of Share Price
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The share price (net asset value) of the shares of the Fund is determined as of
the close of the regular session of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern Time) on each day the New York Stock Exchange is
open for business and may also be determined on any other day when there is
sufficient trading in a Fund's investments that its net asset value might be
materially affected. The net asset value per share of the Fund is calculated by
dividing the sum of the value of the securities held by the Fund plus cash or
other assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent. The
price at which a purchase or redemption of Fund shares is effected is based on
the next calculation of net asset value after the order is placed.
Portfolio securities are valued as follows: (1) securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the most recent bid price, (2) securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price (or, if the last sale price is not readily available, at the
most recent bid price as quoted by brokers that make markets in the securities)
as of the close of the regular session of trading on the New York Stock Exchange
on the day the securities are being valued, (3) securities which are traded both
in the over-the-counter market and on a stock exchange are valued according to
the broadest and most representative market, and (4) securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with consistently
applied procedures established by and under the general supervision of the Board
of Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
Additional information about the Fund is included in the Statement of Additional
Information ("SAI") dated _____________, 1999, which is incorporated by
reference in its entirety. Additional information about the Fund's investments
will be available in the Fund's annual and semiannual reports to shareholders
once the Fund has been in existence for the appropriate time period. In the
Fund's annual report, you will find a discussion of the market conditions and
strategies that significantly affected the Fund's performance during the last
fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Fund, or to make shareholder inquiries about the Fund,
please call 1-888-884-8482.
Information about the Fund (including the SAI) can be reviewed and copied at the
Securities and Exchange Commission's public reference room in Washington, D.C.
Information about the operation of the public reference room can be obtained by
calling the Commission at 1.800.SEC.0330. Reports and other information about
the Fund are available on the Commission's Internet site at http://www.sec.gov.
Copies of information on the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by writing to: Securities and Exchange Commission,
Public Reference Section, Washington, D.C. 20549-6009.
Investment Act No. 811-09445
INGENUITY CAPTIAL TRUST
THE MEDICAL SPECIALISTS FUND
STATEMENT OF ADDITIONAL INFORMATION
_________________, 1999
This Statement of Additional Information is not a Prospectus. It should be read
in conjunction with the Prospectus of Ingenuity Capital Trust dated _________
__, 1999. A copy of the Prospectus can be obtained by writing the Trust at 26888
Almaden Court, Los Altos, CA 94022, or by calling the Trust toll-free at
1-888-884-8482.
TABLE OF CONTENTS
THE TRUST......................................................................3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS..................................3
INVESTMENT RESTRICTIONS.......................................................10
TRUSTEES AND OFFICERS.........................................................11
INVESTMENT ADVISORY AND OTHER SERVICES........................................13
THE UNDERWRITER...............................................................14
SECURITIES TRANSACTIONS.......................................................14
PORTFOLIO TURNOVER............................................................15
PURCHASE, REDEMPTION AND PRICING OF SHARES....................................16
TAXES.........................................................................17
HISTORICAL PERFORMANCE INFORMATION............................................19
CUSTODIAN.....................................................................21
LEGAL COUNSEL AND AUDITORS....................................................21
FIRSTAR MUTUAL FUND SERVICES, LLC.............................................21
APPENDIX A....................................................................22
THE TRUST
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Ingenuity Capital Trust (the "Trust"), an open-end management investment
company, was organized as a Delaware business trust on July 20, 1999. The Trust
currently offers one series of shares to investors, The Medical Specialists
Fund. The Fund is a non-diversified series and has its own investment objective
and policies. The Trust may start another series and offer shares of a new fund
under the Trust at any time.
Shares of the Fund have equal voting rights and liquidation rights, and are
voted in the aggregate and not by Fund except in matters where a separate vote
is required by the Investment Company Act of 1940 (the "1940 Act") or when the
matter affects only the interest of a particular Fund. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each full share owned and fractional votes for fractional shares owned. The
Trust does not normally hold annual meetings of shareholders. The Trustees shall
promptly call and give notice of a meeting of shareholders for the purpose of
voting upon removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Trust's outstanding shares. The Trust
will comply with the provisions of Section 16(c) of the 1940 Act in order to
facilitate communications among shareholders.
Each share of the Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares of that Fund so long as the proportionate
beneficial interests in the assets belonging to that Fund and the rights of
shares of any other Fund are in no way affected. In case of any liquidation of a
Fund, the holders of shares of the Fund being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to that Fund. Expenses attributable to any Fund are borne by that
Fund. Any general expenses of the Trust not readily identifiable as belonging to
a particular Fund are allocated by or under the direction of the Trustees in
such manner as the Trustees allocate such expenses on the basis of relative net
assets or number of shareholders. No shareholder is liable to further calls or
to assessment by the Trust without his or her express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
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A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objectives, Investment
Strategies and Risk Considerations") appears below:
MAJORITY. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
the Fund) means the lesser of (1) two-thirds or more of the outstanding shares
of the Trust (or the Fund) present at a meeting, if the holders of more than 50%
of the outstanding shares of the Trust (or the Fund) are present or represented
at such meeting or (2) more than 50% of the outstanding shares of the Trust (or
the Fund).
DEBT SECURITIES. The Fund may invest in debt obligations of corporate
issuers, the U.S. Government, states, municipalities or state or municipal
government agencies that in the opinion of the Investment Adviser offer
long-term capital appreciation possibilities because of the timing of such
investments. The Fund intends that no more than 35% of its total assets will be
comprised of such debt securities. Investments in such debt obligations may
result in long-term capital appreciation because the value of debt obligations
varies inversely with prevailing interest rates. Thus, an investment in debt
obligations that is sold at a time when prevailing interest rates are lower than
they were at the time of investment will typically result in capital
appreciation. However, the reverse is also true, so that if an investment in
debt obligations is sold at a time when prevailing interest rates are higher
than they were at the time of investment, a capital loss will typically be
realized. Accordingly, if the Fund invests in the debt obligations described
above, such investments will generally be made when the Investment Adviser
expects that prevailing interest rates will be falling, and will generally be
sold when the Investment Adviser expects interest rates to rise.
The Fund's investments in this area will consist solely of investment grade
securities (rated BBB or higher by Standard & Poor's Ratings Group or Baa or
higher by Moody's Investors Service, Inc., or unrated securities determined by
the Investment Adviser to be of comparable quality). While securities in these
categories are generally accepted as being of investment grade, securities rated
BBB or Baa have speculative characteristics and changes in economic conditions
or other circumstances are more likely to lead to a weakened capacity to pay
principal and interest than is the case with higher grade securities. In the
event a security's rating is reduced below the Fund's minimum requirements, the
Fund will sell the security, subject to market conditions and the Investment
Adviser's assessment of the most opportune time for sale.
To the extent the Fund invests in bonds, it will be exposed to the risks
of bond investing. A bond's market value is affected significantly by changes in
interest rates. Generally, when interest rates rise, the bond's market value
declines and when interest rates decline, its market value rises. Also, the
longer a bond's maturity, the greater the risk and the higher its yield.
Conversely, the shorter a bond's maturity, the lower the risk and the lower its
yield. A bond's value can also be affected by changes in the bond's credit
quality rating or its issuer's financial condition. Because bond values
fluctuate, the fund's share price fluctuates.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. The Fund will only invest in commercial paper
rated A-1 by Standard & Poor's Ratings Group ("Standard & Poor's") or Prime-1 by
Moody's Investors Service, Inc. ("Moody's") or unrated paper of issuers who have
outstanding unsecured debt rated AA or better by Standard & Poor's or Aa or
better by Moody's. Certain notes may have floating or variable rates. Variable
and floating rate notes with a demand notice period exceeding seven days will be
subject to each Fund's policy with respect to illiquid investments unless, in
the judgment of the Investment Adviser, such note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
strength of the issuer's parent company and the relationships which exist with
the issuer; and recognition by the management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations. These factors are all considered in determining
whether the commercial paper is rated Prime-1. Issuers of commercial paper rated
A (highest quality) by Standard & Poor's have the following characteristics:
liquidity ratios are adequate to meet cash requirements; long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed; the
issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances; typically, the issuer's industry is well established and the
issuer has a strong position within the industry; and the reliability and
quality of management are unquestioned. The relative strength or weakness of the
above factors determines whether the issuer's commercial paper is rated A-1.
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Fund may invest
consist of certificates of deposit, bankers' acceptances and time deposits
issued by national banks and state banks, trust companies and mutual savings
banks, or by banks or institutions the accounts of which are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time (usually from 14 days to one year) at a stated or
variable interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft which has been drawn on it by a
customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. The Fund will not invest in time
deposits maturing in more than seven days if, as a result thereof, more than 15%
of the value of its net assets would be invested in such securities and other
illiquid securities.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the
Fund purchases a security and simultaneously commits to resell that security to
the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
by the seller of a repurchase agreement, the Fund could experience both delays
in liquidating the underlying security and losses. To minimize these
possibilities, the Fund intends to enter into repurchase agreements only with
its Custodian, with banks having assets in excess of $10 billion and with
broker-dealers who are recognized as primary dealers in U.S. Government
obligations by the Federal Reserve Bank of New York. Collateral for repurchase
agreements is held in safekeeping in the customer-only account of the Funds'
Custodian at the Federal Reserve Bank. The Fund will not enter into a repurchase
agreement not terminable within seven days if, as a result thereof, more than
15% of the value of its net assets would be invested in such securities and
other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time the Fund
enters into a repurchase agreement, the value of the underlying security,
including accrued interest, will equal or exceed the value of the repurchase
agreement, and, in the case of a repurchase agreement exceeding one day, the
seller will agree that the value of the underlying security, including accrued
interest, will at all times equal or exceed the value of the repurchase
agreement. The collateral securing the seller's obligation must be of a credit
quality at least equal to the Fund's investment criteria for portfolio
securities and will be held by the Custodian or in the Federal Reserve Book
Entry System.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan
from the Fund to the seller subject to the repurchase agreement and is therefore
subject to the Fund's investment restriction applicable to loans. It is not
clear whether a court would consider the securities purchased by the Fund
subject to a repurchase agreement as being owned by that 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 securities before repurchase of the security under a repurchase
agreement, the Fund may encounter delay and incur costs before being able to
sell the security. Delays may involve loss of interest or decline in price of
the security. If a court characterized the transaction as a loan and the Fund
has not perfected a security interest in the security, that 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 obligation purchased for the Fund, the Investment
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case, the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case the Fund may
incur a loss if the proceeds to the Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund will direct the seller of the 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 enforce the seller's
contractual obligation to deliver additional securities.
MONEY MARKET FUNDS. The Fund may under certain circumstances invest a
portion of its assets in money market investment companies. The 1940 Act
prohibits the Fund from investing more than 5% of the value of its total assets
in any one investment company, or more than 10% of the value of its total assets
in investment companies in the aggregate, and also restricts its investment in
any investment company to 3% of the voting securities of such investment
company. Investment in a money market investment company involves payment of
such company's pro rata share of advisory and administrative fees charged by
such company, in addition to those paid by the Fund.
WARRANTS. The Fund may invest a portion of its assets in warrants, but only
to the extent that such investments do not exceed 5% of the Fund's net assets at
the time of purchase. 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 coupon or 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).
INITIAL PUBLIC OFFERINGS. The Fund may purchase shares in initial public
offerings (IPOs). Because IPO shares frequently are volatile in price, the Fund
may hold IPO shares for 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. Investing in IPOs have added risks because their shares are
frequently volatile in price. As a result, their performance can be more
volatile and they face greater risk of business failure, which could increase
the volatility of the Fund's portfolio.
FOREIGN SECURITIES. Subject to the Fund's investment policies and quality
standards, the Fund may invest in the securities of foreign issuers listed on
foreign securities exchanges or over-the-counter markets, or which are
represented by American Depository Receipts and listed on domestic securities
exchange or traded in the United States on over-the-counter markets. Because the
Fund may invest in foreign securities, an investment in the Fund involves risks
that are different in some respects from an investment in a fund that invests
only in securities of U.S. domestic issuers. Foreign investments may be affected
favorably or unfavorably by changes in currency rates and exchange control
regulations. There may be less publicly available information about a foreign
company than about a U.S. company, and foreign companies may not be subject to
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. There may be less governmental
supervision of securities markets, brokers and issuers of securities. Securities
of some foreign companies are less liquid or more volatile than securities of
U.S. companies, and foreign brokerage commissions and custodian fees are
generally higher than in the United States. Settlement practices may include
delays and may differ from those customary in United States markets. Investments
in foreign securities may also be subject to other risks different from those
affecting U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, restrictions on foreign investment
and repatriation of capital, imposition of withholding taxes on dividend or
interest payments, currency blockage (which would prevent cash from being
brought back to the United States), and difficulty in enforcing legal rights
outside the United States.
NON-DIVERSIFICATION OF INVESTMENTS. The Fund is operated as a
"non-diversified" portfolio. As a non-diversified investment company, the Fund
may be subject to greater risks than diversified companies because of the
possible fluctuation in the values of securities of fewer issuers. However, at
the close of each fiscal quarter at least 50% of the value of the Fund's total
assets will be represented by one or more of the following: (i) cash and cash
items, including receivables; (ii) U.S. Government securities; (iii) securities
of other regulated investment companies; and (iv) securities (other than U.S.
Government securities and securities of other regulated investment companies) of
any one or more issuers which meet the following limitations: (a) the Fund will
not invest more than 5% of its total assets in the securities of any such issuer
and (b) the entire amount of the securities of such issuer owned by the Fund
will not represent more than 10% of the outstanding voting securities of such
issuer. Additionally, not more than 25% of the value of a Fund's total assets
may be invested in the securities of any one issuer.
WRITING COVERED CALL OPTIONS The Fund may write covered call options on
equity securities or futures contracts to earn premium income, to assure a
definite price for a security that the Fund has considered selling, or to close
out options previously purchased. A call option gives the holder (buyer) the
right to purchase a security or futures contract at a specified price (the
exercise price) at any time until a certain date (the expiration date). A call
option is "covered" if the Fund owns the underlying security subject to the call
option at all times during the option period. A covered call writer is required
to deposit in escrow the underlying security in accordance with the rules of the
exchanges on which the option is traded and the appropriate clearing agency.
The writing of covered call options is a conservative investment technique
which the Investment Adviser believes involves relatively little risk. However,
there is no assurance that a closing transaction can be effected at a favorable
price. During the option period, the covered call writer has, in return for the
premium received, given up the opportunity for capital appreciation above the
exercise price should the market price of the underlying security increase, but
has retained the risk of loss should the price of the underlying security
decline.
WRITING COVERED PUT OPTIONS The Fund may write covered put options on
equity securities and futures contracts to assure a definite price for a
security if they are considering acquiring the security at a lower price than
the current market price or to close out options previously purchased. A put
option gives the holder of the option the right to sell, and the writer has the
obligation to buy, the underlying security at the exercise price at any time
during the option period. The operation of put options in other respects is
substantially identical to that of call options. When the Fund writes a covered
put option, it maintains in a segregated account with its Custodian cash or
liquid securities in an amount not less than the exercise price at all times
while the put option is outstanding.
The risks involved in writing put options include the risk that a closing
transaction cannot be effected at a favorable price and the possibility that the
price of the underlying security may fall below the exercise price, in which
case a Fund may be required to purchase the underlying security at a higher
price than the market price of the security at the time the option is exercised.
OPTIONS TRANSACTIONS GENERALLY. Option transactions in which the Fund may
engage involve the specific risks described above as well as the following
risks: the writer of an option may be assigned an exercise at any time during
the option period; disruptions in the markets for underlying instruments could
result in losses for options investors; imperfect or no correlation between the
option and the securities being hedged; the insolvency of a broker could present
risks for the broker's customers; and market imposed restrictions may prohibit
the exercise of certain options. In addition, the option activities of the Fund
may affect its portfolio turnover rate and the amount of brokerage commissions
paid by the Fund. The success of the Fund in using the option strategies
described above depends, among other things, on the Investment Adviser's ability
to predict the direction and volatility of price movements in the options,
futures contracts and securities markets and the Investment Adviser's ability to
select the proper time, type and duration of the options.
By writing options, the Fund forgoes the opportunity to profit from an
increase in the market price of the underlying security or stock index above the
exercise price except insofar as the premium represents such a profit. The Fund
may also seek to earn additional income through receipt of premiums by writing
covered put options. The risk involved in writing such options is that there
could be a decrease in the market value of the underlying security or stock
index. If this occurred, the option could be exercised and the underlying
security would then be sold to the Fund at a higher price than its then current
market value. The Fund may purchase put and call options to attempt to provide
protection against adverse price effects from anticipated changes in prevailing
prices of securities or stock indices. The purchase of a put option generally
protects the value of portfolio holdings in a falling market, while the purchase
of a call option generally protects cash reserves from a failure to participate
in a rising market. In purchasing a call option, the Fund would be in a position
to realize a gain if, during the option period, the price of the security or
stock index increased by an amount greater than the premium paid. The Fund would
realize a loss if the price of the security or stock index decreased or remained
the same or did not increase during the period by more than the amount of the
premium. If a put or call option purchased by the Fund were permitted to expire
without being sold or exercised, its premium would represent a realized loss to
the Fund. When writing put options the Fund will be required to segregate cash
and/or liquid securities to meet its obligations. When writing call options the
Fund will be required to own the underlying financial instrument or segregate
with its Custodian cash and/or liquid securities to meet its obligations under
written calls. By so doing, the Fund's ability to meet current obligations, to
honor redemptions or to achieve its investment objective may be impaired. The
staff of the Securities and Exchange Commission has taken the position that
over-the-counter options and the assets used as "cover" for over-the-counter
options are illiquid securities.
The imperfect correlation in price movement between an option and the
underlying financial instrument and/or the costs of implementing such an option
may limit the effectiveness of the strategy. The Fund's ability to establish and
close out options positions will be subject to the existence of a liquid
secondary market. Although the Fund generally will purchase or sell only those
options for which there appears to be an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. If an option purchased by the Fund
expires unexercised, the Fund will lose the premium it paid. In addition, the
Fund could suffer a loss if the premium paid by the Fund in a closing
transaction exceeds the premium income it received. When the Fund writes a call
option, its ability to participate in the capital appreciation of the underlying
obligation is limited.
It is the present intention of the Adviser not to commit greater than 30%
of the Fund's net assets to option strategies.
BORROWING. The Fund may borrow from banks for temporary or emergency
purposes in an aggregate amount not to exceed 25% of its total assets. Borrowing
magnifies the potential for gain or loss on the portfolio securities of the Fund
and, therefore, if employed, increases the possibility of fluctuation in the
Fund's net asset value. This is the speculative factor known as leverage. To
reduce the risks of borrowing, the Fund will limit its borrowings as described
above. The Fund may pledge its assets in connection with borrowings. While the
Fund's borrowings exceed 5% of its total assets, it will not purchase additional
portfolio securities.
The use of borrowing by the Fund involves special risk considerations that
may not be associated with other funds having similar policies. Since
substantially all of the Fund's assets fluctuate in value, whereas the interest
obligation resulting from a borrowing will be fixed by the terms of the Fund's
agreement with their lender, the asset value per share of the Fund will tend to
increase more when its portfolio securities increase in value and decrease more
when its portfolio securities 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.
LOANS OF PORTFOLIO SECURITIES. The Fund may make short-term loans of its
portfolio securities to banks, brokers and dealers. Lending portfolio securities
exposes a Fund to the risk that the borrower may fail to return the loaned
securities or may not be able to provide additional collateral or that the Fund
may experience delays in recovery of the loaned securities or loss of rights in
the collateral if the borrower fails financially. To minimize these risks, the
borrower must agree to maintain collateral marked to market daily, in the form
of cash and/or U.S. Government obligations, with the Fund's Custodian in an
amount at least equal to the market value of the loaned securities. The Fund
will limit the amount of its loans of its portfolio securities to no more than
30% of its total assets.
Under applicable regulatory requirements (which are subject to change), the
loan collateral must, on each business day, at least equal the value of the
loaned securities. To be acceptable as collateral, letters of credit must
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 must be satisfactory to the
Fund. The Fund receive amounts equal to the dividends or interest on loaned
securities and also receive one or more of (a) negotiated loan fees, (b)
interest on securities used as collateral, or (c) interest on short-term debt
securities purchased with such collateral; either type of interest may be shared
with the borrower. The Fund may also pay fees to placing brokers as well as
custodian and administrative fees in connection with loans. Fees may only be
paid to a placing broker provided that the Trustees determine that the fee paid
to the placing broker is reasonable and based solely upon services rendered,
that the Trustees separately consider the propriety of any fee shared by the
placing broker with the borrower, and that the fees are not used to compensate
the Adviser or any affiliated person of the Trust or an affiliated person of the
Adviser or other affiliated person. The terms of the Fund's loans must meet
applicable tests under the Internal Revenue Code and permit the Fund to
reacquire loaned securities on five days' notice or in time to vote on any
important matter.
ILLIQUID SECURITIES. 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 securities such
as 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 placements 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 a mutual fund might be unable to dispose of restricted securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemption requirements. A mutual fund might also have to register such
restricted securities in order to dispose of 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 be indicative of the liquidity of such
investments. The Board of Trustees may determine that such securities are not
illiquid securities notwithstanding their legal or contractual restrictions on
resale. In all other cases, however, securities subject to restrictions on
resale will be deemed illiquid. The Fund will not invest more than 15% of the
value of its net assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven days after notice, non negotiable
fixed time deposits with maturates over seven days, over-the-counter options and
certain restricted securities not determined by the Trustee to be liquid.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Trust has adopted certain fundamental investment restrictions designed
to reduce the risk of an investment in the Fund. These restrictions may not be
changed with respect to the Fund without the affirmative vote of a majority of
the outstanding voting securities of the Fund. The Fund may not:
1. Underwrite the securities of other issuers, except that the Fund
may, as indicated in the Prospectus, acquire restricted securities
under circumstances where, if such securities are sold, the Fund
might be deemed to be an underwriter for purposes of the
Securities Act of 1933.
2. Purchase or sell real estate or interests in real estate, but the
Fund may purchase marketable securities of companies holding real
estate or interests in real estate.
3. Purchase or sell commodities or commodity contracts, including
futures contracts, except that the Fund may purchase and sell
futures contracts to the extent authorized by the Board of
Trustees.
4. Make loans to other persons except (i) by the purchase of a
portion of an issue of publicly distributed bonds, debentures or
other debt securities or privately sold bonds, debentures or other
debt securities immediately convertible into equity securities,
such purchases of privately sold debt securities not to exceed 5%
of the Fund's total assets, and (ii) the entry into portfolio
lending agreements (i.e., loans of portfolio securities) provided
that the value of securities subject to such lending agreements
may not exceed 30% of the value of the Fund's total assets.
5. Purchase securities on margin, but the Fund may obtain such
short-term credits as may be necessary for the clearance of
purchases and sales of securities.
6. Borrow money from banks except for temporary or emergency (not
leveraging) purposes, including the meeting of redemption requests
that might otherwise require the untimely disposition of
securities, in an aggregate amount not exceeding 25% of the value
of the Fund's total assets at the time any borrowing is made.
While the Fund's borrowings are in excess of 5% of its total
assets, the Fund will not purchase portfolio securities.
7. Purchase or sell puts and calls on securities, except that the
Fund may purchase and sell puts and calls on stocks and stock
indices.
8. Make short sales of securities.
9. Participate on a joint or joint and several basis in any securities
trading account.
10. Purchase the securities of any other investment company except in
compliance with the 1940 Act.
The following investment limitation is a non-fundamental policy, however it may
be changed only with shareholder approval. The Fund may not:
11. Invest in the securities of any one industry, except in the health
and biotechnology fields, with the exception of securities issued
or guaranteed by the U.S. Government, its agencies, and
instrumentalities, if as a result, more than 20% of the Fund's
total assets would be invested in the securities of such industry.
Except during temporary defensive periods, not less than 65% of
the Fund's total assets will be invented in the securities of
companies engaged in the health and biotechnology industries.
The following investment limitation is a non-fundamental policy and may be
changed by the Board of Trustees without shareholder approval. The Fund may not:
12. Issue senior securities except that the Fund may borrow money in
amounts up to 25% of the value of its total assets.
With respect to the percentages adopted by the Trust as maximum limitations
on the Fund's investment policies and restrictions, an excess above the fixed
percentage (except for the percentage limitations relative to the borrowing of
money) will not be a violation of the policy or restriction unless the excess
results immediately and directly from the acquisition of any security or the
action taken.
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The business of the Trust is managed under the direction of the Board of
Trustees in accordance with the Declaration of Trust of the Trust, which
Declaration of Trust has been filed with the Securities and Exchange Commission
and is available upon request. Pursuant to the Declaration of Trust, the
Trustees shall elect officers including a president, secretary and treasurer.
The Board of Trustees retains the power to conduct, operate and carry on the
business of the Trust and has the power to incur and pay any expenses which, in
the opinion of the Board of Trustees, are necessary or incidental to carry out
any of the Trust's purposes. The Trustees, officers, employees and agents of the
Trust, when acting in such capacities, shall not be subject to any personal
liability except for his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties. Following is a list of
the Trustees and executive officers of the Trust and their principal occupation
over the last five years.
<TABLE>
<S> <C> <C> <C>
Principal Occupation during the Past Five
Name and Address Age Position Years
- ---------------------------------- ------- ---------------------- --------------------------------------------
*Kendrick W. Kam 38 Trustee, President President, Ingenuity Capital Management
26888 Almaden Court and Treasurer LLC (July 1999 to Present); President,
Los Altos, CA 94022 Interactive Research Advisers, Inc. and
co-portfolio manger (1993 to 1999).
