As filed with the Securities and Exchange Commission on September 16, 1999
Securities Act Registration No: 333-82833
Investment Company Act Registration No: 811-09445
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___ [ ] Post-Effective Amendment No. ___
(Check appropriate box or boxes)
INGENUITY CAPITAL TRUST
(Exact Name of Registrant as Specified in Charter)
26888 Almaden Court
Los Altos, CA 94022
(Address of Principal Executive Offices)
(Number, Street, City, State, Zip Code)
(650) 948-1216
(Registrant's Telephone Number, Including Area Code)
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 practicable after this
Registration Statement becomes effective. The registrant hereby amends this
registration statement on such date or dates as may be necessary to delay its
effective date until the registrant shall file a further amendment which
specifically states that this registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933, as
amended, or until the registration statement shall become effective on such date
as the Commission, acting pursuant to said Section 8(a), may determine.
No filing fee is required under the Securities Act of 1933, as amended, because
an indefinite number of shares of beneficial interest, with par value $0.001 per
share, has previously been registered pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. Pursuant to Rule 429 under the
Securities Act of 1933, this Registration Statement relates to the
aforementioned shares previously registered on Form N-1A.
CROSS REFERENCE SHEET
Form N-14 Item Location in Prospectus/
Part A, Proxy Statement
- --------- ------ --------------------------
1 Beginning of Registration Front Cover; Cross Reference
Statement and Outside Front
Cover Page of Prospectus
2 Beginning and Outside Back Table of Contents
Cover Page of Prospectus
3 Fee Table, Synopsis Introduction; Description of the
Information, and Risk Proposed Reorganization;
Factors Comparison of the Funds; Risk
Factors
4 Information About the Introduction, The Proposal,
Transaction Description of the Proposed
Reorganization
5, 6 Information About the Comparison of the Funds; Risk
Registrant Factors; Further Information
About the Fund and the
Acquiring Fund
7 Voting Information Shares and Voting; Vote Required
8 Interest of Certain Persons Miscellaneous Issues
9 Additional Information Not Applicable
Required for Reoffering by
Persons Deemed to be
Underwriters
Form N-14 Item Location in Statement of
Part B, Additional Information
- --------- ------- ----------------------------
10 Cover Page Cover Page
11 Table of Contents Table of Contents
12 Additional Information About Incorporation of Documents by
the Registrant Reference in Statement of
Additional Information
13 Additional Information About Not Applicable
the Company Being Acquired
14 Financial Statements Incorporation of Documents by
Reference in Statement of
Additional Information
Form N-14 Item
Part C
- ---------- ------
15-17 Information required to be included in Part C is set
forth under the appropriate item, so numbered, in
Part C of Form N-14.
THE FOLLOWING ITEMS ARE HEREBY INCORPORATED BY REFERENCE:
From the Registration Statement of Ingenuity Capital Trust, filed July 14, 1999
(SEC File No. 811-09445):
Preliminary Prospectus for Ingenuity Medical Specialists Fund, dated ____, 1999.
Preliminary Statement of Additional Information for Preliminary
Prospectus for Ingenuity Medical Specialists Fund, dated ____, 1999.
From Post-Effective Amendment No. 9 of Firsthand Funds, filed August 31, 1999
(SEC File No. 811-8268):
Prospectus for Firsthand Medical Specialists Fund, dated August 31, 1999.
Statement of Additional Information for Firsthand Medical Specialists
Fund (and three other series of Firsthand Funds), dated May 11, 1999.
As previously sent to shareholders of Firsthand Medical Specialists Fund, and as
filed with the SEC pursuant to Rule 30b2-1:
Annual Report for the Firsthand Medical Specialists Fund (with other
funds of Firsthand Funds), for the fiscal year ended December 31, 1998,
as contained in the Annual Report for Firsthand Funds dated as of and
for the periods ended December 31, 1998.
Semi-Annual Report for the Firsthand Medical Specialists Fund (with
other funds of Firsthand Funds), for the semi-annual fiscal year ended
June 30, 1999, as contained in the Semi-Annual Report for Firsthand
Funds dated as of and for the periods ended June 30, 1999.
FIRSTHAND FUNDS
101 Park Center Plaza, Suite 1300
San Jose, California 95113
September 27, 1999
Dear Medical Specialists Fund Shareholder,
I am writing to shareholders of the Firsthand Medical Specialists Fund ("Fund")
to inform you of a Special Meeting of Shareholders to be held on October __,
1999. Before that meeting, I would like your vote on the important issue
affecting your Fund as described in the attached Combined Prospectus/Proxy
Statement.