- ---------------------------------- ------- ---------------------- --------------------------------------------
William J. Scilacci __ Trustee Retired; President, Bank of Santa Clara
26888 Almaden Court (1982-1993).
Los Altos, CA 94022
- ---------------------------------- ------- ---------------------- --------------------------------------------
Arthur L. Roth __ Trustee, Chairman of Retired; Director and CEO, Levi Strauss &
26888 Almaden Court Board Co., a clothing manufacturer, (19__ to
Los Altos, CA 94022 19__); CEO, PharmChem Laboratories, a
national drug testing firm (19__ to 19__).
- ---------------------------------- ------- ---------------------- --------------------------------------------
Elaine E. Richards 31 Secretary Legal Compliance Administrator and Trust
615 East Michigan Street Officer, Firstar Mutual Fund Services,
Milwaukee, WI 53202 LLC, June 1998 to present; Associate
Attorney, Reinhart, Boerner, Van Deuren, Norris
& Rieselbach, s.c., Milwaukee, Wisconsin,
1995 to 1998.
- ---------------------------------- ------- ---------------------- --------------------------------------------
</TABLE>
* Kendrick W. Kam, as an affiliated person of Ingenuity Capital Management LLC,
the Fund's investment adviser, is an "interested persons" of the Trust within
the meaning of Section 2(a)(19) of the 1940 Act.
Compensation
For their service as Trustees, the independent Trustees will receive a fee
of $50 per meeting attended, as well as reimbursement for expenses incurred in
connection with attendance at such meetings. The interested Trustees of the
Trust receive no compensation for their service as Trustees. The table below
details the estimated amount of compensation the Trustees may receive from the
Trust for the next fiscal year. Presently, none of the executive officers
receive compensation from the Trust. The aggregate compensation is provided for
the Trust, which is comprised of eleven portfolios.
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
Name and Position Estimated Pension or Retirement Estimated Annual Estimated Total
Aggregate Benefits Accrued As Benefits Upon Compensation from
Compensation Part of Trust Expenses Retirement Trust and Fund Complex
From Trust Paid to Trustees
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
Kendrick W. Kam * None None None None
Arthur L. Roth $250 None None $250
William J. Scilacci $250 None None $250
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
</TABLE>
*This trustee is deemed to be an interested person as defined in the 1940 Act.
Management Ownership
As of ______, 1999, for organizational purposes only, the Trustees own 100% of
the outstanding shares of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------------------------------------------------
Ingenuity Capital Management LLC (the "Investment Adviser"), is registered
as an investment adviser with the Securities and Exchange Commission under the
Investment Advisers Act of 1940. Kendrick W. Kam is the President of the
Investment Adviser and the only portfolio manager. Prior to forming the
Investment Adviser and the Trust, Mr. Kam was President and co-founder of
Interactive Research Advisers, Inc. Mr. Kam was also co-portfolio manager of
three mutual funds managed by Interactive Research Advisers, Inc. Mr. Kam is the
sole shareholder of the Investment Adviser and there are no other affiliates to
the Fund.
Under the terms of the Investment Advisory and Management Agreement (the
"Advisory Agreement") between the Trust and the Investment Adviser, the
Investment Adviser (i) manages the investment operations of the Fund and the
composition of its portfolio, including the purchase, retention and disposition
of securities in accordance with the Fund's investment objective, (ii) provides
all statistical, economic and financial information reasonably required by the
Fund and reasonably available to the Investment Adviser, (iii) provides the
Custodian of the Fund's securities on each business day with a list of trades
for that day, and (iv) provides persons satisfactory to the Trust's Board of
Trustees to act as officers and employees of the Trust.
Pursuant to the Advisory Agreement, the Fund pays to the Investment
Adviser, on a monthly basis, an advisory fee at an annual rate of 1.50% of its
average daily net assets. The Advisory Agreement requires the Investment Adviser
to waive its management fees and, if necessary, reimburse expenses of the Fund
to the extent necessary to limit each Fund's total operating expenses to 1.95%
of its average net assets up to $200 million, 1.90% of such assets from $200
million to $500 million, 1.85% of such assets from $500 million to $1 billion,
and 1.80% of such assets in excess of $1 billion.
By its terms, the Advisory Agreement remains in force from year to year,
subject to annual approval by (a) the Board of Trustees or (b) a vote of the
majority of the Fund's outstanding voting securities; provided that in either
event continuance is also approved by a majority of the Trustees who are not
interested persons of the Trust, by a vote cast in person at a meeting called
for the purpose of voting such approval. The Advisory Agreement may be
terminated at any time, on 60 days' written notice, without the payment of any
penalty, by the Board of Trustees, by a vote of the majority of the Fund's
outstanding voting securities, or by the Investment Adviser. The Advisory
Agreement automatically terminates in the event of its assignment, as defined by
the 1940 Act and the rules thereunder.
The Board of Trustees of the Trust has approved an Administration Agreement
with the Investment Adviser wherein the Investment Adviser is responsible for
the provision of administrative and supervisory services to the Fund. The
Investment Adviser, at its expense, shall supply the Trustees and the officers
of the Trust with all statistical information and reports reasonably required by
it and reasonably available to the Investment Adviser. The Investment Adviser
shall oversee the maintenance of all books and records with respect to the
Fund's security transactions and the Fund's books of account in accordance with
all applicable federal and state laws and regulations. The Investment Adviser
will arrange for the preservation of the records required to be maintained by
the 1940 Act.
Pursuant to the Administration Agreement, the Fund will pay to the
Investment Adviser, on a monthly basis, a fee equal to .45% per annum of its
average daily net assets up to $200 million, .40% of such assets from $200
million to $500 million, .35% of such assets from $500 million to $1 billion,
and .30% of such assets in excess of $1 billion.
The Administration Agreement may be terminated by the Trust at any time, on
60 days' notice to the Investment Adviser, without penalty either (a) by vote of
the Board of Trustees of the Trust, or (b) by vote of a majority of the
outstanding voting securities of a Fund. It may be terminated at any time by the
Investment Adviser on 60 days' written notice to the Trust.
THE UNDERWRITER
- --------------------------------------------------------------------------------
Rafferty Capital Markets, Inc. (the "Underwriter"), 1311 Mamaroneck Ave,
White Plains, New York 10605, serves as principal underwriter for the Trust
pursuant to an Underwriting Agreement. No affiliated persons of the Fund are
affiliated persons of the Underwriter. Shares are sold on a continuous basis by
the Underwriter. The Underwriter has agreed to use its best efforts to solicit
orders for the sale of Trust shares, but it is not obliged to sell any
particular amount of shares. The Underwriting Agreement provides that, unless
sooner terminated, it will continue in effect from year to year, subject to
annual approval by (a) the Board of Trustees or a vote of a majority of the
outstanding shares, and (b) by a majority of the Trustees who are not interested
persons of the Trust or of the Underwriter by vote cast in person at a meeting
called for the purpose of voting on such approval.
The Underwriting Agreement may be terminated by the Trust at any time,
without the payment of any penalty, by vote of a majority of the entire Board of
Trustees of the Trust or by vote of a majority of the outstanding shares of the
Fund on 60 days' written notice to the Underwriter, or by the Underwriter at any
time, without the payment of any penalty, on 60 days' written notice to the
Trust. The Underwriting Agreement will automatically terminate in the event of
its assignment.
SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------
The Investment Adviser furnishes advice and recommendations with respect to
the Fund's portfolio decisions and, subject to the supervision of the Board of
Trustees of the Trust, determines the broker to be used in each specific
transaction. In executing the Fund's portfolio transactions, the Investment
Adviser seeks to obtain the best net results for the Fund, taking into account
such factors as the overall net economic result to the Fund (involving both
price paid or received and any commissions and other costs paid), the efficiency
with which the specific transaction is effected, the ability to effect the
transaction where a large block is involved, the known practices of brokers and
the availability to execute possibly difficult transactions in the future and
the financial strength and stability of the broker. While the Investment Adviser
generally seeks reasonably competitive commission rates, the Fund does not
necessarily pay the lowest commission or spread available.
The Investment Adviser may direct the Fund's portfolio transactions to
persons or firms because of research and investment services provided by such
persons or firms if the amount of commissions in effecting the transactions is
reasonable in relationship to the value of the investment information provided
by those persons or firms. Such research and investment services are those which
brokerage houses customarily provide to institutional investors and include
statistical and economic data and research reports on particular companies and
industries. These services may be used by the Investment Adviser in connection
with all of its investment activities, and some of the services obtained in
connection with the execution of transactions for the Fund may be used in
managing the Investment Adviser's other investment accounts.
The Fund may deal in some instances in securities which are not listed on a
national securities exchange but are traded in the over-the-counter market. The
Fund may also purchase listed securities through the "third market" (i.e.,
otherwise than on the exchanges on which the securities are listed). When
transactions are executed in the over-the-counter market or the third market,
the Investment Adviser will seek to deal with primary market makers and to
execute transactions on the Fund's own behalf, except in those circumstances
where, in the opinion of the Investment Adviser, better prices and executions
may be available elsewhere. The Fund does not allocate brokerage business in
return for sales of the Fund's shares.
Neither the Investment Adviser nor any affiliated person thereof will
participate in commissions paid by the Fund to brokers or dealers or will
receive any reciprocal business, directly or indirectly, as a result of such
commissions.
The Board of Trustees reviews periodically the allocation of brokerage
orders to monitor the operation of these policies.
PORTFOLIO TURNOVER
- --------------------------------------------------------------------------------
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Fund. A 100% turnover rate would occur if all of the Fund's portfolio securities
were replaced once within a one year period.
Generally, the Fund intends to invest for long-term purposes. However, the
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when the Adviser believes that portfolio changes
are appropriate.
If the Investment Adviser engages in active trading of its portfolio
securities to achieve its investment goals, it could result in the Fund
experiencing a high turnover rate (100% or more). High turnover rates lead to
increase loss, could cause you to pay higher taxes and could negatively affect
the Fund's performance.
PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------
CALCULATION OF SHARE PRICE
The share price (net asset value) of the shares of the Fund is determined
as of the close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., eastern time), on each day the Trust is open for business.
The Trust is open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. The Trust may also be open for business on other days in which there
is sufficient trading in the Fund's portfolio securities that its net asset
value might be materially affected. For a description of the methods used to
determine the share price, see "Calculation of Share Price" in the Prospectus.
In valuing the Fund's assets for the purpose of determining net asset
value, readily marketable portfolio securities listed on a national securities
exchange are valued at the last sale price on such exchange on the business day
as of which such value is being determined. If there has been no sale on such
exchange on such day, the security is valued at the closing bid price on such
day. If no bid price is quoted on such exchange on such day, then the security
is valued by such method as the Investment Adviser under the supervision of the
Board of Trustees determines in good faith to reflect its fair value. Readily
marketable securities traded only in the over-the-counter market are valued at
the last sale price, if available, otherwise at the most recent bid price. If no
bid price is quoted on such day, then the security is valued by such method as
the Investment Adviser under the supervision of the Board of Trustees determines
in good faith to reflect its fair value. All other assets of the Fund, including
restricted securities and securities that are not readily marketable, are valued
in such manner as the Investment Adviser under the supervision of the Board of
Trustees in good faith deems appropriate to reflect their fair value.
PURCHASE OF SHARES
Orders for shares received by the Trust in good order prior to the close of
business on the New York Stock Exchange (the "Exchange") on each day during such
periods that the Exchange is open for trading are priced at net asset value per
share computed as of the close of the regular session of trading on the
Exchange. Orders received in good order after the close of the Exchange, or on a
day it is not open for trading, are priced at the close of such Exchange on the
next day on which it is open for trading at the next determined net asset value
per share.
Good order means that your purchase request includes: (1) the name of the
fund, (2) the dollar amount of shares to be purchased, (3) your purchase
application or investment status, (4) your check payable to "Ingenuity Capital
Trust."
REDEMPTION OF SHARES
The right of redemption may not be suspended or the date of payment upon
redemption postponed for more than seven calendar days after a shareholder's
redemption request made in accordance with the procedures set forth in the
Prospectus, except for any period during which the Exchange is closed (other
than customary weekend and holiday closing) or during which the Securities and
Exchange Commission determines that trading thereon is restricted, or for any
period during which an emergency (as determined by the Securities and Exchange
Commission) exists as a result of which disposal by a Fund of securities owned
by it is not reasonably practicable or as a result of which it is not reasonably
practicable for the Fund to fairly determine the value of its net assets, or for
such other period as the Securities and Exchange Commission may by order permit
for the protection of security holders of the Fund.
The Trust will redeem all or any portion of a shareholder's shares of the
Fund when requested in accordance with the procedures set forth in the "How to
Redeem Shares" section of the Prospectus.
REDEMPTION IN KIND
Payment of the net redemption proceeds may be made either in cash or in
portfolio securities (selected in the discretion of the Investment Adviser under
supervision of the Board of Trustees and taken at their value used in
determining the net asset value), or partly in cash and partly in portfolio
securities. However, payments will be made wholly in cash unless the Board of
Trustees believes that economic conditions exist which would make such a
practice detrimental to the best interests of the Fund. If payment for shares
redeemed is made wholly or partly in portfolio securities, brokerage costs may
be incurred by the investor in converting the securities to cash. The Trust has
filed an election with the Securities and Exchange Commission pursuant to which
the Fund will effect a redemption in portfolio securities only if the particular
shareholder of record is redeeming more than $250,000 or 1% of net assets,
whichever is less, during any 90-day period. The Trust expects, however, that
the amount of a redemption request would have to be significantly greater than
$250,000 or 1% of net assets before a redemption wholly or partly in portfolio
securities would be made.
TAXES
- --------------------------------------------------------------------------------
The Fund has elected, and intends to qualify annually, for the special tax
treatment afforded regulated investment companies under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a
regulated investment company, the Fund must, among other things, (a) derive in
each taxable year at least 90% of its gross income from dividend, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of stock, securities or foreign currencies, or other income
(including gains from options, futures and forward contracts) derived with
respect to their business of investing in such stock, securities or currencies;
(b) diversify its holdings so that, at the end of each quarter of the taxable
year, (i) at least 50% of the market value of the Fund's assets are represented
by cash, U.S. Government securities, the securities of other regulated
investment companies, and other securities, with such other securities of any
one issuer limited for the purposes of this calculation to an amount not greater
than 5% of the value of the Fund's total assets or 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets are invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment companies)
or in two or more issuers which the Funds control and which are engaged in the
same or similar trades or businesses; and (c) distribute at least 90% of its
investment company taxable income (which includes dividends, interest and net
short-term capital gains in excess of any net long-term capital losses) each
taxable year.
As regulated investment companies, the Fund will not be subject to U.S.
Federal income tax on its investment company taxable income and net capital
gains (any long-term capital gains in excess of the sum of net short-term
capital losses and capital loss carryovers available from the eight prior
years), if any, that it distributes to shareholders. The Fund intends to
distribute annually to its shareholders substantially all of its investment
company taxable income and any net capital gains. In addition, amounts not
distributed by the Fund on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax. To avoid
the tax, the Fund must distribute during each calendar year an amount equal to
the sum of (1) at least 98% of its ordinary income (with adjustment) for the
calendar year and (2) at least 98% of its capital gains in excess of its capital
losses (and adjusted for certain ordinary losses) for the 12 month period ending
on October 31 of the calendar year, and (3) all ordinary income and capital
gains for previous years that were not distributed during such years. In order
to avoid application of the excise tax, the Fund intends to make distributions
in accordance with these distribution requirements.
In view of the Fund's investment policies, it is expected that dividends
received from domestic and certain foreign corporations will be part of the
Fund's gross income. Distributions by the Fund of such dividends to corporate
shareholders may be eligible for the "70% dividends received" deduction, subject
to the holding period and debt-financing limitations of the Code. However, the
portion of the Fund's gross income attributable to dividends received from
qualifying corporations is largely dependent on its investment activities for a
particular year and therefore cannot be predicted with certainty. In addition,
for purposes of the dividends received deduction available to corporations, a
capital gain dividend received from a regulated investment company is not
treated as a dividend. Corporate shareholders should be aware that availability
of the dividends received deduction is subject to certain restrictions. For
example, the deduction is not available if Fund shares are deemed to have been
held for less than 46 days (within the 90-day period that begins 45 days before
the ex-dividend date and ends 45 days after the ex-dividend date) and is reduced
to the extent such shares are treated as debt-financed under the Code.
Dividends, including the portions thereof qualifying for the dividends received
deduction, are includable in the tax base on which the federal alternative
minimum tax is computed. Dividends of sufficient aggregate amount received
during a prescribed period of time and qualifying for the dividends received
deduction may be treated as "extraordinary dividends" under the Code, resulting
in a reduction in a corporate shareholder's federal tax basis in its Fund
shares.
The Fund may invest as much as 15% of its net assets in securities of
foreign companies and may therefore be liable for foreign withholding and other
taxes, which will reduce the amount available for distribution to shareholders.
Tax conventions between the United States and various other countries may reduce
or eliminate such taxes. A foreign tax credit or deduction is generally allowed
for foreign taxes paid or deemed to be paid. A regulated investment company may
elect to have the foreign tax credit or deduction claimed by the shareholders
rather than the company if certain requirements are met, including the
requirement that more than 50% of the value of the company's total assets at the
end of the taxable year consist of securities in foreign corporations. Because
the Fund does not anticipate investment in securities of foreign corporations to
this extent, the Fund will likely not be able to make this election and foreign
tax credits will be allowed only to reduce the Fund's tax liability, if any.
Under the Code, upon disposition of certain securities denominated in a
foreign currency, gains or losses attributable to fluctuations in the value of
the foreign currency between the date of acquisition of the securities and the
date of disposition are treated as ordinary gain or loss. These gains or losses,
referred to under the Code as "Section 988" gains or losses, may increase or
decrease the amount of the Fund's investment company taxable income.
Any dividend or distribution received shortly after a share purchase will
have the effect of reducing the net asset value of such shares by the amount of
such dividend or distribution. Such dividend or distribution is fully taxable.
Accordingly, prior to purchasing shares of the Fund, an investor should
carefully consider the amount of dividends or capital gains distributions which
are expected to be or have been announced.
Generally, the Code's rules regarding the determination and character of
gain or loss on the sale of a capital asset apply to a sale, redemption or
repurchase of shares of the Fund that are held by the shareholder as capital
assets. However, if a shareholder sells shares of the Fund which he has held for
less than six months and on which he has received distributions of capital
gains, any loss on the sale or exchange of such shares must be treated as
long-term capital loss to the extent of such distributions. Any loss realized on
the sale of shares of the Fund will be disallowed by the "wash sale" rules to
the extent the shares sold are replaced (including through the receipt of
additional shares through reinvested dividends) within a period of time
beginning 30 days before and ending 30 days after the shares are sold. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The Trust is required to withhold and remit to the U.S. Treasury a portion
(31%) of dividend income on any account unless the shareholder provides a
taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
Provided that the Fund qualifies as a regulated investment company under
the Code, it will not be liable for California corporate taxes, other than a
minimum franchise tax, if all of its income is distributed to shareholders for
each taxable year. Shareholders, however, may be liable for state and local
income taxes on distributions from the Fund.
The above discussion and the related discussion in the Prospectus are not
intended to be complete discussions of all applicable federal tax consequences
of an investment in the Fund. The law has expressed no opinion in respect
thereof. Nonresident aliens and foreign persons are subject to different tax
rules, and may be subject to withholding of up to 30% on certain payments
received from the Fund. Shareholders are advised to consult with their own tax
advisors concerning the application of foreign, federal, state and local taxes
to an investment in the Fund.
HISTORICAL PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The Fund's total returns are based on the overall dollar or percentage
change in value of a hypothetical investment in the Fund, assuming all dividends
and distributions are reinvested. Average annual total return reflects the
hypothetical annually compounded return that would have produced the same
cumulative total return if the Fund's performance had been constant over the
entire period presented. Because average annual total returns tend to smooth out
variations in the Fund's returns, investors should recognize that they are not
the same as actual year-by-year returns.
For the purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to other relevant market indices in
advertisements, performance will be stated in terms of average annual total
return. Under regulations adopted by the Securities and Exchange Commission,
funds that intend to advertise performance must include average annual total
return quotations calculated according to the following formula:
P(1+T)n = ERV
Where:
P = a hypothetical initial payment of $1,000 T = average annual total return n =
number of years (1, 5, or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1-, 5-, or 10- year period, at the end of such period (or
fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
1, 5, and 10 year periods of the Fund's existence or shorter periods dating from
the commencement of the Fund's operations. In calculating the ending redeemable
value, all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the Prospectus on the reinvestment
dates during the period. Additionally, redemption of shares is assumed to occur
at the end of each applicable time period.
The foregoing information should be considered in light of the Fund's
investment objectives and policies, as well as the risks incurred in the Fund's
investment practices. Future results will be affected by the future composition
of a Fund's portfolio, as well as by changes in the general level of interest
rates, and general economic and other market conditions.
The Fund may also advertise total return (a "nonstandardized quotation")
which is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A nonstandardized quotation may
also indicate average annual compounded rates of return over periods other than
those specified for average annual total return. A nonstandardized quotation of
total return will always be accompanied by the Fund's average annual total
return as described above.
The performance quotations described above are based on historical earnings
and are not intended to indicate future performance of the Fund.
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Fund may use the following
publications or indices to discuss or compare Fund performance:
Lipper Mutual Fund Performance Analysis measures total return and average
current yield for the mutual fund industry and ranks individual mutual fund
performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Fund may provide comparative
performance information appearing in any appropriate category published by
Lipper Analytical Services, Inc. In addition, the Fund may use comparative
performance information of relevant indices, including the S&P 500 Index, the
Dow Jones Industrial Average, the Russell 2000 Index, the NASDAQ Composite Index
and the Value Line Composite Index. The S&P 500 Index is an unmanaged index of
500 stocks, the purpose of which is to portray the pattern of common stock price
movement. The Dow Jones Industrial Average is a measurement of general market
price movement for 30 widely held stocks listed on the New York Stock Exchange.
The Russell 2000 Index, representing approximately 11% of the U.S. equity
market, is an unmanaged index comprised of the 2,000 smallest U.S. domiciled
publicly-traded common stocks in the Russell 3000 Index (an unmanaged index of
the 3,000 largest U.S. domiciled publicly-traded common stocks by market
capitalization representing approximately 98% of the U.S. publicly-traded equity
market). The NASDAQ Composite Index is an unmanaged index which averages the
trading prices of more than 3,000 domestic over-the-counter companies. The Value
Line Composite Index is an unmanaged index comprised of approximately 1,700
stocks, the purpose of which is to portray the pattern of common stock price
movement.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate their
performance. In addition, there can be no assurance that the Funds will continue
this performance as compared to such other averages.
CUSTODIAN
- --------------------------------------------------------------------------------
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45201, has been
retained to act as Custodian for the Fund's investments. Firstar Bank, N.A. acts
as the Fund's depository, safekeeps its portfolio securities, collects all
income and other payments with respect thereto, disburses funds as instructed
and maintains records in connection with its duties.
LEGAL COUNSEL AND AUDITORS
- --------------------------------------------------------------------------------
The law offices of Roy W. Adams, Attorney At Law, 1024 Country Club Drive,
Suite 135, Moraga, California, 94556, acts as legal counsel for the Trust.
The firm of Tait, Weller & Baker, Eight Penn Center Plaza, Philadelphia,
Pennsylvania, 19103, has been selected as independent auditors for the Trust.
FIRSTAR MUTUAL FUND SERVICES, LLC
- --------------------------------------------------------------------------------
Firstar Mutual Fund Services, LLC ("Firstar"), 615 East Michigan Street,
Milwaukee, Wisconsin 53202, is retained by the Investment Adviser to maintain
the records of each shareholder's account, process purchases and redemptions of
the Fund's shares and act as dividend and distribution disbursing agent. Firstar
also provides administrative services to the Fund, calculates daily net asset
value per share and maintains such books and records as are necessary to enable
Firstar to perform its duties. For the performance of these services, the
Investment Adviser (not the Fund) pays Firstar a fee for administrative
services. In addition, the Investment Adviser reimburses Firstar for
out-of-pocket expenses, including but not limited to, postage, stationery,
checks, drafts, forms, reports, record storage, communication lines and the
costs of external pricing services.
Firstar is an indirect wholly-owned subsidiary of Firstar Corporation
principally engaged in the business of commercial banking.
APPENDIX A
- --------------------------------------------------------------------------------
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
THE RATINGS OF MOODY'S AND STANDARD & POOR'S FOR CORPORATE BONDS IN WHICH
THE FUNDS MAY INVEST ARE AS FOLLOWS:
Moody's
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 fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - 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.
Standard & Poor's
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
THE RATINGS OF MOODY'S AND STANDARD & POOR'S FOR PREFERRED STOCKS IN WHICH
THE FUNDS MAY INVEST ARE AS FOLLOWS:
Moody's
aaa - An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a - An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
Standard & Poor's
AAA - This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
INGENUITY CAPITAL TRUST
PART C
OTHER INFORMATION
Item 23. EXHIBITS
(a) Declaration of Trust
(i) Certificate of Trust -- Filed herewith
(ii) Amended and Restated Agreement and Declaration of Trust
-- Filed herewith
(b) Amended and Restated Bylaws - Filed herewith
(c) Instruments Defining Rights of Security Holders -- Incorporated by
reference to the Amended and Restated Agreements and Declaration of
Trust and Amended and Restated Bylaws
(d) Advisory Agreement-- Filed herewith
(e) Underwriting Agreement-- Filed herewith
(f) Bonus or Profit Sharing Contracts - Not applicable
(g) Custody Agreement-- Filed herewith
(h) Other Material Contracts
(i) Administration Agreement-- Filed herewith
(ii) Transfer Agent Servicing Agreement-- Filed herewith
(iii) Fund Accounting Services Agreement-- Filed herewith
(i) Opinion and Consent of Counsel-- Filed herewith
(j) Consent of Independent Public Accountants -- Filed herewith
(k) Omitted Financial Statements - Not applicable
(l) Agreement Relating to Initial Capital -- Filed herewith
(m) Rule 12b-1 Plan - Not applicable
(n) Financial Data Schedules - Not applicable
(o) Rule 18f-3 Plan - Not applicable
Item 24. Persons Controlled by or Under Common Control with Registrant.
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 25. Indemnification.
Reference is made to Article VII, Section 7.02 of the Registrant's
Agreement and Declaration of Trust.
Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking: "Insofar as indemnification for
liability arising under the Securities Act of 1933 (the "Act") may be permitted
to trustees, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue."
Item 26. Business and Other Connections of the Investment Adviser
(a) Inapplicable
(b) Inapplicable
Item 27. Principal Underwriters.
(a) Rafferty Capital Markets, Inc., 1311 Mamaroneck Avenue, White
Plains, New York 10605, serves as principal underwriter for the
Ingenuity Capital Trust, Potomac Funds, Badgley Funds, Homestate
Group, Texas Capital Value Funds, Brazos Mutual Funds, Bremer
Investment Funds, Inc., Bearguard Funds, Inc., Kirr Marbauch
Partners Funds, Inc., Golf Associated Fund and Leuthold Funds.
(b) The director and officers of Rafferty Capital Markets, Inc. are:
Positions and Offices Position and Offices
Name With Underwriter With Registrant
- -------------------- ----------------------- --------------------
Thomas A. Mulrooney President None
Lawrence C. Rafferty Director None
Stephen P. Sprague CFO/FINOP None
The principal business address of each of the persons listed above is
1311 Mamaroneck Avenue, White Plains, New York 10605.
Item 28. Location of Accounts and Records.
The books and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 are maintained in the physical possession of
the Ingenuity Capital Trust's investment adviser, administrator, custodian,
subcustodian, or transfer agent.
Item 29. Management Services Not Discussed in Parts A and B.
Inapplicable
Item 30. Undertakings.
The Registrant hereby undertakes to furnish each person to whom a
Prospectus for one or more of the series of the Registrant is delivered with a
copy of the relevant latest annual report to shareholders, upon request and
without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this amendment to the Registration Statement to be signed below on its behalf b
the undersigned, thereunto duly authorized, in the City of Los Altos and the
State of California on the 14th day of October, 1999.
INGENUITY CAPITAL TRUST
By: /s/ Kendrick W. Kam*
Kendrick W. Kam, President
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 2 to the Registration Statement has been signed
below by the following persons in the capacities and on October 14, 1999.
Signature Title
/s/ Kendrick W. Kam* President and Trustee
Kendrick W. Kam
/s/ Arthur L. Roth* Trustee, Chairman of the Board
Arthur L. Roth
/s/ William J. Scilacci* Trustee
William J. Scilacci
* By /s/ Elaine E. Richards
Elaine E. Richards Signed as attorney-in-fact pursuant to a Power of
Attorney dated August 16, 1999 filed herewith.
POWER OF ATTORNEY
The undersigned Officers and Trustees of the Ingenuity Capital Trust
(the "Trust") hereby appoint Elaine Richards, Michael Karbouski, and Jim Matel
as attorneys-in-fact and agents, with the power, to execute, and to file any of
the documents referred to below relating to the initial registration of the
Trust as an investment company under the Investment Company Act of 1940, as
amended (the "Act") and the registration of the Trust's securities under the
Securities Act of 1933, as amended (the "Securities Act") including the Trust's
Registration Statement on Form N-1A, any and all amendments thereto, including
all exhibits and any documents required to be filed with respect thereto with
any regulatory authority, including applications for exemptive order rulings.
Each of the undersigned grants to the said attorneys full authority to do every
act necessary to be done in order to effectuate the same as fully, to all
intents and purposes, as he could do if personally present, thereby ratifying
all that said attorneys-in-fact and agents may lawfully do or cause to be done
by virtue hereof.
The undersigned officers and Trustees hereby execute this Power of
Attorney as of this 16th day of August, 1999.
Name Title
- ---- -----
/s/Arthur L. Roth Trustee
- -----------------
Arthur L. Roth
/s/ William J. Scilacci Trustee
- ------------------------
William J. Scilacci
/s/ Kendrick W. Kam President, Trustee
- -------------------
Kendrick W. Kam
CERTIFICATE OF TRUST
OF
INGENUITY CAPITAL TRUST
A Delaware Business Trust
THIS Certificate of Trust of Ingenuity Capital Trust (the "Trust"),
dated as of this 14th day of July, 1999, is being duly executed and filed, in
order to form a business trust pursuant to the Delaware Business Trust Act (the
"Act"), Del. Code Ann.tit. 12, Sections 3801-3819.
1. NAME. The name of the business trust formed hereby is
"Ingenuity Capital Trust."
2. REGISTERED OFFICE AND REGISTERED AGENT. The Trust will become, prior to the
issuance of shares of beneficial interest, a registered investment company under
the Investment Company Act of 1940, as amended. Therefore, in accordance with
section 3807(b) of the Act, the Trust has and shall maintain in the State of
Delaware a registered office and a registered agent for service of process.
(a) REGISTERED OFFICE. The registered office of the Trust in Delaware is The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801.
(b) REGISTERED AGENT. The registered agent for service of process
on the Trust in Delaware is The Corporation Trust Company,
1209 Orange Street, Wilmington, Delaware 19801.
3. LIMITATION OF LIABILITY. Pursuant to section 3804(a) of the Act, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular series of the Trust, established pursuant
to the terms of the Agreement and Declaration of Trust, shall be enforceable
against the assets of such series only and not against the assets of the Trust
generally.
IN WITNESS WHEREOF, the Trustee named below does hereby execute this
Certificate of Trust as of the date first-above written.
/s/ Kendrick W. Kam
-------------------
Kendrick W. Kam
INGNEUTIY CAPITAL TRUST
AMENDED AND RESTATED
DECLARATION OF TRUST
INGENUITY CAPITAL TRUST
TABLE OF CONTENTS
Page
Declaration of Trust...........................................................1
INGENUITY CAPITAL TRUST.....................................................4
ARTICLE I. THE TRUST...........................................................4
SECTION I.1 NAME............................................................4
SECTION I.2 TRUST PURPOSE...................................................4
SECTION I.3 DEFINITIONS.....................................................4
ARTICLE II. TRUSTEES...........................................................6
SECTION II.1 NUMBER AND QUALIFICATION...................................6
SECTION II.2 TERM AND ELECTION..............................................6
SECTION II.3 RESIGNATION AND REMOVAL........................................6
SECTION II.4 VACANCIES......................................................6
SECTION II.5 MEETINGS.......................................................7
SECTION II.6 OFFICERS; CHAIRMAN OF THE BOARD................................7
SECTION II.7 BY-LAWS........................................................8
ARTICLE III. POWERS OF TRUSTEES................................................8
SECTION III.1 GENERAL.....................................................8
SECTION III.2 INVESTMENTS...................................................8
SECTION III.3 LEGAL TITLE...................................................8
SECTION III.4 SALE OF INTERESTS............................................9
SECTION III.5 BORROW MONEY..................................................9
SECTION III.6 DELEGATION; COMMITTEES......................................9
SECTION III.7 COLLECTION AND PAYMENT.....................................9
SECTION III.8 EXPENSES......................................................9
SECTION III.9 MISCELLANEOUS POWERS........................................9
SECTION III.10 FURTHER POWERS..............................................10
ARTICLE IV. INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES AND PLACEMENT AGENT
ARRANGEMENTS...............................................................10
SECTION IV.1 INVESTMENT ADVISORY AND OTHER ARRANGEMENTS...................10
SECTION IV.2 PARTIES TO CONTRACT.......................................10
ARTICLE V. LIMITATIONS OF LIABILITY...........................................11
SECTION V.1 NO PERSONAL LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES,
AGENTS.....................................................................11
SECTION V.2 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS.....11
SECTION V.3 LIABILITY OF HOLDERS; INDEMNIFICATION.....................11
SECTION V.4 NO BOND REQUIRED OF TRUSTEES..................................12
SECTION V.5 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC....12
SECTION V.6 RELIANCE ON EXPERTS, ETC......................................12
SECTION V.7 ASSENT TO DECLARATION..........................................12
ARTICLE VI. INTERESTS IN THE TRUST............................................12
SECTION VI.1 INTERESTS....................................................12
SECTION VI.2 RIGHTS OF HOLDERS............................................12
SECTION VI.3 REGISTER OF INTERESTS.........................................13
SECTION VI.4 NOTICES.......................................................13
SECTION VI.5 NO PRE-EMPTIVE RIGHTS; DERIVATIVE SUITS.......................13
SECTION VI.6 NO APPRAISAL RIGHTS.........................................13
ARTICLE VII. PURCHASES AND REDEMPTIONS........................................13
SECTION VII.1 PURCHASES....................................................13
SECTION VII.2 REDEMPTION BY HOLDER........................................13
SECTION VII.3 REDEMPTION BY TRUST.......................................14
SECTION VII.4 NET ASSET VALUE............................................14
ARTICLE VIII. HOLDERS.........................................................14
SECTION VIII.1 MEETINGS OF HOLDERS........................................14
SECTION VIII.2 NOTICE OF MEETINGS......................................14
SECTION VIII.3 RECORD DATE FOR MEETINGS....................................15
SECTION VIII.4 PROXIES, ETC................................................15
SECTION VIII.5 REPORTS.....................................................15
SECTION VIII.6 INSPECTION OF RECORDS....................................15
SECTION VIII.7 VOTING POWERS...............................................15
SECTION VIII.8 SERIES OF INTERESTS........................................16
SECTION VIII.9 HOLDER ACTION BY WRITTEN CONSENT..........................17
SECTION VIII.10 HOLDER COMMUNICATIONS...................................17
ARTICLE IX. DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS; ETC...........18
SECTION IX.1 DURATION......................................................18
SECTION IX.2 TERMINATION OF TRUST..........................................18
SECTION IX.3 AMENDMENT PROCEDURE...........................................19
SECTION IX.4 MERGER, CONSOLIDATION AND SALE OF ASSETS....................19
SECTION IX.5 INCORPORATION................................................19
ARTICLE X. MISCELLANEOUS......................................................20
SECTION X.1 CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS......20
SECTION X.2 GOVERNING LAW...............................................20
SECTION X.3 COUNTERPARTS...................................................20
SECTION X.4 RELIANCE BY THIRD PARTIES...................................20
SECTION X.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS....................20
SECTION X.6 TRUST ONLY.....................................................21
SECTION X.7 WITHHOLDING..................................................21
SECTION X.8 HEADINGS AND CONSTRUCTION...................................21
INGENUITY CAPITAL TRUST
DECLARATION OF TRUST
This DECLARATION OF TRUST of INGENUITY CAPITAL TRUST is made on this
twentieth day of July, 1999 by the parties signatory hereto, as trustees.
WHEREAS, the Trustee desires to form a business trust under the law of
Delaware for the investment and reinvestment of its assets; and
WHEREAS, it is proposed that the Trust assets be composed of cash,
securities and other Assets contributed to the Trust by the holders of interests
in the Trust entitled to ownership rights in the Trust,
NOW, THEREFORE, the Trustee hereby declares that the Trustees will hold in
trust all cash, securities and other assets which they may from time to time
acquire in any manner as Trustees hereunder, and manage and dispose of the same
for the benefit of the holders of interests in the Trust and subject to the
following terms and conditions.
ARTICLE I. THE TRUST
SECTION I.1 NAME.
The name of the trust created hereby (the "Trust") shall be "Ingenuity Capital
Trust", and so far as may be practicable the Trustees shall conduct the Trusts
activities, execute all documents and sue or be sued under that name, which name
(and the word "Trust" wherever hereinafter used) shall not refer to the Trustees
in their individual capacities or to the officers, agents, employees or holders
of interest in the Trust. However, should the Trustees determine that the use of
the name of the Trust is not advisable, they may select such other name for the
Trust as they deem proper and the Trust may hold its property and conduct its
activities under such other name. Any name change shall become effective upon
the execution by a majority of the then Trustees of an instrument setting forth
the new name and the filing of a certificate of amendment pursuant to Section
3810(b) of Title 12 of the Delaware Code (the "DBTA"). Any such instrument shall
not require the approval of the holders of interests in the Trust, but shall
have the status of an amendment to this Declaration.
SECTION I.2 TRUST PURPOSE.
The purpose of the Trust is to conduct, operate and carry on the business of an
open-end management investment company registered under the 1940 Act. In
furtherance of the foregoing, it shall be the purpose of the Trust to do
everything necessary, suitable, convenient or proper for the conduct, promotion
and attainment of any businesses and purposes which at any time may be
incidental or may appear conducive or expedient for the accomplishment of the
business of an open-end management investment company registered under the 1940
Act and which may be engaged in or carried on by a trust organized under the
DBTA and in connection therewith the Trust shall have and may exercise all of
the powers conferred by the laws of the State of Delaware upon a Delaware
business trust.
SECTION I.3 DEFINITIONS.
As used in this Declaration, the following terms shall have the following
meanings:
(a) "1940 Act" shall mean the Investment Company Act of 1940, as
amended from time to time, and the rules and regulations thereunder, as adopted
or amended from time to time.
(b) "Affiliated Person", "Assignment" and "Interested Person" shall
have the meanings given them in the 1940 Act.
(c) "Administrator" shall mean any party furnishing services to the
Trust pursuant to any administrative services contract described in Section 4.1
hereof.
(d) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations thereunder, as adopted or
amended from time to time.
(f) "Commission" shall mean the Securities and Exchange Commission.
(g) "Declaration" shall mean this Declaration of Trust as amended from
time to time. References in this Declaration to "Declaration", "hereof",
"herein", and "hereunder" shall be deemed to refer to the Declaration rather
than the article or section in which such words appear. This Declaration shall,
together with the By-Laws, constitute the governing instrument of the Trust
under the DBTA.
(h) "DBTA" shall mean the Delaware Business Trust Act, Delaware Code
Annotated title 12, Sections 3801 et seq., as amended from time to time.
(i) "Fiscal Year" shall mean an annual period as determined by the
Trustees unless otherwise provided by the Code or applicable regulations.
(j) "Holders" shall mean as of any particular time any or all holders
of record of Interests in the Trust or in Trust Property, as the case may be, at
such time.
(k) "Interest" shall mean a Holders units of interest into which the
beneficial interest in the Trust and each series of the Trust shall be divided
from time to time.
(l) "Investment Adviser" shall mean any party furnishing services to
the Trust pursuant to any investment advisory contract described in Section 4.1
hereof.
(m) "Majority Interests Vote" shall mean the vote, at a meeting of the
Holders of interests, of the lesser of , (A) 67% or more of the Interests
present or represented at such meeting, provided the Holders of more than 50% of
the Interests are present or represented by proxy or (B) more than 50% of the
interest.
(n) "Person" shall mean and include an individual, corporation,
partnership, trust, association, joint venture and other entity, whether or not
a legal entity, and a government and agencies and political subdivisions
thereof.
(o) "Registration Statement" as of any particular time shall mean the
Registration Statement of the Trust which is effective at such time under the
1940 Act.
(p) "Trust Property" shall mean as of any particular time any and all
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust or the Trustees. The Trustees may
authorize the division of Trust Property into two or more series, in accordance
with the provisions of Section 8.8 hereof, in which case all references in this
Declaration to the Trust, Trust Property, Interests therein or Holders thereof
shall be deemed to refer to each such series, as the case may be, except as the
context otherwise requires. Any series of Trust Property shall be established
and designated, and the variations in the relative rights and preferences as
between the different series shall be fixed and determined, by the Trustees.
(q) "Trustees" shall mean such persons who are indemnified as trustees
of the Trust on the signature page of this Declaration, so long as they shall
continue in office in accordance with the terms of this Declaration of Trust,
and all other persons who at the time in question have been duly elected or
appointed as trustees in accordance with the provisions of this Declaration of
Trust and are then in office, in their capacity as trustees hereunder.
ARTICLE II. TRUSTEES
SECTION II.1 NUMBER AND QUALIFICATION.
The number of Trustees shall initially be two and shall thereafter be fixed from
time to time by written instrument signed by majority of the Trustees so fixed
then in office, provided, however, that the number of Trustees shall in no event
be less than one. A Trustee shall be an individual at least 21 years of age who
is not under legal disability.
(a) Any vacancy created by an increase in Trustees shall be filled by
the appointment or election of an individual having the qualifications described
in this Article as provided in Section 2.4. Any such appointment shall not
become effective, however, until the individual appointed or elected shall have
accepted in writing such appointment or election and agreed in writing to be
bound by the terms of the Declaration. No reduction in the number of Trustees
shall have the effect of removing any Trustee from office.
(b) Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in Section 2.4 hereof, the Trustees in
office, regardless of their number, shall have all the powers granted to the
Trustees and shall discharge all the duties imposed upon the Trustees by this
Declaration.
SECTION II.2 TERM AND ELECTION.
Each Trustee named herein, or elected or appointed prior to the first meeting of
the Holders, shall (except in the event of resignations or removals or vacancies
pursuant to Section 2.3 or 2.4 hereof) hold office until his or her successor
has been elected at such meeting and has qualified to serve as Trustee.
Beginning with the Trustees elected at the first meeting of Holders, each
Trustee shall hold office during the lifetime of this Trust and until its
termination as hereinafter provided unless such Trustee resigns or is removed as
provided in Section 2.3 below.
SECTION II.3 RESIGNATION AND REMOVAL.
Any Trustee may resign (without need for prior or subsequent accounting by
an instrument in writing signed by him or her and delivered or mailed to the
Chairman, if any, the President or the Secretary and such resignation shall be
effective upon such delivery, or at a later date according to the terms of the
instrument.
(a) Any of the Trustees may be removed with or without cause by the
affirmative vote of the Holders of two-thirds (2/3) of the Interests or
(provided the aggregate number of Trustees, after such removal and after giving
effect to any appointment made to fill the vacancy created by such removal,
shall not be less than the number required by Section 2.1 hereof) with cause, by
the action of two-thirds (2/3) of the remaining Trustees. Removal with cause
shall include, but not be limited to, the removal of a Trustee due to physical
or mental incapacity.
(b) Upon the resignation or removal of a Trustee, or his or her
otherwise ceasing to be a Trustee, he or she shall execute and deliver such
documents as the remaining Trustees shall require for the purpose of conveying
to the Trust or the remaining Trustees any Trust Property held in the name of
the resigning or removed Trustee. Upon the death of any Trustee or upon removal
or resignation due to any Trustees incapacity to serve as trustee, his or her
legal representative shall execute and deliver on his or her behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
SECTION II.4 VACANCIES.
The term of office of a Trustee shall terminate and a vacancy shall occur in the
event of the death, resignation, adjudicated incompetence or other incapacity to
perform the duties of the office, or removal, of a Trustee. A vacancy shall also
occur in the event of an increase in the number of trustees as provided in
Section 2.1. No such vacancy shall operate to annul this Declaration or to
revoke any existing trust created pursuant to the terms of this Declaration. In
the case of a vacancy, the Holders of at least a majority of the Interests
entitled to vote, acting at any meeting of the Holders held in accordance with
Section 8.1 hereof, or, to the extent permitted by the 1940 Act, a majority vote
of the Trustees continuing in office acting by written instrument or
instruments, may fill such vacancy, and any Trustee so elected by the Trustees
or the Holders shall hold office as provided in this Declaration. There shall be
no cumulative voting by the Holders in the election of Trustees.
SECTION II.5 MEETINGS.
Meetings of the Trustees shall be held from time to time within or without the
State of Delaware upon the call of the Chairman, if any, the President, the
Chief Operating Officer, the Secretary, an Assistant Secretary or any two
Trustees.
(a) Regular meetings of the Trustees may be held without call or
notice at a time and place fixed by the By-Laws or by resolution of the
Trustees. Notice of any other meeting shall be given not later than 72 hours
preceding the meeting by United States mail or by electronic transmission to
each Trustee at his business address as set forth in the records of the Trust or
otherwise given personally not less than 24 hours before the meeting but may be
waived in writing by any Trustee either before or after such meeting. The
attendance of a Trustee at a meeting shall constitute a waiver of notice of such
meeting except where a Trustee attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
(b) A quorum for all meetings of the Trustees shall be one-third of
the total number of Trustees, but (except at such time as there is only one
Trustee) no less than two Trustees. Unless provided otherwise in this
Declaration, any action of the Trustees may be taken at a meeting by vote of a
majority of the Trustees present (a quorum being present) or without a meeting
by written consent of a majority of the Trustees, which written consent shall be
filed with the minutes of proceedings of the Trustees or any such committee. If
there be less than a quorum present at any meeting of the Trustees, a majority
of those present may adjourn the meeting until a quorum shall have been
obtained.
(c) Any committee of the Trustees, including an executive committee,
if any, may act with or without a meeting. A quorum for all meetings of any such
committee shall be two or more of the members thereof, unless the Board shall
provide otherwise. Unless provided otherwise in this Declaration, any action of
any such committee may be taken at a meeting by vote of a majority of the
members present (a quorum being present) or without a meeting by written consent
of a majority of the members, which written consent shall be filed with the
minutes of proceedings of the Trustees or any such committee.
(d) With respect to actions of the Trustees and any committee of the
Trustees, Trustees who are Interested Persons of the Trust or are otherwise
interested in any action to be taken may be counted for quorum purposes under
this Section 2.5 and shall be entitled to vote to the extent permitted by the
1940 Act.
(e) All or any one or more Trustees may participate in a meeting of
the Trustees or any committee thereof by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to such
communications system shall constitute presence in person at such meeting,
unless the 1940 Act specifically requires the Trustees to act "in person" in
which case such term shall be construed consistent with Commission or staff
releases or interpretations.
SECTION II.6 OFFICERS; CHAIRMAN OF THE BOARD.
The Trustees shall, from time to time, elect officers of the Trust, including a
President, a Secretary and a Treasurer. The Trustees shall elect or appoint,
from time to time, a Trustee to act as Chairman of the Board who shall preside
at all meetings of the Trustees and carry out such other duties as the Trustees
shall designate. The Trustees may elect or appoint or authorize the President to
appoint such other officers or agents with such powers as the Trustees may deem
to be advisable. The President, Secretary and Treasurer may, but need not, be a
Trustee. The Chairman of the Board and such officers of the Trust shall serve in
such capacity for such time and with such authority as the Trustees may, in
their discretion, so designate or as provided by in the By-Laws.
SECTION II.7 BY-LAWS.
The Trustees may adopt and, from time to time, amend or repeal the By-Laws for
the conduct of the business of the Trust not inconsistent with this Declaration
and such By-Laws are hereby incorporated in this Declaration by reference
thereto.
ARTICLE III. POWERS OF TRUSTEES
SECTION III.1 GENERAL.
The Trustees shall have exclusive and absolute control over management of the
business and affairs of the Trust, but with such powers of delegation as may be
permitted by this Declaration and the DBTA. The Trustees may perform such acts
as in their sole discretion are proper for conducting the business and affairs
of the Trust. The enumeration of any specific power herein shall not be
construed as limiting the aforesaid power. Such powers of the Trustee may be
exercised without order of or recourse to any court.
SECTION III.2 INVESTMENTS.
The Trustees shall have power to:
(a) conduct, operate and carry on the business of an investment company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute or otherwise
deal in or dispose of United States and foreign currencies and related
instruments including forward contracts, and securities, including common and
preferred stock, warrants, bonds, debentures, time notes and all other evidences
of indebtedness, negotiable or nonnegotiable instruments, obligations,
certificates of deposit or indebtedness, commercial paper, repurchase
agreements, reverse repurchase agreements, convertible securities, forward
contracts, options, futures contracts, and other securities, including, without
limitation, those issued, guaranteed or sponsored by any state, territory or
possession of the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United States
Government, any foreign government, or any agency, instrumentality or political
subdivision of the United States Government or any foreign government, or
international instrumentalities, or by any bank, savings institution,
corporation or other business entity organized under the laws of the United
States or under foreign laws; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such investments
of every kind and description, including, without limitation, the right to
consent and otherwise act with respect thereto, with power to designate one or
more persons, firms, associations, or corporations to exercise any of said
rights, powers and privileges in respect of any of said instruments; and the
Trustees shall be deemed to have the foregoing powers with respect to any
additional securities in which the Trustees may determine to invest.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
SECTION III.3 LEGAL TITLE.
Legal title to all the Trust Property shall be vested in the Trust as a separate
legal entity under the DBTA, except that the Trustees shall have the power to
cause legal title to any Trust Property to be held by or in the name of one or
more of the Trustees or in the name of any other Person on behalf of the Trust
on such terms as the Trustees may determine.
In the event that title to any part of the Trust Property is vested in
one or more Trustees, the right, title and interest of the Trustees in the Trust
Property shall vest automatically in each person who may hereafter become a
Trustee upon his or her due election and qualification. Upon the resignation,
removal or death of a Trustee he or she shall automatically cease to have any
right, title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. To the extent permitted by law, such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
SECTION III.4 SALE OF INTERESTS.
Subject to the more detailed provisions set forth in Article VII, the Trustees
shall have the power to permit persons to purchase Interests and to add or
reduce, in whole or in part, their Interest in the Trust.
SECTION III.5 BORROW MONEY.
The Trustees shall have power to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security the
assets of the Trust, including the lending of portfolio securities, and to
endorse, guarantee or undertake the performance of any obligation, contract or
engagement of any other person, firm, association or corporation.
SECTION III.6 DELEGATION; COMMITTEES.
The Trustees shall have the power, consistent with their continuing exclusive
authority over the management of the Trust and the Trust Property, to delegate
from time to time to such of their number or to officers, employees or agents of
the Trust the doing of such things and the execution of such instruments, either
in the name of the Trust or the names of the Trustees or otherwise, as the
Trustees may deem expedient.
SECTION III.7 COLLECTION AND PAYMENT.
The Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any security interest securing any obligations, by virtue of which any property
is owned to the Trust; and to enter into releases, agreements and other
instruments.
SECTION III.8 EXPENSES.
The Trustees shall have the power to incur and pay any expenses which in the
opinion of the Trustees are necessary or incidental to carry out any of the
purposes of this Declaration, and to pay reasonable compensation from the funds
of the Trust to themselves as Trustees. The Trustees shall fix the compensation
of all officers, employees and Trustees. The Trustees may pay themselves such
compensation for special services, including legal and brokerage services, as
they in good faith may deem reasonable (subject to any limitations in the 1940
Act), and reimbursement for expenses reasonably incurred by themselves on behalf
of the Trust.
SECTION III.9 MISCELLANEOUS POWERS.
The Trustees shall have the power to: (a) employ or contract with such Persons
as the Trustees may deem desirable for the transaction of the business of the
Trust and terminate such employees or contractual relationships as they consider
appropriate; (b) enter into joint ventures, partnerships and any other
combinations or associations; (c) purchase, and pay for out of Trust Property,
insurance policies (including, but not limited to, fidelity bonding and errors
and omission policies) insuring the Investment Adviser, Administrator,
Distributor, Holders, Trustees, officers, employees, agents, or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such person in
such capacity, whether or not the Trust would have the power to indemnify such
Person against liability; (d) establish pension, profit-sharing and other
retirement, incentive and benefit plans for all Trustees, officers, employees
and agents of the Trust; (e) to the extent permitted by law, indemnify any
Person with whom the Trust has dealings, including the Investment Adviser,
Administrator, Distributor, Holders, Trustees, officers, employees, agents or
independent contractors of the Trust, to such extent as the Trustees shall
determine; (f) guarantee indebtedness or contractual obligations of others; (g)
determine and change the Fiscal Year of the Trust and the method by which its
accounts shall be kept; and (h) adopt a seal for the Trust, but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Trust.
SECTION III.10 FURTHER POWERS.
The Trustees shall have power to conduct the business of the Trust and carry on
its operations in any and all of its branches and maintain offices, whether
within or without the State of Delaware, in any and all states of the United
States of America, in the District of Columbia, in any foreign countries, and in
any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities of the United States of America and of foreign
countries, and to do all such other things and execute all such instruments as
they deem necessary, proper or desirable in order to promote the interests of
the Trust although such things are not herein specifically mentioned. Any
determination as to what is in the interests of the Trust made by the Trustees
in good faith shall be conclusive and shall be binding upon the Trust and the
Holders, past, present and future. In construing the provisions of this
Declaration, the presumption shall be in favor of a grant of power to the
Trustees. The Trustees shall not be required to obtain any court order to deal
with Trust Property.
ARTICLE IV. INVESTMENT ADVISORY, ADMINISTRATIVE SERVICES
AND PLACEMENT AGENT ARRANGEMENTS
SECTION IV.1 INVESTMENT ADVISORY AND OTHER ARRANGEMENTS.
The Trustees may in their discretion, from time to time, enter into contracts or
agreements for investment advisory services, administrative services (including
transfer and dividend disbursing agency services), distribution services,
fiduciary (including custodian) services, placement agent services, Holder
servicing and distribution services or other services, whereby the other party
to such contract or agreement shall undertake to furnish the Trustees such
services as the Trustees shall, from time to time, consider desirable and all
upon such terms and conditions as the Trustees may in their discretion
determine. Notwithstanding any other provisions of this Declaration to the
contrary, the Trustees may authorize any Investment Adviser (subject to such
general or specific instructions as the Trustees may, from time to time, adopt)
to effect purchases, sales, loans or exchanges of Trust Property on behalf of
the Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of any such
Investment Adviser (all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be binding upon the Trust.
SECTION IV.2 PARTIES TO CONTRACT.
Any contract or agreement of the character described in Section 4.1 of this
Article IV or in the By-Laws of the Trust may be entered into with any Person,
although one or more of the Trustees or officers of the Trust or any Holder may
be an officer, director, trustee, shareholder, or member of such other party to
the contract or agreement, and no such contract or agreement shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of such contract or agreement or accountable for any profit realized
directly or indirectly therefrom, provided that the contract or agreement when
entered into was reasonable and fair and not inconsistent with the provisions of
this Article IV or the By-Laws. Any Trustee or officer of the Trust or any
Holder may be the other party to contracts or agreements entered into pursuant
to Section 4.1 hereof or the By-Laws of the Trust, and any Trustee or officer of
the Trust or any Holder may be financially interested or otherwise affiliated
with Persons who are parties to any or all of the contracts or agreements
mentioned in this Section 4.2.
ARTICLE V. LIMITATIONS OF LIABILITY
SECTION V.1 NO PERSONAL LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS.
No Trustee, officer, employee or agent of the Trust when acting in such capacity
shall be subject to any personal liability whatsoever, in his or her individual
capacity, to any Person, other than the Trust or its Holders, in connection with
Trust Property or the affairs of the Trust; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature against a
Trustee, officer, employee or agent of the Trust arising in connection with the
affairs of the Trust. No Trustee, officer, employee or agent of the Trust shall
be liable to the Trust, Holders of Interests therein, or to any Trustee,
officer, employee, or agent thereof for any action or failure to act (including,
without limitation, the failure to compel in any way any former or acting
Trustee to redress any breach of trust) except for his or her own bad faith,
willful misfeasance, gross negligence or reckless disregard of his or her
duties.
SECTION V.2 INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS.
The Trust shall indemnify each of its Trustees, officers, employees, and agents
(including Persons who serve at its request as directors, officers or trustees
of another organization in which it has an interest, as a shareholder, creditor
or otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him or her in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or criminal,
in which he or she may be involved or with which he or she may be threatened,
while in office or thereafter, by reason of his or her being or having been such
a Trustee, officer, employee or agent, except with respect to any matter as to
which he or she shall have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties;
provided, however, that as to any matter disposed of by a compromise payment by
such Person, pursuant to a consent decree or otherwise, no indemnification
either for said payment or for any other expenses shall be provided unless there
has been a determination that such Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office by the court or other body approving the settlement
or other disposition or by a reasonable determination, based upon review of
readily available facts (as opposed to a full trial-type inquiry), that he or
she did not engage in such conduct by written opinion from independent legal
counsel approved by the Trustees. The rights accruing to any Person under these
provisions shall not exclude any other right to which he or she may be lawfully
entitled; provided that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he or she may be
otherwise entitled except out of the Trust Property. The Trustees may make
advance payments in connection with indemnification under this Section 5.2,
provided that the indemnified Person shall have given a written undertaking to
reimburse the Trust in the event it is subsequently determined that he or she is
not entitled to such indemnification.
SECTION V.3 LIABILITY OF HOLDERS; INDEMNIFICATION.
The Trust shall indemnify and hold each Holder harmless from and against any
claim or liability to which such Holder may become subject solely by reason of
his or her being or having been a Holder and not because of such Holders acts or
omissions or for some other reason, and shall reimburse such Holder for all
legal and other expenses reasonably incurred by him or her in connection with
any such claim or liability (upon proper and timely request by the Holder);
provided, however, that no Holder shall be entitled to indemnification by any
series established in accordance with Section 8.8 unless such Holder is a Holder
of Interests of such series. The rights accruing to a Holder under this Section
5.3 shall not exclude any other right to which such Holder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Trust to
indemnify or reimburse a Holder in any appropriate situation even though not
specifically provided herein.
SECTION V.4 NO BOND REQUIRED OF TRUSTEES.
No Trustee shall, as such, be obligated to give any bond or surety or other
security for the performance of any of his or her duties hereunder.
SECTION V.5 NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS, ETC.
No purchaser, lender, or other Person dealing with the Trustees or any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every obligation, contract, instrument, certificate
or other interest or undertaking of the Trust, and every other act or thing
whatsoever executed in connection with the Trust, shall be conclusively taken to
have been executed or done by the executors thereof only in their capacity as
Trustees, officers, employees or agents of the Trust. Every written obligation,
contract, instrument, certificate or other interest or undertaking of the Trust
made by the Trustees or by any officer, employee or agent of the Trust, in his
or her capacity as such, shall contain an appropriate recital to the effect that
the Trustee, officer, employee and agent of the Trust shall not personally be
bound by or liable thereunder, nor shall resort be had to their private property
or the private property of the Holders for the satisfaction of any obligation or
claim thereunder, and appropriate references shall be made therein to the
Declaration, and may contain any further recital which they may deem
appropriate, but the omission of such recital shall not operate to impose
personal liability on any of the Trustees, officers, employees or agents of the
Trust. The Trustees may maintain insurance for the protection of the Trust
Property, Holders, Trustees, officers, employees and agents in such amount as
the Trustees shall deem advisable.
SECTION V.6 RELIANCE ON EXPERTS, ETC.
Each Trustee and officer or employee of the Trust shall, in the performance of
his or her duties, be fully and completely justified and protected with regard
to any act or any failure to act resulting from reliance in good faith upon the
books of account or other records of the Trust, upon an opinion of counsel, or
upon reports made to the Trust by any of its. officers or employees or by any
Investment Adviser, Administrator, accountant, appraiser or other experts or
consultants selected with reasonable care by the Trustees, officers or employees
of the Trust, regardless of whether such counsel or expert may also be a
Trustee.
SECTION V.7 ASSENT TO DECLARATION.
Every Holder, by virtue of having become a Holder in accordance with the terms
of this Declaration, shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto.
ARTICLE VI. INTERESTS IN THE TRUST
SECTION VI.1 INTERESTS.
The beneficial interests in the property of the Trust shall consist of an
unlimited number of Interests. No certificates certifying the ownership of
Interests need be issued except as the Trustees may otherwise determine from
time to time.
SECTION VI.2 RIGHTS OF HOLDERS.
The ownership of the Trust Property of every description and the right to
conduct any business hereinbefore described are vested exclusively in the Trust
or the Trustees, and the Holders shall have no right or title therein other than
the beneficial interest conferred by their Interests and they shall have no
right to call for any partition or division of any property, profits or rights
of the Trust. The Interests shall be personal property giving only the rights
specifically set forth in this Declaration.
SECTION VI.3 REGISTER OF INTERESTS.
A register shall be kept by the Trust under the direction of the Trustees which
shall contain the names and addresses of the Holders and Interests held by each
Holder. Each such register shall be conclusive as to the identity of the Holders
of the Trust and the Persons who shall be entitled to payments of distributions
or otherwise to exercise or enjoy the rights of Holders. No Holder shall be
entitled to receive payment of any distribution, nor to have notice given to it
as herein provided, until it has given its address to such officer or agent of
the Trustees as shall keep the said register for entry thereon.
SECTION VI.4 NOTICES
Any and all notices to which any Holder hereunder may be entitled and any and
all communications shall be deemed duly served or given if mailed, postage
prepaid, addressed to any Holder of record at its last known address as recorded
on the register of the Trust.
SECTION VI.5 NO PRE-EMPTIVE RIGHTS; DERIVATIVE SUITS.
Holders shall have no preemptive or other right to subscribe to any additional
Interests or other securities issued by the Trust or any series thereof. No
action may be brought by a Holder on behalf of the Trust unless Holders owning
no less than 10% of the then outstanding Interests join in the bringing of such
action.
SECTION VI.6 NO APPRAISAL RIGHTS.
Holders shall have no right to demand payment for their Interests or to any
other rights of dissenting Holders in the event the Trust participates in any
transaction which would give rise to appraisal or dissenters rights by a holder
of a corporation organized under the General Corporation Law of Delaware, or
otherwise.
ARTICLE VII. PURCHASES AND REDEMPTIONS
SECTION VII.1 PURCHASES.
The Trustees, in their discretion, may, from time to time, without a vote of the
Holders, permit the purchase of Interests by such party or parties (or increase
in the interests of a Holder) and for such type of consideration, including,
without limitation, cash or property, at such time or times (including, without
limitation each business day), and on such terms as the Trustees may deem best,
and may in such manner acquire other assets (including, without limitation, the
acquisition of assets subject to, and in connection with the assumption of
liabilities) and businesses.
SECTION VII.2 REDEMPTION BY HOLDER.
Each Holder of Interests of the Trust or any series thereof shall have the right
at such times as may be permitted by the Trust to require the Trust to redeem
all or any part of his or her Interests of the Trust or series thereof at a
redemption price equal to the net asset value per Interest of the Trust or
series thereof next determined in accordance with Section 7.4 hereof after the
Interests are properly tendered for redemption, subject to any contingent
deferred sales charge in effect at the time of redemption. Payment of the
redemption price shall be in cash; provided, however, that if the Trustees
determine, which determination shall be conclusive, that conditions exist which
make payment wholly in cash unwise or undesirable, the Trust may, subject to the
requirements of the 1940 Act, make payment wholly or partly in securities or
other assets belonging to the Trust or series thereof of which the Interests
being redeemed are part of the value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the Holders of Interests of the
Trust or series thereof to require the Trust to redeem Shares of the Trust of
series during any period or at any time when and to the extent permissible under
the 1940 Act.
SECTION VII.3 REDEMPTION BY TRUST.
Each Interest of the Trust or series thereof that has been established and
designated is subject to redemption by the Trust at the redemption price which
would be applicable if such Interest was then being redeemed by the Holder
pursuant to Section 7.2 hereof: (i) at any time, if the Trustees determine in
their sole discretion and by majority vote that failure to so redeem may have
materially adverse consequences to the Trust or any series or to the Holders of
the Interests of the Trust or any series thereof, or (ii) upon such other
conditions as may from time to time be determined by the Trustees and set forth
in the then current Prospectus of the Trust with respect to maintenance of
Holder accounts of a minimum amount. Upon such redemption the Holders of the
Interests so redeemed shall have no further right with respect thereto other
than to receive payment of such redemption price.
SECTION VII.4 NET ASSET VALUE.
The net asset value per Interest of any series shall be (i) in the case of a
series whose Interests are not divided into classes, the quotient obtained by
dividing the value of the net assets of that series (being the value of the
assets belonging to that series less the liabilities belonging to that series)
by the total number of Interests of that series outstanding, and (ii) in the
case of a class of Interests of a series whose Interests are divided into
classes, the quotient obtained by dividing the value of the net assets of that
series allocable to such class (being the value of the assets belonging to that
series allocable to such class less the liabilities belonging to such class) by
the total number of Interests of such class outstanding; all determined in
accordance with the methods and procedures, including without limitation those
with respect to rounding, established by the Trustees from time to time.
The Trustees may determine to maintain the net asset value per Interest of
any series at a designated constant dollar amount and in connection therewith
may adopt procedures consistent with the 1940 Act for continuing declarations of
income attributable to that series as dividends payable in additional Interests
of that series at the designated constant dollar amount and for the handling of
any losses attributable to that series.
ARTICLE VIII. HOLDERS
SECTION VIII.1 MEETINGS OF HOLDERS.
Meetings of the Holders may be called at any time by a majority of the Trustees
and shall be called by any Trustee upon written request of Holders holding, in
the aggregate, not less than 10% of the Interests, such request specifying the
purpose or purposes for which such meeting is to be called. Any such meeting
shall be held within or without the State of Delaware on such day and at such
time as the Trustees shall designate. Holders of one-third of the Interests in
the Trust, present in person or by proxy, shall constitute a quorum for the
transaction of any business, except as may otherwise be required by the 1940 Act
or other applicable law or by this Declaration or the By-Laws of the Trust. If a
quorum is present at a meeting, an affirmative vote by the Holders present, in
person or by proxy, holding more than 50% of the total Interests of the Holders
present, either in person or by proxy, at such meeting constitutes the action of
the Holders, unless the 1940 Act, other applicable law, this Declaration or the
By-Laws of the Trust requires a greater number of affirmative votes.
SECTION VIII.2 NOTICE OF MEETINGS.
Written or printed notice of all meetings of the Holders, stating the time,
place and purposes of the meeting, shall be given by the Trustees either by
presenting it personally to a Holder, leaving it at his or her residence or
usual place of business, or by sending it via United States mail or by
electronic transmission to a Holder, at his or her registered address, at least
10 business days and not more than 90 business days before the meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail addressed to the Holder at his or her address as it is registered
with the Trust, with postage thereon prepaid. At any such meeting, any business
properly before the meeting may be considered whether or not stated in the
notice of the meeting. Any adjourned meeting may be held as adjourned without
further notice.
SECTION VIII.3 RECORD DATE FOR MEETINGS.
For the purpose of determining the Holders who are entitled to notice of any
meeting and to vote at any meeting, or to participate in any distribution, or
for the purpose of any other action, the Trustees may from time to time fix a
date, not more than 90 calendar days prior to the date of any meeting of the
Holders or payment of distributions or other action, as the case may be, as a
record date for the determination of the persons to be treated as holders of
record for such purposes. If the Trustees shall divide the Trust Property into
two or more series in accordance with Section 8.8 herein, nothing in this
Section 8.3 shall be construed as precluding the Trustees from setting different
record dates for different series.
SECTION VIII.4 PROXIES, ETC.
At any meeting of Holders, any Holder entitled to vote thereat may vote by
proxy, provided that no proxy shall be voted at any meeting unless it shall have
been placed on file with the Secretary, or with such other officer or agent of
the Trust as the Secretary may direct, for verification prior to the time at
which such vote shall be taken.
(a) Pursuant to a resolution of a majority of the Trustees, proxies
may be solicited in the name of one or more Trustees or one or more of the
officers of the Trust. Only Holders of record shall be entitled to vote. Each
Holder shall be entitled to a vote proportionate to its Interest in the Trust.
(b) When Interests are held jointly by several persons, any one of
them may vote at any meeting in person or by proxy in respect of such Interest,
but if more than one of them shall be present at such meeting in person or by
proxy, and such joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such Interest.
(c) A proxy purporting to be executed by or on behalf of a Holder
shall be deemed valid unless challenged at or prior to its exercise, and the
burden of proving invalidity shall rest on the challenger. If the Holder is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person regarding the charge or management of its Interest,
he or she may vote by his or her guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy.
SECTION VIII.5 REPORTS.
The Trustees shall cause to be prepared, at least annually, a report of
operations containing a balance sheet and statement of income and undistributed
income of the Trust prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant on such financial
statements. The Trustees shall, in addition, furnish to the Holders at least
semi-annually interim reports containing an unaudited balance sheet as of the
end of such period and an unaudited statement of income and surplus for the
period from the beginning of the current Fiscal Year to the end of such period.
SECTION VIII.6 INSPECTION OF RECORDS.
The records of the Trust shall be open to inspection by Holders during normal
business hours and for any purpose not harmful to the Trust.
SECTION VIII.7 VOTING POWERS.
The Holders shall have power to vote only (a) for the election of Trustees as
contemplated by Section 2.2 hereof, (b) with respect to any investment advisory
contract as contemplated by Section 4.1 hereof, (c) with respect to termination
of the Trust as provided in Section 9.2 hereof, (d) with respect to any merger,
consolidation or sale of assets as provided in Section 9.4 hereof, (e) with
respect to incorporation of the Trust to the extent and as provided in Section
9.5 hereof, (f) with respect to such additional matters relating to the Trust as
may be required by the 1940 Act, DBTA, or any other applicable law, the
Declaration, the By-Laws or any registration of the Trust with the Commission
(or any successor agency) or any state, or as and when the Trustees may consider
necessary or desirable.
Each Holder shall be entitled to vote based on the ratio its Interest bears
to the Interests of all Holders entitled to vote. Until Interests are issued,
the Trustees may exercise all rights of Holders and may take any action required
by law, the Declaration or the By-Laws to be taken by Holders, The By-Laws may
include further provisions for Holder's votes and meetings and related matters
not inconsistent with this Declaration.
SECTION VIII.8 SERIES OF INTERESTS.
The Trustees shall have the power to divide the Trust Property into two or more
series. The following provisions shall be applicable to such series and any
further series that may from time to time be established and designated by the
Trustees:
(a) All consideration received by the Trust for the issue or sale of
Interests of a particular series together with all Trust Property in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Trust. In the event that there is any Trust Property, or any income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular series, the Trustees shall allocate
them among any one or more of the series established and designated from time to
time in such manner and on such basis as they, in their sole discretion, deem
fair and equitable. Each such allocation by the Trustees shall be conclusive and
binding upon the Holders of all Interests for all purposes.
(b) The Trust Property belonging to each particular series shall be
charged with the liabilities of the Trust in respect of that series and all
expenses, costs, charges and reserves attributable to that series, and any
general liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular series shall be
allocated and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees in their sole discretion deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Holders of all interests for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital, and each such determination and allocation shall be conclusive and
binding upon the Holders. Without limitation of the foregoing provisions of this
Section, but subject to the right of the Trustees in their discretion to
allocate general liabilities, expenses, costs, charges or reserves as herein
provided, the debts, liabilities, obligations and expenses incurred, contracted
for or otherwise existing with respect to a particular series shall be
enforceable against the assets of such series only, and not against the assets
of any other series. Notice of this limitation on inter-series liabilities may,
in the Trustees sole discretion, be set forth in the certificate of trust of the
Trust (whether originally or by amendment) as filed or to be filed in the Office
of the Secretary of State of the State of Delaware pursuant to the DBTA, and
upon the giving of such notice in the certificate of trust, the statutory
provisions of Section 3804 of the DBTA relating to limitations on interseries
liabilities (and the statutory effect under Section 3804 of setting forth such
notice in the certificate of trust) shall become applicable to the Trust and
each series. Every note, bond, contract or other undertaking issued by or on
behalf of a particular series shall include a recitation limiting the obligation
represented thereby to that series and its assets.
(c) Dividends and distributions on Interests of a particular series
may be paid with such frequency as the Trustees may determine, which may be
daily or otherwise, pursuant to a standing resolution or resolution adopted only
once or with such frequency as the Trustees may determine, to the Holders of
Interests in that series, from such of the income and capital gains, accrued or
realized, from the Trust Property belonging to that series as the Trustees may
determine, after providing for actual and accrued liabilities belonging to that
series. All dividends and distributions on Interests in a particular series
shall be distributed pro rata to the Holders of Interests in that series in
proportion to the total outstanding Interests in that series held by such
Holders at the date and time of record establishment for the payment of such
dividends or distribution.
(d) The Interests in a series of the Trust shall represent beneficial
interests in the Trust Property belonging to such series. Each Holder of
Interests in a series shall be entitled to receive its pro rata share of
distributions of income and capital gains made with respect to such series. Upon
reduction or withdrawal of its Interests or indemnification for liabilities
incurred by reason of being or having been a Holder of Interests in a series,
such Holder shall be paid solely out of the funds and property of such series of
the Trust. Upon liquidation or termination of a series of the Trust, Holders of
Interests in such series shall be entitled to receive a pro rata share of the
Trust Property belonging to such series. A Holder of Interests in a particular
series of the Trust shall not be entitled to participate in a derivative or
class action lawsuit on behalf of any other series or the Holders of Interests
in any other series of the Trust.
(e) Notwithstanding any other provision hereof, if the Trust Property
has been divided into two or more series, then on any matter submitted to a vote
of Holders of Interests in the Trust, all Interests then entitled to vote shall
be voted by individual series, except that (1) when required by the 1940 Act,
Interests shall be voted in the aggregate and not by individual series, and (2)
when the Trustees have determined that the matter affects only the interests of
Holders of Interests in a limited number of series, then only the Holders of
Interests in such series shall be entitled to vote thereon. Except as otherwise
provided in this Article VIII, the Trustees shall have the power to determine
the designations, preferences, privileges, limitations and rights, including
voting and dividend rights, of each series of Interests.
(f) The establishment and designation of any series of Interests other
than those set forth above shall be effective upon the execution by a majority
of the then Trustees of an instrument setting forth such establishment and
designation and the relative rights and preferences of such series, or as
otherwise provided in such instrument. At any time that there are no Interests
outstanding of any particular series previously established and designated, the
Trustees may by an instrument executed by a majority of their number abolish
that series and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to this
Declaration.
(g) If the Trust Property has been divided into two or more series,
then Section 9.2 of this Agreement shall apply also with respect to each such
series as if such series were a separate trust.
(h) The Trustees shall be authorized to issue an unlimited number of
Interests of each series.
(i) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that Holders of Interests of any
series shall have the right to convert said Interests into one or more other
series in accordance with such requirements and procedures as may be established
by the Trustees.
SECTION VIII.9 HOLDER ACTION BY WRITTEN CONSENT.
Any action which may be taken by Holders may be taken without notice and without
a meeting if Holders holding more than 50% of the total Interests entitled to
vote (or such larger proportion thereof as shall be required by any express
provision of this Declaration) shall consent to the action in writing and the
written consents shall be filed with the records of the meetings of Holders.
Such consents shall be treated for all purposes as votes taken at a meeting of
Holders.
SECTION VIII.10 HOLDER COMMUNICATIONS.
Whenever ten or more Holders who have been such for at least six months
preceding the date of application, and who hold in the aggregate at least 1% of
the total Interests, shall apply to the Trustees in writing, stating that they
wish to communicate with other Holders with a view to obtaining signatures to a
request for a meeting of Holders and accompanied by a form of communication and
request which they wish to transmit, the Trustees shall within five business
days after receipt of such application either (1) afford to such applicants
access to a list of the names and addresses of all Holders as recorded on the
books of the Trust; or (2) inform such applicants as to the approximate number
of Holders, and the approximate cost of transmitting to them the proposed
communication and form of request.
If the Trustees elect to follow the course specified in clause (2) above,
the Trustees, upon the written request of such applicants, accompanied by a
tender of the material to be transmitted and of the reasonable expenses of
transmission, shall, with reasonable promptness, transmit, by United States mail
or by electronic transmission, such material to all Holders at their addresses
as recorded on the books, unless within five business days after such tender the
Trustees shall transmit, by United States mail or by electronic transmission, to
such applicants and file with the Commission, together with a copy of the
material to be transmitted, a written statement signed by at least a majority of
the Trustees to the effect that in their opinion either such material contains
untrue statements of fact or omits to state facts necessary to make the
statements contained therein not misleading, or would be in violation of
applicable law, and specifying the basis of such opinion. The Trustees shall
thereafter comply with any order entered by the Commission and the requirements
of the 1940 Act and the Securities Exchange Act of 1934.