The meeting is being held to vote on one proposal to complete the restructuring
of the Fund. As you know, earlier this month we held a special meeting to vote
on restructuring the adviser for the Fund ("Adviser Restructuring"). The Adviser
Restructuring was approved and as a result Interactive Research Advisers is no
longer the adviser for the Fund. Also, although I am still portfolio manager of
the Fund, I am no longer an owner, director or officer of the Interactive
Research Advisers or a Trustee of the Firsthand Funds. I have formed my own
investment advisory firm - Ingenuity Capital Management LLC - and continue to
advise your Fund through this new advisory firm.
To fully complete the restructuring of the Fund, the Board of Trustees proposes
that shareholders consider and act upon the Agreement and Plan of Reorganization
whereby your Fund would be transferred on a tax-free basis out of the Firsthand
Funds into a new mutual fund group - Ingenuity Capital Trust. Ingenuity Capital
Trust would be a group of mutual funds advised by Ingenuity Capital Management
LLC. If approved by the Fund's shareholders, this proposal will not result in
any change in your Fund's investment objective, policies or strategies.
Furthermore, there will be no tax consequences to Fund shareholders.
If this proposal is approved:
o I will continue to be portfolio manager of your Fund;
o There will be no changes to the expenses of your Fund; and
o The Fund will become a series of Ingenuity Capital Trust group of
mutual funds instead of Firsthand Funds.
The Board of Trustees of Firsthand Funds has approved the proposal and
recommends that you vote FOR this proposal.
Attached with this letter are a Notice of Special Meeting of Shareholders, a
Combined Prospectus/Proxy Statement and a proxy card. I realize that this
Prospectus/Proxy Statement will take time to review, but your vote is very
important. Regardless of the number of Fund shares you own, it is important that
your shares are represented and voted on the proposal.
Please take the time to familiarize yourself with the proposal. If you attend
the meeting, you may vote your shares in person. If you do not expect to attend
the meeting, complete, date, sign and return the enclosed proxy card in the
enclosed envelope. If you have any questions about the proxy, please call (650)
948-1216.
We thank you for your time and for your investment in your Fund.
Sincerely,
- ----------------------
Kendrick W. Kam, President
Ingenuity Capital Management LLC
FIRSTHAND FUNDS
101 Park Center Plaza
San Jose, California 95113
Firsthand Medical Specialists Fund (650) 948-1216
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF
FIRSTHAND MEDICAL SPECIALISTS FUND
TO BE HELD October __, 1999
To the Shareholders of Firsthand Medical Specialists Fund:
NOTICE IS HEREBY GIVEN that a special meeting (the "Meeting")
of shareholders of Firsthand Medical Specialists Fund (the "Fund"), a series of
Firsthand Funds, will be held at the Rickey's Hyatt Hotel, located at 4219 El
Camino Real, Palo Alto, California 94306 on October __, 1999 at 10 a.m., local
time, for the following purposes:
1. To approve or disapprove a proposed reorganization of
the Fund into Ingenuity Medical Specialists Fund, a
series of Ingenuity Capital Trust.
2. To transact such other business as may properly come
before the Meeting or any adjournment(s) thereof.
Only shareholders of record at the close of business on
October ___, 1999 (the "Record Date") will be entitled to notice of and to vote
at the Meeting or any adjournment thereof.
By Order of the Board of Trustees for Firsthand Funds
Kendrick W. Kam, President
Ingenuity Capital Management LLC
San Jose, California
October ___, 1999
Your vote is important regardless of how many
shares you owned on the record date.
As a shareholder of the Firsthand Medical Specialists Fund, you are asked to
attend the Special Meeting either in person or by proxy. If you are unable to
attend, we urge you to please indicate your voting instructions on the enclosed
proxy form, date and sign it, and return it in the pre-addressed envelope
provided. No postage is necessary if mailed in the United States. In order to
avoid the additional expense of further solicitation, we request your
cooperation in mailing your proxy promptly.
PROXY
FOR SPECIAL MEETING OF SHAREHOLDERS OF
FIRSTHAND MEDICAL SPECIALISTS FUND
ON OCTOBER __, 1999
The undersigned hereby appoints each of Kendrick W. Kam and Roy W.
Adams, Jr., proxy for the undersigned, each with full power of substitution, to
represent the undersigned and to vote all of the shares of Firsthand Medical
Specialists Fund (the "Fund") of Firsthand Funds (the "Trust") which the
undersigned is entitled to vote at the Special Meeting of Shareholders of the
Fund to be held on October __, 1999 and at any adjournment thereof.
1. To approve a reorganization of the Fund into Ingenuity Medical
Specialists Fund (the "Acquiring Fund"), a series of Ingenuity
Capital Trust, which provides for (a) the transfer of all of
the net assets of the Fund to the Acquiring Fund, in exchange
for shares of the Acquiring Fund (the "Acquiring Fund Shares")
of equivalent value, (b) the pro rata distribution of such
Acquiring Fund Shares to the shareholders of the Fund in full
redemption of such shareholders' shares in the Fund, and (c)
the immediate liquidation and termination of the Fund.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. And, in their discretion, to transact any other business that
may lawfully come before the Meeting or any adjournment(s)
thereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES AND
WILL BE VOTED AS DIRECTED HEREIN. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE PROPOSAL.