ARTICLE IX. DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS; ETC.
SECTION IX.1 DURATION.
Subject to possible termination in accordance with the provisions of Section
9.2, the Trust created hereby shall continue perpetually pursuant to Section
3808 of DBTA.
SECTION IX.2 TERMINATION OF TRUST.
(a) The Trust may be terminated (i) by the affirmative vote of the
Holders of not less than two-thirds of the Interests in the Trust at any meeting
of the Holders, or (ii) by an instrument in writing, without a meeting, signed
by a majority of the Trustees and consented to by the Holders of not less than
two-thirds of such Interests, or (iii) by the Trustees by written notice to the
Holders.
Upon any such termination:
(i) The Trust shall carry on no business except for the purpose
of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Trust and all of the powers of the Trustees under this Declaration shall
continue until the affairs of the Trust shall have been wound up, including the
power to fulfill or discharge the contracts of the Trust, collect its assets,
sell, convey, assign, exchange, or otherwise dispose of all or any part of the
remaining Trust Property to one or more Persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and do all other acts
appropriate to liquidate its business; provided that any sale, conveyance,
assignment, exchange, or other disposition of all or substantially all of the
Trust Property shall require approval of the principal terms of the transaction
and the nature and amount of the consideration by the Holders by a Majority
Interests Vote.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly each,
among the Holders according to their respective rights.
(b) Upon termination of the Trust and distribution to the Holders as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination and file a certificate of cancellation in accordance with Section
3810 of the DBTA. Upon termination of the Trust, the Trustees shall thereon be
discharged from all further liabilities and duties hereunder, and the rights and
interests of all Holders shall thereupon cease.
SECTION IX.3 AMENDMENT PROCEDURE.
(a) All rights granted to the Holders under this Declaration of Trust
are granted subject to the reservation of the right of the Trustees to amend
this Declaration of Trust as herein provided, except as set forth herein to the
contrary. Subject to the foregoing, the provisions of this Declaration of Trust
(whether or not related to the rights of Holders) may be amended at any time, so
long as such amendment is not in contravention of applicable law, including the
1940 Act, by an instrument in writing signed by a majority of the then Trustees
(or by an officer of the Trust pursuant to the vote of a majority of such
Trustees). Any such amendment shall be effective as provided in the instrument
containing the terms of such amendment or, if there is no provision therein with
respect to effectiveness, upon the execution of such instrument and of a
certificate (which may be a part of such instrument) executed by a Trustee or
officer of the Trust to the effect that such amendment has been duly adopted.
(b) No amendment may be made, under Section 9.4 (a) above, which would
change any rights with respect to any Interest in the Trust by reducing the
amount payable thereon upon liquidation of the Trust, by repealing the
limitations on personal liability of any Holder or Trustee, or by diminishing or
eliminating any voting rights pertaining thereto, except with a Majority
Interests Vote.
(c) A certification signed by a majority of the Trustees setting forth
an amendment and reciting that it was duly adopted by the Holders or by the
Trustees as aforesaid or a copy of the Declaration, as amended, and executed by
a majority of the Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
(d) Notwithstanding any other provision hereof, until such time as
Interests are first sold, this Declaration may be terminated or amended in any
respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
SECTION IX.4 MERGER, CONSOLIDATION AND SALE OF ASSETS.
The Trust, or any series thereof, may merge or consolidate with any other
corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of its property, including its good will, upon
such terms and conditions and for such consideration when and as authorized by
no less than a majority of the Trustees and by a Majority Interests Vote of the
Trust or such series, as the case may be, or by an instrument or instruments in
writing without a meeting, consented to by the Holders of not less than 50% of
the total Interests of the Trust or such series, as the case may be, and any
such merger, consolidation, sale, lease or exchange shall be deemed for all
purposes to have been accomplished under and pursuant to the statutes of the
State of Delaware. In accordance with Section 3815(f) of DBTA, an agreement of
merger or consolidation may effect any amendment to the Declaration or By-Laws
or effect the adoption of a new declaration of trust or by-laws of the trust if
the Trust is the surviving or resulting business trust. A certificate of merger
or consolidation of the Trust shall be signed by a majority of the Trustees.
SECTION IX.5 INCORPORATION.
Upon a Majority Interests Vote, the Trustees may cause to be organized or assist
in organizing a corporation or corporations under the laws of any jurisdiction
or any other trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, association or organization in
exchange for the equity interests thereof or otherwise, and to lend money to,
subscribe for the equity interests of, and enter into any contracts with any
such corporation, trust, partnership, association or organization, or any
corporation, partnership, trust, association or organization in which the Trust
holds or is about to acquire equity interests. The Trustees may also cause a
merger or consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of the Holders for the
Trustees to organize or assist in organizing one or more corporations, trusts,
partnerships, associations or other organizations and selling, conveying or
transferring a portion of the Trust Property to such organizations or entities.
ARTICLE X. MISCELLANEOUS
SECTION X.1 CERTIFICATE OF DESIGNATION; AGENT FOR SERVICE OF PROCESS.
The Trust shall file, in accordance with Section 3812 of DBTA, in the office of
the Secretary of State of Delaware, a certificate of trust, in the form and with
such information required by Section 3810 by DBTA and executed in the manner
specified in Section 3811 of DBTA. In the event the Trust does not have at least
one Trustee qualified under Section 3807(a) of DBTA, then the Trust shall comply
with Section 3807(b) of DBTA by having and maintaining a registered office in
Delaware and by designating a registered agent for service of process on the
Trust, which agent shall have the same business office as the Trusts registered
office. The failure to file any such certificate, to maintain a registered
office, to designate a registered agent for service of process, or to include
such other information shall not affect the validity of the establishment of the
Trust, the Declaration, the By-Laws or any action taken by the Trustees, the
Trust officers or any other Person with respect to the Trust except insofar as a
provision of the DBTA would have governed, in which case the Delaware common law
governs.
SECTION X.2 GOVERNING LAW.
This Declaration is executed by all of the Trustees and delivered with reference
to DBTA and the laws of the State of Delaware, and the rights of all parties and
the validity and construction of every provision hereof shall be subject to and
construed according to DBTA and the laws of the State of Delaware (unless and to
the extent otherwise provided for and/or preempted by the 1940 Act or other
applicable federal securities laws); provided, however, that there shall not be
applicable to the Trust, the Trustees or this Declaration (a) the provisions of
Section 3540 of Title 12 of the Delaware Code or (b) any provisions of the laws
(statutory or common) of the State of Delaware (other than the DBTA) pertaining
to trusts which are inconsistent with the rights, duties, powers, limitations or
liabilities of the Trustees set forth or referenced in this Declaration.
SECTION X.3 COUNTERPARTS.
This Declaration may be simultaneously executed in several counterparts, each of
which shall be deemed to be an original, and such counterparts, together, shall
constitute one and the same instrument, which shall be sufficiently evidenced by
any such original counterpart.
SECTION X.4 RELIANCE BY THIRD PARTIES.
Any certificate executed by an individual who, according to the records of the
Trust or of any recording office in which this Declaration may be recorded,
appears to be a Trustee hereunder, certifying to (a) the number or identity of
Trustees or Holders, (b) the due authorization of the execution of any
instrument or writing, (c) the form of any vote passed at a meeting of Trustees
or Holders, (d) the fact that the number of Trustees or Holders present at any
meeting or executing any written instrument satisfies the requirements of this
Declaration, (e) the form of any By-Laws adapted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any person dealing with the
Trustees and their successors.
SECTION X.5 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the DBTA, or with other applicable
laws and regulations, the conflicting provisions shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
SECTION X.6 TRUST ONLY.
It is the intention of the Trustees to create only a business trust under DBTA
with the relationship of Trustee and beneficiary between the Trustees and each
Holder from time to time. It is not the intention of the Trustees to create a
general partnership, limited partnership, joint stock association, corporation,
bailment, or any form of legal relationship other than a Delaware business trust
except to the extent such trust is deemed to constitute a corporation under the
Code and applicable state tax laws. Nothing in this Declaration of Trust shall
be construed to make the Holders, either by themselves or with the Trustees,
partners or members of a joint stock association.
SECTION X.7 WITHHOLDING.
Should any Holder be subject to withholding pursuant to the Code or any other
provision of law, the Trust shall withhold all amounts otherwise distributable
to such Holder as shall be required by law and any amounts so withheld shall be
deemed to have been distributed to such Holder under this Declaration of Trust.
If any sums are withheld pursuant to this provision, the Trust shall remit the
sums so withheld to and file the required forms with the Internal Revenue
Service, or other applicable government agency.
SECTION X.8 HEADINGS AND CONSTRUCTION.
Headings are placed herein for convenience of reference only and shall not be
taken as a part hereof or control or affect the meaning, construction or effect
of this instrument. Whenever the singular number is used herein, the same shall
include the plural; and the neuter, masculine and feminine genders shall include
each other, as applicable.
IN WITNESS WHEREOF the undersigned has caused this Declaration of Trust to
be executed as of the day and year first above written.
/s/ Kendrick W. Kam July 20, 1999
- ------------------- -------------
Kendrick Kam, Trustee Date
INGENUITY CAPITAL TRUST
BY-LAWS
Effective July 20, 1999
INGENUITY CAPITAL TRUST
TABLE OF CONTENTS
Page
ARTICLE I. MEETINGS OF HOLDERS..........................................3
SECTION I.1 ANNUAL MEETING.................................................3
SECTION I.2 CHAIRMAN........................................................3
SECTION I.3 PROXIES; VOTING................................................3
SECTION I.4 FIXING RECORD DATES.............................................3
SECTION I.5 INSPECTORS OF ELECTION......................................3
SECTION I.6 RECORDS OF MEETINGS OF HOLDERS..................................4
ARTICLE II. TRUSTEES...........................................................4
SECTION II.1 ANNUAL AND REGULAR MEETINGS....................................4
SECTION II.2 SPECIAL MEETINGS..............................................4
SECTION II.3 NOTICE.........................................................4
SECTION II.4 CHAIRMAN; RECORDS............................................4
SECTION II.5 AUDIT COMMITTEE................................................4
SECTION II.6 NOMINATING COMMITTEE OF TRUSTEES..............................5
SECTION II.7 EXECUTIVE COMMITTEE..........................................5
SECTION II.8 OTHER COMMITTEES...............................................5
SECTION II.9 COMMITTEE PROCEDURES.........................................5
ARTICLE III. OFFICERS..........................................................5
SECTION III.1 OFFICERS OF THE TRUST: COMPENSATION........................5
SECTION III.2 ELECTION AND TENURE...........................................5
SECTION III.3 REMOVAL OF OFFICERS..........................................5
SECTION III.4 BONDS AND SURETY..............................................6
SECTION III.5 PRESIDENT AND VICE-PRESIDENTS...............................6
SECTION III.6 SECRETARY...................................................6
SECTION III.7 TREASURER.....................................................6
SECTION III.8 OTHER OFFICERS AND DUTIES.....................................7
ARTICLE IV. CUSTODIAN..........................................................7
SECTION IV.1 APPOINTMENT AND DUTIES.........................................7
SECTION IV.2 CENTRAL CERTIFICATE SYSTEM.....................................7
ARTICLE V. MISCELLANEOUS.......................................................7
SECTION V.1 DEPOSITORIES...................................................7
SECTION V.2 SIGNATURES....................................................7
SECTION V.3 FISCAL YEAR.....................................................8
ARTICLE VI. INTERESTS..........................................................8
SECTION VI.1 INTERESTS....................................................8
SECTION VI.2 REGULATIONS...................................................8
SECTION VI.3 DISTRIBUTION DISBURSING AGENTS AND THE LIKE................8
ARTICLE VII. AMENDMENT OF BY-LAWS..............................................8
SECTION VII.1 AMENDMENT AND REPEAL OF BY-LAWS..............................8
SECTION VII.2 NO PERSONAL LIABILITY....................................8
INGENUITY CAPTIAL TRUST: BY-LAWS
These By-Laws are made as of the twentieth day of July, 1999 and adopted
pursuant to Section 2.7 of (the "Declaration") of Trust establishing Ingenuity
Capital Trust dated July 20, 1999, as from time to time amended (hereinafter
called the "Declaration"). All words and terms capitalized in these By-Laws
shall have the meaning or meanings set forth for such words or terms in the
Declaration.
ARTICLE I. MEETINGS OF HOLDERS
SECTION I.1 ANNUAL MEETING.
An annual meeting of the Holders of Interests in the Trust, which may be held on
such date and at such hour as may from time to time be designated by the Board
of Trustees and stated in the notice of such meeting, is not required to be held
unless certain actions must be taken by the Holders as set forth in Section 8.7
of the Declaration, or except when the Trustees consider it necessary or
desirable.
SECTION I.2 CHAIRMAN.
The President or, in his or her absence, the Chief Operating Officer shall act
as chairman at all meetings of the Holders and, in the absence of both of them,
the Trustee or Trustees present at the meeting may elect a temporary chairman
for the meeting, who may be one of themselves or an officer of the Trust.
SECTION I.3 PROXIES; VOTING.
Holders may vote either in person or by duly executed proxy and each Holder
shall be entitled to a vote proportionate to his or her Interest in the Trust,
all as provided in Article VIII of the Declaration. No proxy shall be valid
after eleven (11) months from the date of its execution, unless a longer period
is expressly stated in such proxy.
SECTION I.4 FIXING RECORD DATES.
For the purpose of determining the Holders who are entitled to notice of or to
vote or act at a meeting, including any adjournment thereof, or who are entitled
to participate in any distributions, or for any other proper purpose, the
Trustees may from time to time fix a record date in the manner provided in
Section 8.3 of the Declaration. If the Trustees do not, prior to any meeting of
the Holders, so fix a record date, then the date of mailing notice of the
meeting shall be the record date.
SECTION I.5 INSPECTORS OF ELECTION.
In advance of any meeting of the Holders, the Trustees may appoint Inspectors of
Election to act at the meeting or any adjournment thereof. If Inspectors of
Election are not so appointed, the chairman, if any, of any meeting of the
Holders may, and on the request of any Holder or his or her proxy shall, appoint
Inspectors of Election of the meeting. The number of Inspectors shall be either
one or three. If appointed at the meeting on the request of one or more Holders
or proxies, a Majority Interests Vote shall determine whether one or three
Inspectors are to be appointed, but failure to allow such determination by
By-laws the Holders shall not affect the validity of the appointment of
Inspectors of Election. In (case any person appointed as Inspector fails to
appear or fails or refuses to act, the vacancy may be filled by appointment made
by the Trustees in advance of the convening of the meeting or at the meeting by
the person acting as chairman. The Inspectors of Election shall determine the
Interests owned by Holders, the Interests represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies, shall
receive votes, ballots or consents, shall hear and determine all challenges and
questions in any way arising in connection with the right to vote, shall count
and tabulate all votes or consents, determine the results, and do such other
acts as may be proper to conduct the election or vote with fairness to all
Holders. If there are three Inspectors of Election, the decision, act or
certificate of a majority is effective in all respects as the decision, act or
certificate of all. On request of the chairman, if any, of the meeting, or of
any Holder or his or her proxy, the Inspectors of Election shall make a report
in writing of any challenge or question or matter determined by them and shall
execute a certificate of any facts found by them.
SECTION I.6 RECORDS OF MEETINGS OF HOLDERS.
At each meeting of the Holders there shall be open for inspection the minutes of
the last previous meeting of Holders of the Trust and a list of the Holders of
the Trust, certified to be true and correct by the Secretary or other proper
agent of the Trust, as of the record date of the meeting. Such list of Holders
shall contain the name of each Holder in alphabetical order, the Holder's
address and Interests owned by such Holder. Holders shall have the right to
inspect books and records of the Trust during normal business hours for any
purpose not harmful to the Trust.
ARTICLE II. TRUSTEES
SECTION II.1 ANNUAL AND REGULAR MEETINGS.
The Trustees shall hold an Annual Meeting of the Trustees for the election of
officers and the transaction of other business which may come before such
meeting. Regular meetings of the Trustees may be held without call or notice at
such place or places and times as the Trustees may by resolution provide from
time to time.
SECTION II.2 SPECIAL MEETINGS.
Special Meetings of the Trustees shall be held upon the call of the chairman, if
any, the President, the Secretary, or any two Trustees, at such time, on such
day and at such Place, as shall be designated in the notice of the meeting.
SECTION II.3 NOTICE.
Notice of a meeting shall be given by mail (which term shall include overnight
mail) or by telegram (which term shall include a cablegram or telephone
facsimile) or delivered personally (which tern shall include notice by
telephone). If notice is given by mail, it shall be mailed not later than 72
hours preceding the meeting and if given by telegram or personally, such notice
shall be delivered not later than 24 hours preceding the meeting. Notice of a
meeting of Trustees may be waived before or after any meeting by signed written
waiver. Neither the business to be transacted at, nor the purpose of, any
meeting of the Board of Trustees need be stated in the notice or waiver of
notice of such meeting, and no notice need be given of action proposed to be
taken by written consent. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting, at the commencement of such
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
SECTION II.4 CHAIRMAN; RECORDS.
The Trustees shall appoint a Chairman of the Board from among their number. Such
Chairman of the Board shall act as chairman at all meetings of the Trustees; in
his or her absence the President shall act as chairman; and, in the absence of
all of them, the Trustees present shall elect one of their number to act as
temporary chairman. The results of all actions taken at a meeting of the
Trustees, or by written consent of the Trustees, shall be recorded by the
Secretary.
SECTION II.5 AUDIT COMMITTEE.
The Board of Trustees may, by the affirmative vote of a majority of the entire
Board, appoint from its members an Audit Committee composed of two or more
Trustees who are not "interested persons" of the Trust as defined in the
Investment Company Act of 1940 (the "1940 Act"), as the Board may from time to
time determine. The Audit Committee shall (a) recommend independent public
accountants for selection by the Board, (b) review the scope of audit,
accounting and financial internal controls and the quality and adequacy of the
Trust's accounting staff with the independent public accountants and such other
persons as may be deemed appropriate, (c) review with the accounting staff and
the independent public accountants the compliance of transactions of the Trust
with its investment adviser, administrator or any other service provider with
the financial terms of applicable contracts or agreements, (d) review reports of
the independent public accountants and comment to the Board when warranted, (e)
report to the Board at least once each year and at such other times as the
committee deems desirable, and (f) be directly available at all times to
independent public accountants and responsible officers of the Trust for
consultation on audit, accounting and related financial matters.
SECTION II.6 NOMINATING COMMITTEE OF TRUSTEES.
The Board of Trustees may, by the affirmative vote of a majority of the entire
Board, appoint from its members a Trustee Nominating Committee composed of two
or more Trustees. The Trustee Nominating Committee shall recommend to the Board
a slate of persons to be nominated for election as Trustees by the Holders at a
meeting of the Holders and a person to be elected to fill any vacancy occurring
for any reason in the Board. Notwithstanding anything in this Section to the
contrary, if the Trust has a plan in effect pursuant to Rule 12b-1 under the
1940 Act, the selection and nomination of those Trustees who are not "interested
persons" shall be committed to the discretion of such Disinterested Trustees.
SECTION II.7 EXECUTIVE COMMITTEE.
The Board of Trustees may appoint from its members an Executive Committee
composed of those Trustees as the Board may from time to time determine, of
which committee the Chairman of the Board shall be a member. In the intervals
between meetings of the Board, the Executive Committee shall have the power of
the Board to (a) determine the value of securities and assets owned by the
Trust, (b) elect or appoint officers of the Trust to serve until the next
meeting of the Board, and (c) take such action as may be necessary to manage the
portfolio security loan business of the Trust. All action by the Executive
Committee shall be recorded and reported to the Board at its next meeting
succeeding such action.
SECTION II.8 OTHER COMMITTEES.
The Board of Trustees may appoint from among its members other committees
composed of two or more of its Trustees which shall have such powers as may be
delegated or authorized by the resolution appointing them.
SECTION II.9 COMMITTEE PROCEDURES.
The Board of Trustees may at any time change the members of any committee, fill
vacancies or discharge any committee. In the absence of any member of any
committee, the member or members thereof present at any meeting, whether or not
they constitute a quorum, may unanimously appoint to act in the place of such
absent member a member of the Board who, except in the case of the Executive
Committee, is not an interested person of the Trust as the Board may from time
to time determine. Each committee may fix its own rules of procedure and may
meet as, and when, provided by those rules. Copies of the minutes of all
meetings of committees other than the Nominating Committee and the Executive
Committee shall be distributed to the Board unless the Board shall otherwise
provide.
ARTICLE III. OFFICERS
SECTION III.1 OFFICERS OF THE TRUST: COMPENSATION.
The officers of the Trust shall consist of the Chairman of the Board of
Trustees, a President, a Secretary, a Treasurer and such other officers or
assistant officers, including Vice-Presidents, as may, be elected by the
Trustees. Any two or more of the offices may be held by the same person. The
Trustees may designate a Vice-President as an Executive Vice-President and may
designate the order in which the other Vice-Presidents may act. The Chairman
shall be a Trustee, but no other officer of the Trust need be a Trustee. The
Board of Trustees may determine what, if any, compensation shall be paid to the
officers of the Trust.
SECTION III.2 ELECTION AND TENURE.
At the initial organization meeting and thereafter at each annual meeting of the
Trustees, the Trustees shall elect the Chairman, President, Secretary, Treasurer
and such other officers as the Trustees shall deem necessary or appropriate in
order to carry out the business of the Trust. Such officers shall hold office
until the next annual meeting of the Trustees and until their successors have
been duly elected and qualified. The Trustees may fill any vacant office or add
any additional officers at any time.
SECTION III.3 REMOVAL OF OFFICERS.
Any officer may be removed at any time with or without cause, by action of a
majority of the Trustees. This provision shall not prevent the making of a
contract of employment for a definite term with any officer and shall have no
effect upon any cause of action which any officer may have as a result of
removal in breach of a contract of employment. Any officer may resign at any
time by notice in writing signed by such officer and delivered or mailed to the
President or Secretary, and such resignation shall take effect immediately, or
at a later date according to the terms of such notice in writing.
SECTION III.4 BONDS AND SURETY.
Any officer may be required by the Trustees to be bonded for the faithful
performance of his or her duties in such amount and with such sureties as the
Trustees may determine.
SECTION III.5 PRESIDENT AND VICE-PRESIDENTS.
The President shall be the chief executive officer of the Trust and, subject to
the control of the Trustees, shall have general supervision, direction and
control of the business of the Trust and of its employees and shall exercise
such general powers of management as are usually vested in the office of
president of a corporation. The President shall preside at all meetings of the
Holders and, in the absence of the Chairman of the Board, the President shall
preside at all meetings of the Trustees. The President shall be, ex officio, a
member of all standing committees. Subject to direction of the Trustees, the
President shall have the power, in the name and on behalf of the Trust, to
execute any and all loan documents, contracts, agreements, deeds, mortgages, and
other instruments in writing, and to employ and discharge employees and agents
of the Trust. Unless otherwise directed by the Trustees, the President shall
have full authority and power, on behalf of all of the Trustees, to attend and
to act and to vote, on behalf of the Trust at any meetings of business
organizations in which the Trust holds an interest, or to confer such powers
upon any other persons, by executing any proxies duly authorizing such persons.
The President shall have such further authorities and duties as the Trustees
shall from time to time determine. In the absence or disability of the
President, the Vice-Presidents in order of their rank or the Vice-President
designated by the Trustees, shall perform all of the duties of President, and
when so acting shall have all the powers of and be subject to all of the
restrictions upon the President. Subject to the direction of the President, the
Treasurer and each Vice-President shall have the power in the name and on behalf
of the Trust to execute any and all loan documents, contracts, agreements,
deeds, mortgages and other instruments in writing, and, in addition, shall have
such other duties and powers as shall be designated from time to time by the
Trustees, the Chairman, or the President.
SECTION III.6 SECRETARY.
The Secretary shall keep the minutes of all meetings of, and record all votes
of, Holders, Trustees and any committees of Trustees, provided that, in the
absence or disability of the Secretary, the Holders or Trustees or committee may
appoint any other person to keep the minutes of a meeting and record votes. The
Secretary shall attest the signature or signatures of the officer or officers
executing any instrument on behalf of the Trust. The Secretary shall also
perform any other duties commonly incident to such office in a Delaware
corporation, and shall have such other authorities and duties as the Trustees
shall from time to time determine.
SECTION III.7 TREASURER.
Except as otherwise directed by the Trustees, the Treasurer shall have the
general supervision of the monies, funds, securities, notes receivable and other
valuable papers and documents of the Trust, and shall have and exercise under
the supervision of the Trustees and of the Chairman and the President all powers
and duties normally incident to his office. He may endorse for deposit or
collection all notes, checks and other instruments payable to the Trust or to
its order. He shall deposit all funds of the Trust as may be ordered by the
Trustees, the Chairman or the President. He shall keep accurate account of the
books of the Trust's transactions which shall be the property of the Trust and
which, together with all other property of the Trust in his possession, shall be
subject at all times to the inspection and control of the Trustees. Unless the
Trustees shall otherwise determine, the Treasurer shall be the principal
accounting officer of the Trust and shall also be the principal financial
officer of the Trust. He shall have such other duties and authorities as the
Trustees shall from time to time determine. Notwithstanding anything to the
contrary herein contained, the Trustees may authorize any adviser or
administrator to maintain bank accounts and deposit and disburse funds on behalf
of the Trust.
SECTION III.8 OTHER OFFICERS AND DUTIES.
The Trustees may elect such other officers and assistant officers as they shall
from time to time determine to be necessary or desirable in order to conduct the
business of the Trust. Assistant officers shall act generally in the absence of
the officer whom they assist and shall assist that officer in the duties of his
office. Each officer, employee and agent of the Trust shall have such other
duties and authority as may be conferred upon his by the Trustees or delegated
to him by the President.
ARTICLE IV. CUSTODIAN
SECTION IV.1 APPOINTMENT AND DUTIES.
The Trustees shall at all times employ a custodian or custodians with authority
as its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in these By-Laws:
(1) to hold the securities owned by the Trust and deliver the same upon
written order;
(2) to receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of the
Trust and furnish clerical and accounting services; and
(5) if authorized to do so by the Trustees, to compute the net income and
net assets of the Trust;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. The Trustees may also authorize the custodian to employ one
or more subcustodians, from time to time, to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such subcustodian and approved by the Trustee.
SECTION IV.2 CENTRAL CERTIFICATE SYSTEM.
Subject to such rules, regulations and orders as the Commission may adapt, the
Trustees may direct the custodian to deposit all or any part of the securities
owned by the Trust in a system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Commission under the Securities Exchange Act of
1934, any such other person or entity with which the Trustees may authorize
deposit in accordance with the 1940 Act, pursuant to which system all securities
of any particular class or series of any issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of such securities. All such deposits shall be subject
to withdrawal only upon the order of the Trust.
ARTICLE V. MISCELLANEOUS
SECTION V.1 DEPOSITORIES.
In accordance with Article IV of these By-Laws, the funds of the Trust shall be
deposited in such depositories as the Trustees shall designate and shall be
drawn out on checks, drafts or other orders signed by such officer, officers,
agent or agents (including any adviser or administrator), as the Trustees may
from time to time authorize.
SECTION V.2 SIGNATURES.
All contracts and other instruments shall be executed on behalf of the Trust by
such officer, officers, agent or agents, as provided in these By-Laws or as the
Trustees may from time to time by resolution or authorization provide.
SECTION V.3 FISCAL YEAR.
The fiscal year of the Trust shall end on December 31 of each year, subject,
however, to change from time to time by the Board of Trustees.
ARTICLE VI. INTERESTS
SECTION VI.1 INTERESTS.
Except as otherwise provided by law, the Trust shall be entitled to recognize
the exclusive right of a person in whose name interests stand on the record of
Holders as the owners of such Interests for all purposes, including, without
limitation, the rights to receive distributions, and to vote as such owner, and
the Trust shall not be bound to recognize any equitable or legal claim to or
interest in any such Interests on the part of any other person.
SECTION VI.2 REGULATIONS.
The Trustees may make such additional rules and regulations, not inconsistent
with these By-Laws, as they may deem expedient concerning the sale and purchase
of Interests of the Trust.
SECTION VI.3 DISTRIBUTION DISBURSING AGENTS AND THE LIKE.
The Trustees shall have the power to employ and compensate such distribution
disbursing agents, warrant its agents and agents for the reinvestment of
distributions as they shall deem necessary or desirable. Any of such agents
shall have such power and authority as is delegated to any of them by the
Trustees.
ARTICLE VII. AMENDMENT OF BY-LAWS
SECTION VII.1 AMENDMENT AND REPEAL OF BY-LAWS.
In accordance with Section 2.7 of the Declaration, the Trustees shall have the
power to alter, amend or repeal the By-Laws or adopt new By-Laws at any time.
The Trustees shall in no event adopt By-Laws which are in conflict with the
Declaration, Title 12 of the Delaware Code (Section 3801, et. seq.), the 1940
Act or applicable federal securities laws.
SECTION VII.2 NO PERSONAL LIABILITY.
The Declaration establishing Ingenuity Capital Trust provides that the name
Ingenuity Capital Trust does not refer to the Trustees as individuals or
personally; and no Trustee, officer, employee or agent of, or Holder of Interest
in, Ingenuity Capital Trust shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise in connection with the affairs of Ingenuity Capital Trust
(except to the extent of a Holder's Interest in the Trust).
Investment Advisory and Management Agreement
This Investment Advisory and Management Agreement ("Agreement"), is made
and entered into as of _____________, 1999 by and between Ingenuity Capital
Trust, a Delaware business trust ("the Fund") having its principal place of
business at 26888 Almaden Court, Los Altos, CA 94022 and Ingenuity Capital
Management, LLC. ("Adviser"), having its principal place of business at 26888
Almaden Court, Los Altos, CA 94022.
WHEREAS, the Fund, an open-end, non-diversified investment company
registered under the Investment Company Act of 1940 (the "1940 Act"), wishes to
retain the Adviser to provide investment advisory and management services to The
Medical Specialists Fund; and
WHERAS, the Adviser is willing to furnish such services on the terms an
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. The Trust hereby appoints the Adviser to manage the investment and
reinvestment of assets of The Medical Specialists Fund (the "Fund") for the
period and on the terms set forth in this Agreement. The Adviser accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. The Fund shall at all times inform the Adviser as to the securities
owned by it, the funds available or to become available for investment by it,
and generally as to the conditio of its affairs. It shall furnish the Adviser
with such other documents and information with regard to its affairs as the
Adviser may from time to time reasonably request.
3. Subject to the direction and control of the Fund's Board of
Trustees, the Adviser shall regularly provide the Fund with investment research,
advice, management and supervision and shall furnish a continuous investment
program for the Fund's portfolio of securities consistent with the Fund's
investment objective, policies, and limitations as stated in the Fund's current
Prospectus and Statement of Additional Information. The Adviser shall determine
from time to time what securities will be purchased, retained or sold by the
Fund, and shall implement those decisions, all subject to the provisions of the
Fund's Declaration of Trust, the 1940 Act, the applicable rules and regulations
of the Securities and Exchange Commission, and other applicable federal and
state laws, as well as the investment objectives, policies, and limitations of
the Fund. In placing orders for the Fund with brokers and dealers with respect
to the execution of the Fund's securities transactions, the Adviser shall
attempt to obtain the best net results. In doing so, the Adviser may consider
such factors which it deems relevant to the Fund's best interest, such as price,
the size of the transaction, the nature of the market for the security, the
amount of the commission, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer involved and the quality
of service rendered by the broker-dealer in other transactions. The Adviser
shall have the discretionary authority to utilize certain broker-dealers even
though it may result in the payment by the Fund of an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, providing,
however, that the Adviser had determined that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by the broker-dealer effecting the transaction. In no instance will
portfolio securities be purchased from or sold to the Adviser or any affiliated
person thereof except in accordance with the rules and regulations promulgated
by the Securities and Exchange Commission pursuant to the 1940 Act. The Adviser
shall also provide advice and recommendations with respect to other aspects of
the business and affairs of the Fund and shall perform such other functions of
management and supervision as may be directed by the Board of Trustees of the
Fund, provided that in no event shall the Adviser be responsible for any expense
occasioned by the performance of such functions.
4. The Adviser is responsible for (1) compensation of any of the Fund's
trustees, officers and employees who are interested persons of the Adviser and
(2) compensation of the Adviser's personnel and other expenses incurred in
connection with the provisions of portfolio management services under this
Agreement. Other than as herein specifically indicated, the Adviser shall not be
responsible for the Fund's expenses. Specifically, the Adviser will not be
responsible, except to the extent of the reasonable compensation of employees of
the Fund whose services may be used by the Adviser hereunder, for any of the
following expenses of the Fund, which expenses shall be borne by the Fund: legal
and audit expenses, organization expenses; interest; taxes; governmental fees;
fees, voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; the cost (including brokerage
commissions or charges, if any) of securities purchased or sold by the Fund and
any losses incurred in connection therewith; fees of custodian, transfer agents,
registrars or other agents; distribution fees; expenses of preparing share
certificates; expenses relating to the redemption or purchase of the Fund's
shares; expenses of registering and qualifying Fund shares for sale under
applicable federal and state law and maintaining such registrations and
qualification; expenses of preparing, setting in print, printing and
distributing prospectuses, proxy statements, reports, notices and dividends to
Fund shareholders; cost of stationery; costs of shareholders and other meetings
of the Fund; compensation and expenses of the independent trustees of the Fund;
and the Fund's pro rata portion of premiums of any fidelity bond and other
insurance covering the Fund and its officers and trustees.
5. No trustee, officer or employee of the Fund shall receive from the
Fund any salary or other compensation as such trustee, officer or employee while
he is at the same time a director, officer or employee of the Adviser or any
affiliated company of the Adviser. This paragraph shall not apply to trustees,
executive committee members, consultants and other persons who are not regular
members of the Adviser's or any affiliated company's staff.
6. As compensation for the services performed by the Adviser, the Fund
shall pay the Adviser, as promptly as possible after the last day of each month,
a fee, accrued each calendar day (including weekends and holidays) at the rate
of 1.5% per annum of the daily net assets of the Fund. The Adviser shall reduce
such fee or, if necessary, make expense reimbursements to the Fund to the extent
required to limit the total annual operating expenses of the Fund to 1.95% of
its average daily net assets up to $200 million; 1.90% of such assets from $200
million to $500 million; 1.85% of such assets from $500 million to $1 billion;
and 1.80% of such assets in excess of $1 billion. The daily net assets of the
Funds shall be computed as of the time of the regular close of business of the
New York Stock Exchange, or such other time as may be determined by the Board of
Trustees of the Fund. Any of such payments as to which the Adviser may so
request shall be accompanied by a report of the Fund prepared either by the Fund
or by a reputable firm of independent accountants which shall show the amount
properly payable to the Adviser under this Agreement and the detailed
computation thereof.
7. The Adviser assumes no responsibility under this Agreement other
than to render the services called for hereunder in good faith, and shall not be
responsible for any action of the Board of Trustees of the Fund in the following
or declining to follow any advice or recommendation of the Adviser; provided
that nothing in this Agreement shall protect the Adviser against any liability
to the Fund or its stockholders to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its obligations and duties
hereunder.
8. The Adviser shall be an independent contractor and shall have no
authority to act for or represent the Fund in its investment commitments unless
otherwise provided. No agreement, bid, offer, commitment, contract or other
engagement entered into by the Adviser whether on behalf of the Adviser or
whether purporting to have been entered unto on behalf of the Fund shall be
finding upon the Fund, and all acts authorized to be done by the Adviser under
this Agreement shall be done by it as an independent contractor and not as an
agent.
9. Nothing in this Agreement shall limit or restrict the right of any
director, officer, or employee of the Adviser who may also be a trustee,
officer, or employee of the Fund, to engage in any other business or to devote
his time and attention in part to the management or other aspects of any other
business, whether of a similar nature or a dissimilar nature, nor to limit or
restrict the right of the Adviser to engage in any other business or to render
services of any kind, including investment advisory and management services, to
any other corporation, firm, individual or association.
10. As used in this Agreement, the terms "assignment," "interested
person," and "majority of the outstanding voting securities" shall have the
meanings given to them by Section 2(a) of the 1940 Act, subject to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation or order.
11. This Agreement shall terminate automatically in the event of its
assignment by the Adviser and shall not be assignable by the Fund without the
consent of the Adviser. This Agreement may also be terminated at any time,
without the payment of penalty, by the Fund or by the Adviser on sixty (60)
days' written notice addressed to the other party at its principal place of
business.
12. This Agreement shall become effective on the date hereof and shall
continue in effect for two years and from year to year thereafter only so long
as specifically approved annually, (1) by vote of a majority of the trustees of
the Fund who are not parties to this Agreement or interested persons of such
parties, cast in person at a meeting called for that purpose, and, (2) either by
vote of the holders of a majority of the outstanding voting securities of the
Fund or by a majority vote of the Fund's Board of Trustees.
13. No provision of this Agreement may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought, and no materials amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the Fund's outstanding voting
securities.
14. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and sealed by their officers thereunto duly authorized on the day and
year first above written. Attest:
Attest: INGENUITY CAPITAL TRUST
By: ______________________ By: ________________________
Arthur Roth
Its: Chairman
Attest: INGENUITY CAPITAL MANAGEMENT, LLC
By: ______________________ By: _________________________
Kendrick W. Kam
Its: President
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of _____________, 1999, between Ingenuity
Capital Management LLC, a Delaware limited liability corporation (hereinafter
referred to as the "ICM"), as investment advisor for the Ingenuity Capital
Trust, (hereinafter referred to as the "Trust"), and Rafferty Capital Markets,
Inc. ("RCM"), a corporation organized and existing under the laws of the State
of New York.
WHEREAS the Fund is registered under the Investment Act of 1940, as
amended ("1940 Act"), as an open-end management investment company, and has
registered one or more distinct series of shares of beneficial interest
("Shares") for sale to the public under the Securities Act of 1933, as amended
("1933 Act"), and has qualified its shares for sale to the public under various
state securities laws; and
WHEREAS the Fund desires to retain RCM as principal underwriter in
connection with the offering and sale of the Shares of each series listed on
Schedule A ( as amended from time to time) to this Agreement; and
WHEREAS this Agreement has been approved by a vote of the Fund's board
of trustees or directors ("Board") and its disinterested trustees/directors in
conformity with Section 15(c) under the 1940 Act; and
WHEREAS RCM is willing to act as principal underwriter for the Fund on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the parties hereto as follows;
1. Appointment. The Fund hereby appoints RCM as its agent to be the principal
underwriter so as to hold itself out as available to receive and accept orders
for the purchase and redemption of the Shares and redemption of Shares on behalf
of the Fund, subject to the terms and for the period set forth in this
Agreement. RCM hereby accepts such appointment and agrees to act hereunder. The
Fund understands that any solicitation activities conducted on behalf of the
Fund will be conducted primarily, if not exclusively, by employees of the Fund's
sponsor who shall become registered representatives of RCM.
2. Services and Duties of RCM.
(a) RCM agrees to sell Shares on a best efforts basis from
time to time during the term of this Agreement as agent for the Fund and upon
the terms described in the Registration Statement. As used in this Agreement,
the term "Registration Statement" shall mean the currently effective
registration statement of the Fund, and any supplements thereto, under the 1933
Act and the 1940 Act.
(1) RCM will hold itself available to receive purchase and redemption
orders satisfactory to RCM for Shares and will accept such orders on behalf of
the Fund. Such purchase orders shall be deemed effective at the time and in the
manner set forth in the Registration Statement.
(2) RCM, with the operational assistance of the Fund's transfer agent,
shall make Shares available through the National Securities Clearing
Corporation's Fund/SERV System.
(3) RCM shall provide to investors and potential investors only such
information regarding the Fund as the Fund shall provide or approve. RCM shall
review and file all proposed advertisements and sales literature with
appropriate regulators and consult with the Fund regarding any comments provided
by regulators with respect to such materials.
(4) The offering price of the Shares shall be the price determined in
accordance with, and in the manner set forth in, the most-current Prospectus.
The Fund shall make available to RCM a statement of each computation of net
asset value and the details of entering into such computation.
(5) RCM at its sole discretion may repurchase Shares offered for sale by
the shareholders. Repurchase of Shares by RCM shall be at the price determined
in accordance with, and in the manner set forth in, the most-current Prospectus.
At the end of each business day, RCM shall notify, by any appropriate means, the
Fund and its transfer agent of the orders for repurchase of Shares received by
RCM since the last report, the amount to be paid for such Shares, and the
identity of the shareholders offering Shares for repurchase. The Fund reserves
the right to suspend such repurchase right upon written notice to RCM. RCM
further agrees to act as agent for the Fund to receive and transmit promptly to
the Fund's transfer agent shareholder requests for redemption of Shares.
(6) RCM shall not be obligated to sell any certain number of Shares.
(7) RCM shall prepare reports for the Board regarding its activities under
this Agreement as from time to time shall be reasonably requested by the Board.
3. Duties of the Fund.
(1) The Fund shall keep RCM fully informed of its affairs and shall provide
to RCM from time to time copies of all information, financial statements, and
other papers that RCM may reasonably request for use in connection with the
distribution of Shares, including, without limitation, certified copies of any
financial statements prepared for the Fund by its independent public accountant
and such reasonable number of copies of the most current Prospectus, Statement
of Additional Information ("SAI"), and annual and interim reports as RCM may
request, and the Fund shall fully cooperate in the efforts of RCM to sell and
arrange for the sale of Shares.
(2) The Fund shall maintain a currently effective Registration Statement on
Form N-1A with the Securities and Exchange Commission (the "SEC"), maintain
qualification with applicable states and file such reports and other documents
as may be required under applicable federal and state laws. The Fund shall
notify RCM in writing of the states in which the Shares may be sold and shall
notify RCM in writing of any changes to such information. The Fund shall bear
all expenses related to preparing and typesetting such Prospectuses, SAI and
other materials required by law and such other expenses, including printing and
mailing expenses, related to the Fund's communication with persons who are
shareholders.
(3) The Fund shall not use any advertisements or other sales materials that
have not been (i) submitted to RCM for its review and approval, and (ii) filed
with the appropriate regulators.
(4) The Fund represents and warrants that its Registration Statement and
any advertisements and sales literature (excluding statements relating to RCM
and the services it provides that are based upon written information furnished
by RCM expressly for inclusion therein) of the Fund shall not contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that all statements or information furnished to RCM, pursuant to Section 3(a)
hereof, shall be true and correct in all material respects.
4. Other Broker-Dealers. RCM in its discretion may enter into agreements to sell
Shares to such registered and qualified retail dealers, as reasonably requested
by the Fund. In making agreements with such dealers, RCM shall not act only as
principal and not as agent for the Fund. The form of any such dealer agreement
shall be mutually agreed upon and approved by the Fund and RCM.
5. Withdrawal of Offering. The Fund reserves the right at any time to withdraw
all offerings of any or all Shares by written notice to RCM at its principal
office. No Shares shall be offered by either RCM or the Fund under any
provisions of this Agreement and no orders for the purchase or Sale of Shares
hereunder shall be accepted by the Fund if and so long as effectiveness of the
Registration Statement then in effect or any necessary amendments thereto shall
be suspended under any of the provisions of the 1933 Act, or if and so long as a
current prospectus as required by Section 5(b)(2) of the 1933 Act is not on file
with the SEC.
6.Services Not Exclusive. The services furnished by RCM hereunder are not to be
deemed exclusive and RCM shall be free to furnish similar services to others
so long as its services under this Agreement are not impaired thereby.
7. Expenses of the Fund. The Fund shall bear all costs and expenses of
registering the Shares with the SEC and state and other regulatory bodies, and
shall assume expenses related to communications with shareholders of the Fund
including, but not limited to, (i) fees and disbursements of its counsel and
independent public accountant; (ii) the preparation, filing, and printing of
Registration Statements and/or Prospectuses or SAIs; (iii) the preparation and
mailing of annual and interim reports, Prospectuses, SAIs, and proxy materials
to shareholders; (iv) such other expenses related to the communications with
persons who are shareholders of the Fund; and (v)the qualifications of Shares
for sale under the securities laws of such jurisdictions as shall be selected by
the Fund pursuant to Paragraph 3(b) hereof, and the costs and expenses payable
to each such jurisdiction for continuing qualification therein. In addition, the
Fund shall bear all costs of preparing, printing, mailing and filing any
advertisements and sales literature. RCM does not assume responsibility for any
expenses not assumed hereunder.
8. Compensation. As compensation for the services performed and the expenses
assumed by RCM under this Agreement including, but not limited to, any
commissions paid for sales of Shares, the Fund shall pay RCM, as promptly as
possible after receipt of a quarterly invoice, a fee for services as set forth
in Schedule B to this Agreement.
9. Share Certificates. The Fund shall not issue certificates representing Shares
unless requested to do so by a shareholder. If such request is transmitted
through RCM, the Fund will cause certificates evidencing the Shares owned to be
issued in such names and denominations as RCM shall from time to time direct.
10. Status of RCM. RCM is an independent contractor and shall be agent of the
Fund only with respect to the sale and redemption of Shares.
11. Indemnification.
(a) The Fund agrees to indemnify, defend, and hold RCM, its
officers and directors, and any person who controls RCM within the meaning of
Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the cost of investigating
or defending such claims, demands, or liabilities and any counsel fees incurred
in connection therewith) that RCM, its officers, directors, or any such
controlling person may incur under the 1933 Act, or under common law or
otherwise, arising out of or based upon any (i) alleged untrue statement of a
material fact contained in the Registration Statement, Prospectus, SAI or sales
literature, (ii) alleged omission to state a material fact required to be stated
in the either thereof or necessary to make the statements therein not
misleading, or (iii) failure by the Fund to comply with the terms of the
Agreement; provided, that in no event shall anything contained herein be so
construed as to protect RCM against any liability to the Fund or its
shareholders to which RCM would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of its obligations under this Agreement.
(b) The Fund shall not be liable to RCM under this Agreement
with respect to any claim made against RCM on any person indemnified unless RCM
or other such person shall have notified the Fund 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 RCM or such
other person (or after RCM or the person shall have received notice of service
on any designated agent). However, failure to notify the Fund of any claim shall
not relieve the Fund from any liability that it may have to RCM or any other
person against whom such action is brought otherwise than on account of this
Agreement.
(c) The Fund shall be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any claims subject to this Agreement. If the Fund elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Fund and satisfactory to indemnified defendants in the suit whose
approval shall not be unreasonably withheld. In the event that the Fund elects
to assume the defense of any suit and retain counsel, the indemnified defendants
shall bear the fees and expenses of any additional counsel retained by them. If
the Fund does not elect to assume the defense of a suit, it will reimburse the
indemnified defendants for the reasonable fees and expenses of any counsel
retained by the indemnified defendants. The Fund agrees to promptly notify RCM
of the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of any of its
Shares.
(d) RCM agrees to indemnify, defend, and hold the Fund, its
officers and directors, and any person who controls the Fund within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities, and expenses (including the cost of investigating
or defending against such claims, demands, or liabilities and any counsel fees
incurred in connection therewith) that the Fund, its directors or officers, or
any such controlling person may incur under the 1933 Act, or under common law or
otherwise, resulting from RCM's willful misfeasance, bad faith or gross
negligence in the performance of its obligations and duties under this
Agreement, or arising out of or based upon any alleged untrue statement of a
material fact contained in information furnished in writing by RCM to the Fund
for use in the Registration Statement, Prospectus or SAI arising out of or based
upon any alleged omission to state a material fact in connection with such
information required to be stated in either thereof or necessary to make such
information not misleading.
(e) RCM shall be entitled to participate, at its own expense,
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce the claim, but if RCM elects to assume the defense, the defense shall be
conducted by counsel chosen by RCM and satisfactory to the indemnified
defendants whose approval shall not be unreasonably withheld. In the event that
RCM elects to assume the defense of any suit and retain counsel, the defendants
in the suit shall bear the fees and expenses of any additional counsel retained
by them. If RCM does not elect to assume the defense of any suit, it will
reimburse the indemnified defendants in the suit for the reasonable fees and
expenses of any counsel retained by them.
12. Duration and Termination.
(a) This Agreement shall become effective on the date first
written above or such later date as indicated in Schedule A and, unless sooner
terminated as provided herein, will continue in effect for two years from the
above written date. Thereafter, if not terminated this Agreement shall continue
in effect for successive annual periods, provided that such continuance is
specifically approved at least annually (i) by a vote of a majority of the
Fund's Board who are neither interested persons (as defined in the 1940 Act) of
the Fund ("Independent trustees/directors") or RCM, cast in person at a meeting
called for the purpose of voting on such approval, and (ii) by the Board or by
vote of a majority of the outstanding voting securities of the Fund.
(b) Notwithstanding the foregoing, this Agreement may be
terminated in its entirety at any time, without the payment of any penalty, by
vote of the Board, by vote of a majority of the Independent trustees/directors,
or by vote of a majority of the outstanding voting securities of the Fund on
sixty days' written notice to RCM or by RCM at any time, without the payment of
any penalty, on sixty days' written notice to the Fund. This Agreement will
automatically terminate in the event of its assignment.
13. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged, or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge,
or termination is sought. This Agreement may be amended with the approval of the
Board or of a majority of the outstanding voting securities of the Fund;
provided, that in either case, such amendment also shall be approved by a
majority of the Independent trustees/directors.
14. Limitation of Liability. The Board and shareholders of the Fund shall not be
personally liable for obligations of the Fund in connection with any matter
arising from or in connection with this Agreement. If the Fund is a
Massachusetts business trust, this Agreement is not binding upon any trustees,
officer or shareholder of the Fund individually, and no such person shall be
individually liable with respect to any action or inaction resulting from this
Agreement.
15. Notice. Any notice required or permitted to be given by either party to the
other shall be deemed sufficient upon receipt in writing at the other party's
principal offices.
16. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule, or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors. As used in this Agreement, the terms "majority
of the outstanding voting securities," "interested person," and "assignment"
shall have the same meaning as such terms have in the 1940 Act.
17. Governing Law. This Agreement shall be construed in accordance with the laws
of the State of New York and the 1940 Act. To the extent that the applicable
laws of the State of New York conflict with the applicable provisions of the
1940 Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated as of the day and year
first above written.
ATTEST: INGENUITY CAPITAL MANAGEMENT LLC
___________________________ By:______________________________
Title:_____________________________
ATTEST: RAFFERTY CAPITAL MARKETS, INC.
___________________________ By:_______________________________
Title:_____________________________
SCHEDULE A
to the
DISTRIBUTION AGREEMENT
between
INGENUITY CAPITAL MANAGEMENT LLC
and
RAFFERTY CAPITAL MARKETS, INC.
Pursuant to Section 1 of the Distribution Agreement between Ingenuity
Capital Management LLC (the "Adviser"), on behalf of Ingenuity Capital Trust
(the "Fund"), and Rafferty Capital Markets, Inc. ("RCM"), the Adviser hereby
appoints RCM as its agent to be the principal underwriter of the Fund with
respect to its following series:
The Medical Specialist Fund
Dated___________________,1999
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this ___ day of
_______, 1999, by and between Ingenuity Capital Management LLC, a Delaware
limited liability corporation, (hereinafter referred to as the "ICM"), as
investment advisor for the Ingenuity Capital Trust, (hereinafter referred to as
the "Trust"), and Firstar Bank Milwaukee, N.A., a corporation organized under
the laws of the State of Wisconsin (hereinafter referred to as the "Custodian").
WHEREAS, the Trust is open-end management investment companies
which are registered under the Investment Trust Act of 1940, as amended (the
"1940 Act");
WHEREAS, the Trust is authorized to create separate series, each with its
own separate investment portfolio; and
WHEREAS, ICM desires that the securities and cash of each
protfolio (each hereinafter referred to as the "Fund") and each additional
series of the Trust listed on Exhibit A attached hereto, as may be amended from
time to time, shall be hereafter held and administered by Custodian pursuant to
the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, ICM and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Trust by any two
of the President, a Vice President, the Secretary and the Treasurer of the
Trust, or any other persons duly authorized to sign by the Board of Trust.
The word "Board" shall mean Board of Trustees of the Trust.
2. Names, Titles, and Signatures of the Trust Officers
An officer of the Trust will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Trust, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of each Fund, subject only to draft or order by Custodian
acting pursuant to the terms of this Agreement. Custodian shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Trust. Custodian shall make payments of cash
to, or for the account of, the Trust from such cash only:
(a) for the purchase of securities for the portfolio of the
Fund upon the delivery of such securities to Custodian,
registered in the name of the Trust or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or
upon proper instructions from the Trust;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and
postage);
(d) for payments in connection with the conversion, exchange
or surrender of securities owned or subscribed to by the
Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution
of the Board of Trust of the Trust.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating that it
is for a purpose permitted under the terms of items (a), (b), (c), or (d) of
this Subsection A, and also, in respect of item (e), upon receipt of an
officers' certificate specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom such payment
is to be made, provided, however, that an officers' certificate need not precede
the disbursement of cash for the purpose of purchasing a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Trust issues
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by Custodian
for the account of each Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Trust as of specified times agreed upon from time
to time by the Trust and the Custodian in the amount of checks received in
payment for shares of the Fund which are deposited into the Fund's account.
D. If so directed by the Trust, Custodian will invest any and all
available cash in overnight cash-equivalent investments as specified by the
investment manager.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of each Fund,
into which account(s) may be transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Trust held by it pursuant to this Agreement. Custodian agrees
to transfer, exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund upon
receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities
alone or other securities and cash whether pursuant to any
plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms into other
securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock
of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange therefor
shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose permitted
under the terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this
Section 5 and also, in respect of item (i), upon receipt of an officers'
certificate specifying the securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
securities shall be made, provided, however, that an officers' certificate need
not precede any such transfer, exchange or delivery of a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Trust issues
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and other
income items held by it for the account of each Fund, which call for payment
upon presentation and hold the cash received by it upon such payment for the
account of the Fund; (b) collect interest and cash dividends received, with
notice to the Trust, for the account of the Fund; (c) hold for the account of
the Fund hereunder all stock dividends, rights and similar securities issued
with respect to any securities held by it hereunder; and (d) execute, as agent
on behalf of the Trust, all necessary ownership certificates required by the
Internal Revenue Code of 1986, as amended (the "Code") or the Income Tax
Regulations (the "Regulations") of the United States Treasury Department (the
"Treasury Department") or under the laws of any state now or hereafter in
effect, inserting the Trust's name on such certificates as the owner of the
securities covered thereby, to the extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer form, in
the name of a registered nominee of Custodian as defined in the Internal Revenue
Code and any Regulations of the Treasury Department issued thereunder or in any
provision of any subsequent federal tax law exempting such transaction from
liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. All securities held by Custodian
hereunder shall be at all times identifiable in its records held in an account
or accounts of Custodian containing only the assets of the particular Fund.
The Trust shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee, any
securities which it may hold for the account of the Trust and which may from
time to time be registered in the name of the Trust.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of a Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the Trust all
notices, proxies and proxy soliciting materials with respect to such securities,
such proxies to be executed by the registered holder of such securities (if
registered otherwise than in the name of the Trust), but without indicating the
manner in which such proxies are to be voted.
9. Transfer Tax and Other Disbursements
The Trust shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder, and for
all other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement as may
be required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws of
any state, to exempt from taxation any exempt transfers and/or deliveries of any
such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto. Notwithstanding anything to
the contrary, amounts owed by the Trust to Custodian shall only be paid out of
the assets and property of the particular Fund involved.
Custodian shall not be liable for any action taken in good faith
and without negligence and willful misconduct upon any certificate herein
described or certified copy of any resolution of the Board, and may rely on the
genuineness of any such document which it may in good faith believe to have been
validly executed.
The Trust agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including reasonable counsel fees) incurred or assessed against it or by its
nominee in connection with the performance of this Agreement, except such as may
arise from its or its nominee's own bad faith, negligent action, negligent
failure to act or willful misconduct. In the event of any advance of cash for
any purpose made by Custodian resulting from orders or instructions of the
Trust, any property at any time held for the account of the Trust shall be
security therefor.
Custodian agrees to indemnify and hold harmless the Trust from all charges,
expenses, assessments, and claims/liabilities (including reasonable counsel
fees) incurred or assessed against it in connection with the performance of this
Agreement, except such as may arise from the Fund's own bad faith, negligent
action, negligent failure to act, or willful misconduct.
Custodian is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust Instrument of the Trust and
agrees that obligations assumed by the Trust pursuant to this Agreement shall be
limited in all cases to the Trust and its assets, and if the liability relates
to one or more series, the obligations hereunder shall be limited to the
respective assets of such series. Custodian further agrees that it shall not
seek satisfaction of any such obligation from the shareholder or any individual
shareholder of a series of the Trust, nor from the Trust or any individual Trus
of the Trust.
11. Subcustodians
Custodian is hereby authorized to engage another bank or Trust
companies as a subcustodian for all or any part of the Companies assets, so long
as any such bank or Trust companies is itself qualified under the 1940 Act and
the rules and regulations thereunder and provided further that, if the Custodian
utilizes the services of a subcustodian, the Custodian shall remain fully liable
and responsible for any losses caused to the Trust by the subcustodian as fully
as if the Custodian was directly responsible for any such losses under the terms
of this Agreement.
Notwithstanding anything contained herein, if the Trust requires
the Custodian to engage specific subcustodians for the safekeeping and/or
clearing of assets, the Trust agrees to indemnify and hold harmless Custodian
from all claims, expenses and liabilities incurred or assessed against it in
connection with the use of such subcustodian in regard to the Companies assets,
except as may arise from Custodian's own bad faith, negligent action, negligent
failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Trust periodically as agreed upon
with a statement summarizing all transactions and entries for the account of
Trust. Custodian shall furnish to the Trust, at the end of every month, a list
of the portfolio securities for the Fund showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under this
Agreement shall be open to inspection and audit at reasonable times by officers
of, and by auditors employed by, the Trust.
13. Termination or Assignment
This Agreement may be terminated by the Trust, or by Custodian, on ninety (90)
days notice, given in writing and sent by registered mail to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
or to the Trust at:
Ingenuity Capital Management LLC
26888 Almaden Court
Los Altos, CA 94022
as the case may be. Upon any termination of this Agreement, pending appointment
of a successor to Custodian or a vote of the shareholders of the Fund to
dissolve or to function without a custodian of its cash, securities and other
property, Custodian shall not deliver cash, securities or other property of the
Fund to the Trust, but may deliver them to a bank or Trust companies of its own
selection that meets the requirements of the 1940 Act as a Custodian for the
Trust to be held under terms similar to those of this Agreement, provided,
however, that Custodian shall not be required to make any such delivery or
payment until full payment shall have been made by the Trust of all liabilities
constituting a charge on or against the properties then held by Custodian or on
or against Custodian, and until full payment shall have been made to Custodian
of all its fees, compensation, costs and expenses, subject to the provisions of
Section 10 of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Trust, authorized or approved by a resolution of its Board of
Trustees.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the use
by Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board of Trust of the Trust approves by resolution the use
of such central securities clearing agency or securities depository.
15. Records
Custodian shall keep records relating to its services to be
performed hereunder, in the form and manner, and for such period, as it may deem
advisable and is agreeable to the Trust but not inconsistent with the rules and
regulations of appropriate government authorities, in particular Section 31 of
the 1940 Act and the rules thereunder. Custodian agrees that all such records
prepared or maintained by the Custodian relating to the services performed by
Custodian hereunder are the property of the Trust and will be preserved,
maintained, and made available in accordance with such section and rules of the
1940 Act and will be promptly surrendered to the Trust on and in accordance with
its request.
16. Governing Law
This Agreement shall be governed by Wisconsin law. However,
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation promulgated by the Securities and Exchange Commission
thereunder.
17. Proprietary and Confidential Information
The Custodian agrees on behalf of itself and its directors, officers, and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and prior, present, or
potential shareholders of the Trust (and clients of said shareholders), and not
to use such records and information for any purpose other than the performance
of its responsibilities and duties hereunder, except after prior notification to
and approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where the Custodian may be exposed to civil or
criminal contempt proceedings for failure to comply, when requested to divulge
such information by duly constituted authorities, or when so requested by the
Trust.
18. No Agency Relationship
Nothing herein contained shall be deemed to authorize or empower the
Custodian to act as agent for the other party to this Agreement, or to conduct
business in the name of, or for the account of the other party to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by a duly authorized officer on one or more counterparts as of
the day and year first written above.
INGENUITY CAPITAL MANAGEMENT LLC FIRSTAR BANK MILWAUKEE, N.A.
By:______________________________ By: ________________________________
Attest: __________________________ Attest:______________________________
Custody Services
Annual Fee Schedule - Domestic Funds
Exhibit A
Separate Series of Ingenuity Capital Trust
Name of Series Date Added
The Medical Specialist Fund September 15, 1999
Annual fee based upon market value
2 basis point per year
Minimum annual fee per fund - $3,000
Investment transactions
(purchase, sale, exchange, tender, redemption, maturity, receipt, delivery):
$12.00 per book entry security
(depository or Federal Reserve system)
$25.00 per definitive security (physical)
$25.00 per mutual fund trade
$75.00 per Euroclear
$ 8.00 per principal reduction on pass-through certificates $ 6.00 per short
sale/liability transaction
$35.00 per option/futures contract $15.00 per variation margin
$15.00 per Fed wire deposit or withdrawal $12.00 per
DTC/Federal Transactions
Variable Amount Demand Notes: Used as a short-term investment, variable amount
notes offer safety and prevailing high interest rates. Our charge, which is 1/4
of 1%, is deducted from the variable amount note income at the time it is
credited to your account.
Plus out-of-pocket expenses, and extraordinary expenses based upon complexity
Fees and out-of-pocket expenses are billed to the fund monthly, based upon
market value at the beginning of the month
ADMINISTRATION AGREEMENT
This Administration Agreement is made this ____ day of ___________,
19___, by and between INGENUITY CAPITAL TRUST, a Delaware business trust (the
"Trust"), and INGENUITY CAPITAL MANAGEMENT, LLC, a Delaware limited liability
corporation (the "Administrator").
WITNESSETH:
WHEREAS, the Trust is engaged in business as a non-diversified open-end
management investment company and is to be registered as such under the
Investment Company Act of 1940, as amended (the "Act") ; and
WHEREAS, the Administrator is engaged in the business of rendering
administrative and supervisory services to investment companies; and
WHEREAS, the Trust desires to retain the Administrator to render
supervisory and corporate administrative services to The Medical Specialists
Fund (the "Fund") in the manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the terms and
provisions hereinafter set forth, the parties hereto agree as follows:
1.Employment of the Administrator. The Trust hereby employs the
Administrator to administer the affairs of the Fund subject to the direction of
the Board of Trustees and the officers of the Trust, for the period and on the
terms hereinafter set forth. The Administrator hereby accepts such employment
and agrees during such period to render the services and to assume the
obligations herein set forth for the compensation herein provided. The
Administrator shall for all purposes herein be deemed to be an independent
contractor and, except as expressly provided or authorized (whether herein or
otherwise), shall have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund.
2. Obligations of the Administrator. The Administrator, at its expense,
shall supply the Board of Trustees and officers of the Trust with all
statistical information and reports reasonably required by it and reasonably
available to the Administrator and furnish the Fund with office facilities,
including space, furniture and equipment and all personnel reasonably necessary
for the operation of the Fund. The Administrator shall oversee the maintenance
of all books and records with respect to the Fund's securities transactions and
the Fund's book of account in accordance with all applicable federal and state
laws and regulations. In compliance with the requirements of Rule 31a-3 under
the Act, the Administrator hereby agrees that any records which it maintains for
the Fund are the property of the Fund and further agrees to surrender promptly
to the Fund any of such records upon the Fund's request. The Administrator
further agrees to arrange for the preservation of the records required to be
maintained by Rule 31a-1 under the Act for the periods prescribed by Rule 31a-2
under the Act.
3. Expenses of the Fund. The Administrator assumes and shall pay for
maintaining its staff and personnel, and shall at its own expense provide the
equipment, office space and facilities necessary to perform its obligations
under this Agreement. In addition, the Administrator assumes and shall pay all
other expenses of the Fund, including, without limitation: insurance, taxes,
expenses for legal and auditing services, costs of printing proxies, stock
certificates and prospectuses (except to the extent paid by the investment
adviser pursuant to the Investment Advisory and Management Agreement by and
between the parties hereto dated July 21, 1997), the insurance required by
Section 17(g) of the Act, charges of a custodian for safekeeping of the Fund's
securities, Securities and Exchange Commission fees, expense of registering the
shares of the Fund under Federal and state securities laws, fees and expenses of
trustees who are not interested persons of the Fund, accounting and pricing
costs (including the daily calculation of net asset value), interest, brokerage
costs, litigation and other extraordinary or non-recurring expenses, and other
expenses properly payable to the Fund.
4. Compensation. As compensation for the services rendered, the
facilities furnished and the expenses assumed by the Administrator, the Fund
shall pay to the Administrator at the end of each calendar month a fee at the
annual rate of .45% of the Fund's average daily net assets up to $200 million,
.40% of such assets from $200 million to $500 million, 35% of such assets from
$500 million to $1 billion and .30% of such assets in excess of $1 billion, as
determined and computed in accordance with the description of the method of
determination of net asset value contained in the Fund's Prospectus and
Statement of Additional Information.
5. Activities of the Administrator. The services of the Administrator
to the Fund hereunder are not to be deemed exclusive and the Administrator shall
be free to render similar services to others. Subject to, and in accordance with
the Declaration of Trust and By-Laws of the Fund and Section 10(a) of the Act,
it is understood that trustees, officers, agents and beneficial holders of the
Fund are or may be "interested persons" (as defined in the Act) of the
Administrator or its affiliates, and that directors, officers, agents or
shareholders of the Administrator or its affiliates are or may be "interested
persons" of the Fund as beneficial holders or otherwise.
6. Liabilities of the Administrator. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Administrator, the Administrator shall not
be liable to the Fund or to any beneficial holder of the Fund for any act or
omission in the course of, or in connection with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of any
security.
7. Renewal. The term of this Agreement shall commence on the date
hereof and shall continue in effect until __________, _____ and is renewable
thereafter for successive one year periods if such continuance is approved at
least annually by (i) the Fund's Board of Trustees, or by a vote of the holders
of a majority of the outstanding voting securities of the Fund, and (ii) a
majority of the Trustees who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval.
8. Termination. This Agreement (i) may be terminated at any time
without the payment of any penalty either by vote of the Board of Trustees of
the Fund, or by vote of a majority of the outstanding voting securities of the
Fund, on 60 days written notice to the Administrator and (ii) may be terminated
at any time by the Administrator on 60 days written notice to the Fund.
9. Amendments. This Agreement may be amended by the parties only if
such amendment is specifically approved by (i) the Board of Trustees of the
Fund, or by a vote of the holders of a majority of the outstanding voting
securities of the Fund, and (ii) a majority of those trustees of the Fund who
are not parties to this Agreement or interested persons of any such party cast
in person at a meeting called for the purpose of voting on such approval.
10. Notices. Any and all notices or other communications required or
permitted under this Agreement shall be in writing and shall be deemed
sufficient when mailed by United States certified mail, return receipt
requested, or delivered in person against receipt to the party to whom it is to
be given, at the address of such party set forth below:
If to the Administrator:
Ingenuity Capital Management, LLC
26888 Almaden Court
Los Altos, CA 94022
If to the Fund:
Ingenuity Capital
Medical Specialists Fund
26888 Almaden Court
Los Altos, CA 94022
or to such other address as the party shall have furnished in writing in
accordance with the provisions of this Section 11.
11. Severability. If any provision of this Agreement is invalid,
illegal or unenforceable, the balance of this Agreement shall remain in full
force and effect and this Agreement shall be construed in all respects as if
such invalid, illegal or unenforceable provision were omitted.
12. Headings. Any paragraph headings in this Agreement are for
convenience of reference only, and shall be given no effect in the construction
and interpretation of this Agreement or any provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first written above,
INGENUITY CAPITAL TRUST
By:
Arthur Roth, Chairman
INGENUITY CAPITAL MANAGEMENT, LLC.
By:
Kendrick Kam, President
TRANSFER AGENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this __ day of ____, 1999,
by and between Ingenuity Capital Management LLC, a Delaware limited liability
corporation (hereinafter referred to as the "ICM"), as investment advisor for
the Ingenuity Capital Trust, (hereinafter referred to as the "Trust"), and
Firstar Mutual Fund Services, LLC, a limited liability corporation organized
under the laws of the State of Wisconsin (hereinafter referred to as "FMFS").
WHEREAS, the Trust is an open-end management investment company which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Trust is authorized to create separate series, each with it
own separate investment portfolio;
WHEREAS, FMFS is a limited liability corporation and, among other
things, is in the business of administering transfer and dividend disbursing
agent functions for the benefit of its customers; and
WHEREAS, ICM desires to retain FMFS to provide transfer and dividend
disbursing agent services to each series of the Trust listed on Exhibit A
attached hereto, (each hereinafter referred to as a "Fund") as may be amended
from time to time.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
ICM and FMFS agree as follows:
1. Appointment of Transfer Agent
The Trust hereby appoints FMFS as Transfer Agent of the Trust on the
terms and conditions set forth in this Agreement, and FMFS hereby accepts such
appointment and agrees to perform the services and duties set forth in this
Agreement in consideration of the compensation provided for herein
2. Duties and Responsibilities of FMFS
FMFS shall perform all of the customary services of a transfer agent and
dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders with prompt delivery, where appropriate,
of payment and supporting documentation to the Trust's custodian,
and issue the appropriate number of uncertificated shares with
such uncertificated shares being held in the appropriate
shareholder account;
C. Arrange for issuance of shares obtained through transfers of
funds from shareholders' accounts at financial institutions and
arrange for the exchange of shares for shares of other eligible
investment companies, when permitted by Prospectus.
D. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Trust's
custodian;
E. Pay monies upon receipt from the Trust's custodian, where
relevant, in accordance with the instructions of redeeming
shareholders;
F. Process transfers of shares in accordance with the shareholder's
instructions;
G. Process exchanges between funds and/or classes of shares of funds
both within the same family of funds and with the Firstar Money
Market Fund, if applicable;
H. Prepare and transmit payments for dividends and distributions
declared by the Trust with respect to the Fund, after deducting
any amount required to be withheld by any applicable laws, rules
and regulations and in accordance with shareholder instructions;
I. Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic investment,
dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant
to Rule 17ad-10(e) promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), a record of the total
number of shares of the Fund which are authorized, issued and
outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail, receive and
tabulate proxies;
L. Mail shareholder reports and prospectuses to current shareholders;
M. Prepare and file U.S. Treasury Department Forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable transactions
as agreed upon with the Trust;
O. Mail requests for shareholders' certifications under penalties of
perjury and pay on a timely basis to the appropriate Federal
authorities any taxes to be withheld on dividends and
distributions paid by the Trust, all as required by applicable
Federal tax laws and regulations;
P. Provide a Blue Sky System which will enable the Trust to monitor
the total number of shares of the Fund sold in each state. In
addition, the Trust or its agent, including FMFS, shall identify
to FMFS in writing those transactions and assets to be treated as
exempt from the Blue Sky reporting for each state. The
responsibility of FMFS for the Company's Blue Sky state
registration status is solely limited to the initial compliance
by the Trust and the reporting of such transactions to the Trust
or its agent;
Q. Answer correspondence from shareholders, securities brokers and
others relating to FMFS's duties hereunder and such other
correspondence as may from time to time be mutually agreed upon
between FMFS and the Trust.
3. Compensation
ICM agrees to pay FMFS for the performance of the duties listed in this
agreement as set forth on Exhibit A attached hereto; the fees and out-of-pocket
expenses include, but are not limited to the following: printing, postage,
forms, stationery, record retention (if requested by the Trust), mailing,
insertion, programming (if requested by the Trust), labels, shareholder lists
and proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between ICM and FMFS.
ICM agrees to pay all fees and reimbursable expenses within ten (10)
business days following the receipt of the billing notice.
Notwithstanding anything to the contrary, amounts owed by the Trust to
FMFS shall only be paid out of assets and property of the particular Fund
involved.
4. Representations of FMFS
FMFS represents and warrants to ICM and the Trust that:
A. It is a limited liability corporation duly organized, existing and in
good standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Exchange Act.
C. It is duly qualified to carry on its business in the State of Wisconsin;
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement;
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement; and
G. It will comply with all applicable requirements of the Securities
Act of 1933, as amended, and the Exchange Act, the 1940 Act, and
any laws, rules, and regulations of governmental authorities
having jurisdiction.
5. Representations of the Trust and ICM
The Trust represents and warrants to FMFS that:
A. The Trust is an open-ended non diversified investment company under the
1940 Act;
B. The Trust is a business trust organized, existing, and in good standing
under the laws of Massachusetts;
C. ICM is empowered under applicable laws and by its Articles of
Incorporation and Bylaws to enter into and perform this
Agreement;
D. All necessary proceedings required by the Declaration of Trust
have been taken to authorize it to enter into and perform this
Agreement;
E. The Trust will comply with all applicable requirements of the
Securities Act, the Exchange Act, the 1940 Act, and any laws,
rules and regulations of governmental authorities having
jurisdiction; and
F. A registration statement under the Securities Act will be made
effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be
made, with respect to all shares of the Trust being offered for
sale.
6. Covenants of the Trust and FMFS
The Trust shall furnish FMFS a certified copy of the resolution of the
Board of Trustees of the Fund authorizing the appointment of FMFS and the
execution of this Agreement. The Trust shall provide to FMFS a copy of its
Declaration of Trust and Bylaws, and all amendments thereto.
FMFS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the 1940 Act, and the rules thereunder, FMFS agrees
that all such records prepared or maintained by FMFS relating to the services to
be performed by FMFS 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 to the Trust on and in accordance with its
request.
7. Performance of Service; Limitation of Liability
FMFS shall exercise reasonable care in the performance of its duties
under this Agreement. FMFS shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with matters
to which this Agreement relates, including losses resulting from mechanical
breakdowns or the failure of communication or power supplies beyond FMFS's
control, except a loss arising out of or relating to the Agent's refusal or
failure to comply with the terms of this Agreement or from bad faith,
negligence, or willful misconduct on its part in the performance of its duties
under this Agreement. Notwithstanding any other provision of this Agreement, if
FMFS has exercised reasonable care in the performance of its duties under this
Agreement, the Trust shall indemnify and hold harmless FMFS from and against any
and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which FMFS may sustain or incur or which may be asserted
against FMFS by any person arising out of any action taken or omitted to be
taken by it in performing the services hereunder, except for any and all claims,
demands, losses expenses, and liabilities arising out of or relating to FMFS's
refusal or failure to comply with the terms of this Agreement or from bad faith,
negligence or from willful misconduct on its part in performance of its duties
under this Agreement, (i) in accordance with the foregoing standards, or (ii) in
reliance upon any written or oral instruction provided to FMFS by any duly
authorized officer of the Trust, such duly authorized officer to be included in
a list of authorized officers furnished to FMFS and as amended from time to time
in writing by resolution of the Board of Trustees of the Trust.
FMFS shall indemnify and hold the Trust harmless from and against any
and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which the Trust may sustain or incur or which may be asserted
against the Trust by any person arising out of any action taken or omitted to be
taken by FMFS as a result of FMFS's refusal or failure to comply with the terms
of this Agreement, its bad faith, negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, FMFS shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond FMFS's control. FMFS will make every reasonable effort to restore any
lost or damaged data and correct any errors resulting from such a breakdown at
the expense of FMFS. FMFS agrees that it shall, at all times, have reasonable
contingency plans with appropriate parties, making reasonable provision for
emergency use of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Trust shall be entitled to
inspect FMFS's premises and operating capabilities at any time during regular
business hours of FMFS, upon reasonable notice to FMFS.
Regardless of the above, FMFS reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the indemnitor may be asked to
indemnify or hold the indemnitee harmless, the indemnitor shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will use all reasonable care to
notify the indemnitor promptly concerning any situation which presents or
appears likely to present the probability of a claim for indemnification. The
indemnitor shall have the option to defend the indemnitee against any claim
which may be the subject of this indemnification. In the event that the
indemnitor so elects, it will so notify the indemnitee and thereupon the
indemnitor shall take over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or other expenses for which it
shall seek indemnification under this section. The indemnitee shall in no case
confess any claim or make any compromise in any case in which the indemnitor
will be asked to indemnify the indemnitee except with the indemnitor's prior
written consent.
FMFS is hereby expressly put on notice of the limitation of shareholder
liability as set forth in the Trust Instrument of the Trust and agrees that
obligations assumed by the Trust pursuant to this Agreement shall be limited in
all cases to the Trust and its assets, and if the liability relates to one or
more series, the obligations hereunder shall be limited to the respective assets
of such series. FMFS further agrees that it shall not seek satisfaction of any
such obligation from the shareholder or any individual shareholder of a series
of the Trust, nor from the Trustees or any individual Trustee of the Trust.
8. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors, officers, and
employees to treat confidentially and as proprietary information of the Trust
all records and other information relative to the Trust and prior, present, or
potential shareholders (and clients of said shareholders) and not to use such
records and information for any purpose other than the performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where FMFS may be exposed to civil or criminal
contempt proceedings for failure to comply after being requested to divulge such
information by duly constituted authorities, or when so requested by the Trust.
9. Term of Agreement
This Agreement shall become effective as of the date hereof and will
continue in effect for a period of three years. During the initial three year
term of this Agreement, if ICM terminates any services with FMFS, ICM agrees to
compensate Firstar an amount equal to the fees remaining under the initial three
year Agreement. Subsequent to the initial three year term, this Agreement may be
terminated by either party upon giving ninety (90) days prior written notice to
the other party or such shorter period as is mutually agreed upon by the
parties. However, this Agreement may be amended by mutual written consent of the
parties.
10. Notices
Notices of any kind to be given by either party to the other party
shall be in writing and shall be duly given if mailed or delivered as follows:
Notice to FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Trust shall be sent to:
Ingenuity Capital Management LLC
26888 Almaden Court
Los Altos, CA 94022
11. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any
of FMFS's duties or responsibilities hereunder is designated by the Trust by
written notice to FMFS, FMFS will promptly, upon such termination and at the
expense of the Trust, transfer to such successor all relevant books, records,
correspondence, and other data established or maintained by FMFS under this
Agreement in a form reasonably acceptable to the Trust (if such form differs
from the form in which FMFS has maintained, ICM shall pay any expenses
associated with transferring the data to such form), and will cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from FMFS's personnel in the establishment of books, records, and other data by
such successor.
12. Governing Law
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation promulgated by the Securities and Exchange Commission
thereunder.
13. Stock Certificates
If at any time the Trust issues stock certificates, the following
provisions will apply:
(i) In the case of the loss or destruction of any certificate
representing Shares, no new certificate shall be issued in lieu
thereof, unless there shall first have been furnished an
appropriate bond of indemnity issued by the surety company
approved by FMFS.
(ii) Upon receipt of signed stock certificates, which shall be in
proper form for transfer, and upon cancellation or destruction
thereof, FMFS shall countersign, register and issue new
certificates for the same number of Shares and shall deliver them
pursuant to instructions received from the transferor, the rules
and regulations of the SEC, and the laws of the state of relating
to the transfer of shares of beneficial interest.
(iii) Upon receipt of the stock certificates, which shall be in proper
form for transfer, together with the shareholder's instructions
to hold such stock certificates for safekeeping, FMFS shall
reduce such Shares to uncertificated status, while retaining the
appropriate registration in the name of the shareholder upon the
transfer books.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by a duly authorized officer or one or more counterparts as of the day and year
first written above.
INGENUITY CAPITAL MANAGEMENT LLC FIRSTAR MUTUAL FUND SERVICES, LLC
By:______________________________ By: ________________________________
Attest: __________________________ Attest:______________________________
Transfer Agent and Shareholder Servicing
Annual Fee Schedule
Exhibit A
Separate Series of Ingenuity Capital Trust
Name of Series Date Added
The Medical Specialist Fund September 15, 1999
Annual Fee
$16.00 per shareholder account - no-load fund
Minimum annual fee of $15,000 1st year
$20,000 2nd year
$24,000 3rd year
Extraordinary services quoted separately.
Plus Out-of-Pocket Expenses, including but not limited to:
Telephone - toll free lines Retention of records
Postage Microfilm/fiche of records
Programming Special reports
Stationery/envelopes ACH fees
Insurance NSCC charges
Proxies All other out-of-pocket expenses
ACH Shareholder Services
$125.00 per month per fund group $.50 per account setup
and/or change $.50 per ACH item $5.00 per correction,
reversal, return item
File Transfer - $160/month and $.01/record
Qualified Plan Fees (Billed to Investors) *
Annual maintenance fee per account $12.50 / acct. (Cap at $25.00 per SSN)
Education IRA $5.00 / acct. (Cap at $25.00/per SSN)
Transfer to successor trustee $15.00 / trans.
Distribution to participant $15.00 / trans. (Exclusive of SWP)
Refund of excess contribution $15.00 / trans.
Select requests $200.00 / trans
Additional Shareholder Fees (Billed to Investors)
Any outgoing wire transfer $12.00 / wire
Return check fee $20.00 / item
Stop payment $20.00 / stop (Liquidation, dividend, draft
check) Research fee $ 5.00 / item (For requested items of the
second calendar year [or previous] to the request)(Cap at
$25.00)
Fees and out-of-pocket expenses are billed monthly.
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this __ day of ____, 1999,
by and between Ingenuity Capital Management LLC, a Delaware limited liability
corporation (hereinafter referred to as the "ICM"), as investment advisor for
the Ingenuity Capital Trust, (hereinafter referred to as the "Trust"), and
Firstar Mutual Fund Services, LLC, a limited liability corporation organized
under the laws of the State of Wisconsin (hereinafter referred to as "FMFS").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Trust is authorized to create separate series, each with its
own separate investment portfolio;
WHEREAS, FMFS is a limited liability corporation and, among other
things, is in the business of providing mutual fund accounting services to
investment companies; and
WHEREAS, ICM desires to retain FMFS to provide accounting services to
each series of the Trust listed on Exhibit A attached hereto, (each hereinafter
referred to as a "Fund"), as it may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
ICM and FMFS agree as follows:
1. Appointment of Fund Accountant
ICM hereby appoints FMFS as Fund Accountant of the Trust on the terms
and conditions set forth in this Agreement, and FMFS hereby accepts such
appointment and agrees to perform the services and duties set forth in this
Agreement in consideration of the compensation provided for herein.
2. Duties and Responsibilities of FMFS
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date+1 basis
using security trade information communicated from the investment
manager.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Trustees of the Trust and apply
those prices to the portfolio positions. For those securities
where market quotations are not readily available, the Board of
Trustees of the Trust shall approve, in good faith, the method
for determining the fair value for such securities.
(3) Identify interest and dividend accrual balances as of
each valuation date and calculate gross earnings on investments
for the accounting period.
(4) Determine gain/loss on security sales and identify
them as, short-term or long-term; account for periodic
distributions of gains or losses to shareholders and maintain
undistributed gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Trust as to methodology, rate or
dollar amount.
(2) Record payments for Fund expenses upon receipt of
written authorization from the Trust.
(3) Account for Fund expenditures and maintain expense
accrual balances at the level of accounting detail, as agreed
upon by FMFS and the Trust.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for Fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other Fund share activity
as reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Trust.
(3) Determine net investment income (earnings) for the
Fund as of each valuation date. Account for periodic
distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each valuation
date.
(4) Maintain a general ledger and other accounts, books,
and financial records for the Fund in the form as agreed upon.
(5) Determine the net asset value of the Fund according to
the accounting policies and procedures set forth in the Fund's
Prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of Fund
operations at such time as required by the nature and
characteristics of the Fund.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as agreed upon from time
to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment
portfolio of the Fund to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using the tax lot
relief method designated by the Trust.
(4) Provide the necessary financial information to support
the taxable components of income and capital gains distributions
to the transfer agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the Fund's accounting
records available to the Trust, the Securities and Exchange
Commission, and the outside auditors.
(2) Maintain accounting records according to the 1940 Act and
regulations provided thereunder
F. FMFS will perform the following accounting functions on a daily basis:
(1) Reconcile cash and investment balances of each
Portfolio with the Custodian, and provide the Advisor with the
beginning cash balance available for investment purposes;
(2) Update the cash availability throughout the day as
required by the Advisor;
(3) Transmit or mail a copy of the portfolio valuation to
the Advisor;
(4) Review the impact of current day's activity on a per
share basis, review changes in market value of securities, and
review yields for reasonableness.
G. In addition, FMFS will:
(1) Prepare monthly security transactions listings;
(2) Supply various Trust, Portfolio and class statistical
data as requested on an ongoing basis.
3. Pricing of Securities
For each valuation date, obtain prices from a pricing source selected by FMFS
but approved by the Board of Trustees and apply those prices to the portfolio
positions of the Fund. For those securities where market quotations are not
readily available, the Company's Board of Trustees shall approve, in good faith,
the method for determining the fair value for such securities.
If the Trust desires to provide a price which varies from the pricing source,
the Trust shall promptly notify and supply FMFS with the valuation of any such
security on each valuation date. All pricing changes made by the Trust will be
in writing and must specifically identify the securities to be changed by CUSIP,
name of security, new price or rate to be applied, and, if applicable, the time
period for which the new price(s) is/are effective.
4. Changes in Accounting Procedures
Any resolution passed by the Board of Trustees of the Trust that affects
accounting practices and procedures under this Agreement shall be effective upon
written receipt and acceptance by the FMFS.
5. Changes in Equipment, Systems, Service, Etc.
FMFS reserves the right to make changes from time to time, as it deems
advisable, relating to its services, systems, programs, rules, operating
schedules and equipment, so long as such changes do not adversely affect the
service provided to the Trust under this Agreement.
6. Compensation
FMFS shall be compensated for providing the services set forth in this Agreement
in accordance with the Fee Schedule attached hereto as Exhibit A and as mutually
agreed upon and amended from time to time. ICM agrees to pay all fees and
reimbursable expenses within ten (10) business days following the receipt of the
billing notice. Notwithstanding anything to the contrary, amounts owed by the
Trust to FMFS shall only be paid out of the assets and property of the
particular Fund involved.
7. Performance of Service; Limitation of Liability
A. FMFS shall exercise reasonable care in the performance of its
duties under this Agreement. FMFS shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in
connection with matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the failure of
communication or power supplies beyond FMFS's control, except a loss
arising out of or relating to FMFS's refusal or failure to comply with
the terms of this Agreement or from bad faith, negligence, or willful
misconduct on its part in the performance of its duties under this
Agreement. Notwithstanding any other provision of this Agreement, if
FMFS has exercised reasonable care in the performance of its duties
under this Agreement, the Trust shall indemnify and hold harmless FMFS
from and against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law) of any and
every nature (including reasonable attorneys' fees) which FMFS may
sustain or incur or which may be asserted against FMFS by any person
arising out of any action taken or omitted to be taken by it in
performing the services hereunder, except for any and all claims,
demands, losses, expenses, and liabilities arising out of or relating
to FMFS's refusal or failure to comply with the terms of this Agreement
or from bad faith, negligence or from willful misconduct on its part in
performance of its duties under this Agreement, (i) in accordance with
the foregoing standards, or (ii) in reliance upon any written or oral
instruction provided to FMFS by any duly authorized officer of the
Trust, such duly authorized officer to be included in a list of
authorized officers furnished to FMFS and as amended from time to time
in writing by resolution of the Board of Trustees of the Trust.
FMFS shall indemnify and hold the Trust harmless from and against
any and all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which the Trust may sustain or
incur or which may be asserted against the Trust by any person arising
out of any action taken or omitted to be taken by FMFS as a result of
FMFS's refusal or failure to comply with the terms of this Agreement,
its bad faith, negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FMFS shall take all
reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FMFS's control. FMFS will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of FMFS. FMFS
agrees that it shall, at all times, have reasonable contingency plans
with appropriate parties, making reasonable provision for emergency use
of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Trust shall be entitled
to inspect FMFS's premises and operating capabilities at any time
during regular business hours of FMFS, upon reasonable notice to FMFS.
Regardless of the above, FMFS reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the
indemnitor may be asked to indemnify or hold the indemnitee harmless,
the indemnitor shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further
understood that the indemnitee will use all reasonable care to notify
the indemnitor promptly concerning any situation which presents or
appears likely to present the probability of a claim for
indemnification. The indemnitor shall have the option to defend the
indemnitee against any claim which may be the subject of this
indemnification. In the event that the indemnitor so elects, it will so
notify the indemnitee and thereupon the indemnitor shall take over
complete defense of the claim, and the indemnitee shall in such
situation initiate no further legal or other expenses for which it
shall seek indemnification under this section. Indemnitee shall in no
case confess any claim or make any compromise in any case in which the
indemnitor will be asked to indemnify the indemnitee except with the
indemnitor's prior written consent.
C. FMFS is hereby expressly put on notice of the limitation of
shareholder liability as set forth in the Trust Instrument of the Trust
and agrees that obligations assumed by the Trust pursuant to this
Agreement shall be limited in all cases to the Trust and its assets,
and if the liability relates to one or more series, the obligations
hereunder shall be limited to the respective assets of such series.
FMFS further agrees that it shall not seek satisfaction of any such
obligation from the shareholder or any individual shareholder of a
series of the Trust, nor from the Trustees or any individual Trustee of
the Trust.
8. No Agency Relationship
Nothing herein contained shall be deemed to authorize or empower FMFS to act as
agent for the other party to this Agreement, or to conduct business in the name
of, or for the account of the other party to this Agreement.
9. Records
FMFS shall keep records relating to the services to be performed hereunder, in
the form and manner, and for such period as it may deem advisable and is
agreeable to the Trust but not inconsistent with the rules and regulations of
appropriate government authorities, in particular, Section 31 of the 1940 Act,
and the rules thereunder. FMFS agrees that all such records prepared or
maintained by FMFS relating to the services to be performed by FMFS hereunder
are the property of the Trust and will be preserved, maintained, and made
available in accordance with such section and rules of the 1940 Act and will be
promptly surrendered to the Trust on and in accordance with its request.
10. Data Necessary to Perform Services
The Trust or its agent, which may be FMFS, shall furnish to FMFS the data
necessary to perform the services described herein at such times and in such
form as mutually agreed upon. If FMFS is also acting in another capacity for the
Trust, nothing herein shall be deemed to relieve FMFS of any of its obligations
in such capacity.
11. Notification of Error
The Trust will notify FMFS of any balancing or control error caused by FMFS the
later of: within three (3) business days after receipt of any reports rendered
by FMFS to the Trust; within three (3) business days after discovery of any
error or omission not covered in the balancing or control procedure, or within
three (3) business days of receiving notice from any shareholder.
12. Proprietary and Confidential Information
FMFS agrees on behalf of itself and its directors, officers, and employees to
treat confidentially and as proprietary information of the Trust all records and
other information relative to the Trust and prior, present, or potential
shareholders of the Trust (and clients of said shareholders), and not to use
such records and information for any purpose other than the performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall not be unreasonably
withheld and may not be withheld where FMFS may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Trust.
13. Term of Agreement
This Agreement shall become effective as of the date hereof and will continue in
effect for a period of three years. During the initial three year term of this
Agreement, if ICM terminates any services with FMFS, ICM agrees to compensate
Firstar an amount equal to the fees remaining under the initial three year
Agreement. Subsequent to the initial three year term, this Agreement may be
terminated by either party upon giving ninety (90) days prior written notice to
the other party or such shorter period as is mutually agreed upon by the
parties. However, this Agreement may be amended by mutual written consent of the
parties.
14. Notices
Notices of any kind to be given by either party to the other party shall be in
writing and shall be duly given if mailed or delivered as follows: Notice to
FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Trust shall be sent to:
Ingenuity Capital Management LLC
26888 Almaden Court
Los Altos, CA 94022
15. Duties in the Event of Termination
In the event that in connection with termination, a successor to any of FMFS's
duties or responsibilities hereunder is designated by the Trust by written
notice to FMFS, FMFS will promptly, upon such termination and at the expense of
ICM transfer to such successor all relevant books, records, correspondence and
other data established or maintained by FMFS under this Agreement in a form
reasonably acceptable to the Trust (if such form differs from the form in which
FMFS has maintained the same, the Trust shall pay any expenses associated with
transferring the same to such form), and will cooperate in the transfer of such
duties and responsibilities, including provision for assistance from FMFS's
personnel in the establishment of books, records and other data by such
successor.
16. Governing Law
This Agreement shall be construed in accordance with the laws of the State of
Wisconsin. However, nothing herein shall be construed in a manner inconsistent
with the 1940 Act or any rule or regulation promulgated by the SEC thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer on one or more counterparts as of the day
and year first written above.
INGENUITY CAPITAL MANAGEMENT LLC FIRSTAR MUTUAL FUND SERVICES, LLC
By:______________________________ By: ________________________________
Attest: __________________________ Attest:______________________________
Fund Accounting Services
Annual Fee Schedule
Exhibit A
Separate Series of Ingenuity Capital Trust
Name of Series Date Added
The Medical Specialist Fund September 15, 1999
Domestic Equity Funds
$22,000 for the first $40 million 1 basis point on the next
$200 million 1/2 basis point on the balance
Plus out-of-pocket expenses, including pricing service:
Domestic and Canadian Equities $.15
Options $.15
Corp/Gov/Agency Bonds $.50
CMO's $.80
International Equities and Bonds $.50
Municipal Bonds $.80
Money Market Instruments $.80
Fees and out-of-pocket expenses are billed to the fund monthly
Extraordinary services - quoted separately
NOTE - All schedules subject to change depending upon the use of derivatives -
options, futures, short sales, etc.
ROY W. ADAMS, JR.
ATTORNEY AT LAW
TELEPHONE: (925) 631-0222
FACSIMILE: (925) 631-0999
E-MAIL: [email protected]
1024 COUNTRY CLUB DRIVE
SUITE 135
MORAGA, CALIFORNIA 94556
October 14, 1999
Ingenuity Capital Trust
October 14, 1999
Ingenuity Capital Trust
26888 Almaden Court
Los Altos, California
94022
Re: Ingenuity Capital Trust: File No. 811-09445
Gentlemen:
I have acted as counsel to Ingenuity Capital Trust, a Delaware business
trust (the "Trust"), in connection with the Trust's Registration Statement on
Form N-1A filed on July 14, 1999, and subsequent amendments filed with the
Securities and Exchange Commission (the "Pre-Effective Amendments"), and
relating to the issuance by the Trust of an indefinite number shares of
beneficial interest (the "Shares") by the first series of the Trust, The Medical
Specialists Fund (the "Fund").
In connection with this opinion, I have assumed the authenticity of all
records, documents and instruments submitted to me as originals, the genuineness
of all signatures, the legal capacity of natural persons and the conformity to
the originals of all records, documents and instruments submitted to me as
copies. I have based my opinion upon my review of the following records,
documents and instruments:
(a) the Trust's Declaration of Trust dated July 20, 1999 (the
"Declaration of Trust"); and the Trust's Certificate of Trust
dated July 9, 1999 (as filed with the Delaware Secretary of
State on July 10, 1999), as certified to me by an officer of
the Trust as being true and complete and in effect on the date
hereof;
(b) the Bylaws of the Trust dated July 20, 1999, certified to me
by an officer of the Trust as being true and complete and in
effect on the date hereof;
(c) resolutions of the Sole Trustee of the Trust adopted by
written consent on July 14, 1999, and resolutions of the Board
of Trustees at its meeting on August 16, 1999, authorizing the
establishment of the Fund and the issuance of the Shares;
(d) the Pre-Effective Amendments; and
(e) a certificate of an officer of the Trust as to certain
factual matters relevant to this opinion.
My opinion below is limited to the federal law of the United States of
America and the business trust law of the State of Delaware. I am not licensed
to practice law in the State of Delaware, and I have based my opinion below
solely on my review of Chapter 38 of Title 12 of the Delaware Code and the case
law interpreting such Chapter as reported in Delaware Laws Annotated (Aspen Law
& Business, supp. 1998). I have not undertaken a review of other Delaware law or
of any administrative or court decisions in connection with rendering this
opinion. I 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 I 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 my examination of such questions of law as I
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 Trust's Prospectus included in the Pre-Effective Amendments,
and in accordance with the Declaration of Trust, (ii) all consideration for the
Shares will be actually received by the Trust, and (iii) all applicable
securities laws will be complied with, it is my opinion that, when issued and
sold by the Trust, the Shares will be legally issued, fully paid and
nonassessable.
This opinion is rendered to you in connection with the Pre-Effective
Amendments 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 my prior written consent. I
disclaim any obligation to advise you of any developments in areas covered by
this opinion that occur after the date of this opinion.
I hereby consent to (i) the reference to me as Legal Counsel in the
Prospectus and Statement of Additional Information included in the Pre-Effective
Amendments, and (ii) the filing of this opinion as an exhibit to the
Pre-Effective Amendments.
Very truly yours
/s/ Roy W. Adams, Jr.
Roy W. Adams, Jr., Esq.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references made to our Firm in the Pre-Effective Amendment to
the Registration Statement on Form N-1A of The Medical Specialist Fund, a series
of shares of Ingenuity Capital Trust.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 1, 1999
SUBSCRIPTION AGREEMENT
October __, 1999
Ingenuity Capital Trust
26888 Almaden Court
Los Altos, CA 94022
Ladies and Gentlemen:
Ingenuity Capital Trust (the "Trust") proposes to issue and sell to the
public its shares of beneficial interest without par value (the "Shares")
pursuant to a registration statement on Form N-1A (the "Registration Statement")
filed with the Securities and Exchange Commission. The Trust currently consists
of one series namely, The Medical Specialists Fund (the "Fund"). In order to
provide the Trust with $65,000 towards the minimum $100,000 net worth required
by Section 14 of the Investment Company Act of 1940, as amended, I hereby offer
to purchase 6,500 Shares of the Fund at a price of $10.00 per Share prior to the
effective date of the Registration Statement.
I will make payment for the Shares by delivery of a check for $65,000
payable to the order of the Trust or by wire transfer prior to the date
specified by the Trust as the proposed effective date of the Registration
Statement.
I represent and warrant to the Trust that the Shares are being acquired
by me for investment and not with a view to the resale or further distribution
thereof and that I have no present intention to redeem the Shares.
The name Ingenuity Capital Trust is the designation of the Trustees
under the Declaration of Trust dated July 20, 1999, as amended from time to
time. The Declaration of Trust has been filed with the Secretary of State of
Delaware. The obligations of the Trust are not personally binding upon, nor
shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust, but the Trust's
property only shall be bound.
Please confirm that the foregoing correctly sets forth the agreement
with the Trust.
Very truly yours,
---------------------------
Kendrick W. Kam
Confirmed as of the date first above written.
INGENUITY CAPITAL TRUST
By _________________________________
Kendrick W. Kam
President and Trustee
SUBSCRIPTION AGREEMENT
October __, 1999
Ingenuity Capital Trust
26888 Almaden Court
Los Altos, CA 94022
Ladies and Gentlemen:
Ingenuity Capital Trust (the "Trust") proposes to issue and sell to the
public its shares of beneficial interest without par value (the "Shares")
pursuant to a registration statement on Form N-1A (the "Registration Statement")
filed with the Securities and Exchange Commission. The Trust currently consists
of one series namely, The Medical Specialists Fund (the "Fund"). In order to
provide the Trust with $25,000 towards the minimum $100,000 net worth required
by Section 14 of the Investment Company Act of 1940, as amended, I hereby offer
to purchase 2,500 Shares of the Fund at a price of $10.00 per Share prior to the
effective date of the Registration Statement.
I will make payment for the Shares by delivery of a check for $25,000
payable to the order of the Trust or by wire transfer prior to the date
specified by the Trust as the proposed effective date of the Registration
Statement.
I represent and warrant to the Trust that the Shares are being acquired
by me for investment and not with a view to the resale or further distribution
thereof and that I have no present intention to redeem the Shares.
The name Ingenuity Capital Trust is the designation of the Trustees
under the Declaration of Trust dated July 20, 1999, as amended from time to
time. The Declaration of Trust has been filed with the Secretary of State of
Delaware. The obligations of the Trust are not personally binding upon, nor
shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust, but the Trust's
property only shall be bound.
Please confirm that the foregoing correctly sets forth the agreement
with the Trust.
Very truly yours,
---------------------------
Arthur L. Roth
Confirmed as of the date first above written.
INGENUITY CAPITAL TRUST
By _________________________________
Kendrick W. Kam
President and Trustee
SUBSCRIPTION AGREEMENT
October __, 1999
Ingenuity Capital Trust
26888 Almaden Court
Los Altos, CA 94022
Ladies and Gentlemen:
Ingenuity Capital Trust (the "Trust") proposes to issue and sell to the
public its shares of beneficial interest without par value (the "Shares")
pursuant to a registration statement on Form N-1A (the "Registration Statement")
filed with the Securities and Exchange Commission. The Trust currently consists
of one series namely, The Medical Specialists Fund (the "Fund"). In order to
provide the Trust with $10,000 towards the minimum $100,000 net worth required
by Section 14 of the Investment Company Act of 1940, as amended, I hereby offer
to purchase 1,000 Shares of the Fund at a price of $10.00 per Share prior to the
effective date of the Registration Statement.
I will make payment for the Shares by delivery of a check for $10,000
payable to the order of the Trust or by wire transfer prior to the date
specified by the Trust as the proposed effective date of the Registration
Statement.
I represent and warrant to the Trust that the Shares are being acquired
by me for investment and not with a view to the resale or further distribution
thereof and that I have no present intention to redeem the Shares.
The name Ingenuity Capital Trust is the designation of the Trustees
under the Declaration of Trust dated July 20, 1999, as amended from time to
time. The Declaration of Trust has been filed with the Secretary of State of
Delaware. The obligations of the Trust are not personally binding upon, nor
shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust, but the Trust's
property only shall be bound.
Please confirm that the foregoing correctly sets forth the agreement
with the Trust.
Very truly yours,
---------------------------
William J. Scilacci
Confirmed as of the date first above written.
INGENUITY CAPITAL TRUST
By _________________________________
Kendrick W. Kam
President and Trustee