Dated: ___________________________, 1999
- ---------------------------------
Signature of Shareholder
- ---------------------------------
Signature of Shareholder
When shares are registered jointly in the names of two or more persons, ALL must
sign. Signature(s) must correspond exactly with the name(s) shown. Please sign,
date and return promptly in the enclosed envelope.
-----------------------------------------
PART A
COMBINED PROXY STATEMENT AND PROSPECTUS
FOR THE REORGANIZATION OF
FIRSTHAND MEDICAL SPECIALISTS FUND
INTO
INGENUITY MEDICAL SPECIALISTS FUND
-----------------------------------------
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated: October __, 1999
FIRSTHAND FUNDS
Firsthand Medical Specialists Fund
and
INGENUITY CAPITAL TRUST
Ingenuity Medical Specialists Fund
This Combined Proxy Statement and Prospectus, is furnished in
connection with the solicitation of proxies by the Board of Trustees (the "Board
of Trustees") of Firsthand Funds (the "Firsthand Trust") for use at the Special
Meeting (the "Meeting") of shareholders of the Firsthand Medical Specialists
Fund (the "Fund"), a separate series of the Firsthand Trust, to be held at the
Rickey's Hyatt Hotel, 4219 El Camino Real Alto, California 94306 on October ___,
1999, at 10 a.m. local time.
At the Meeting, the shareholders of the Fund will be asked to vote on
the approval or disapproval of a proposed reorganization (the "Reorganization")
of the Fund into Ingenuity Medical Specialists Fund (the "Acquiring Fund"), a
series of Ingenuity Capital Trust (the "Ingenuity Trust"). The Reorganization
will include (a) the transfer of all of the assets and liabilities of the Fund
to the Acquiring Fund in exchange for shares of the Acquiring Fund (the
"Acquiring Fund Shares") of equivalent value to the assets and liabilities
transferred, (b) the pro rata distribution of such Acquiring Fund Shares to
shareholders of record of the Fund as of the effective date of the
Reorganization (the "Effective Date") in full redemption of such shareholders'
shares in the Fund, and (c) the immediate liquidation and termination of the
Fund. As a result of the Reorganization, each shareholder of the Fund as of the
Effective Date will hold Acquiring Fund Shares having the same aggregate net
asset value as the shares of the Fund held by such shareholder immediately
before consummation of the Reorganization. Lawyers for the Acquiring Fund will
issue an opinion to the effect that for federal income tax purposes, the
Reorganization will be treated as a tax-free reorganization that will not cause
the Fund's shareholders to recognize a gain or loss for federal income tax
purposes. See Section II.A.3 below.
Both the Firsthand Trust and the Ingenuity Trust are open-end
management investment companies. The investment objective of both the Fund and
the Acquiring Fund is long-term growth of capital. The Board of Trustees,
including the non-interested Trustees, have determined that it is in the best
interest of the Fund and its shareholders for the Fund to be reorganized into
the Ingenuity Medical Specialists Fund. In making this determination, the Board
of Trustees considered the fact that Mr. Kam, the portfolio manager of the Fund,
was no longer a shareholder or employee of Interactive Research Advisers, Inc.,
the investment adviser for the other Firsthand Funds. The Board further
considered the fact that in connection with the reorganization, Mr. Kam resigned
as a Trustee of the Firsthand Trust, established his own advisory firm and as of
September __, 1999, Mr. Kam's new firm, Ingenuity Capital Management LLC, has
managed the Fund. The Board of Trustees concluded that Mr. Kam could give more
guidance on the investment style and philosophy of the Fund in a separate trust
entity.
This Combined Proxy Statement and Prospectus sets forth concisely the
information that a shareholder of the Fund should know before voting on the
proposal. It should be read and retained for future reference.
The registration statement for the Acquiring Fund (which includes the
Prospectus and the Statement of Additional Information for the Acquiring Fund
dated October __, 1999) , the Prospectus for the Fund dated August 31, 1999, the
combined Statement of Additional Information relating to the Fund (as well as
certain other mutual funds in the Firsthand Family of Funds) dated May 11, 1999,
and the Statement of Additional Information relating to this Combined Proxy
Statement and Prospectus of even date herewith, are on file with the SEC and are
incorporated by reference herein. A copy of the Prospectus of the Acquiring Fund
dated October ___, 1999 and a copy of the Prospectus of the Fund dated August
31, 1999 accompanies this document.
The Statement of Additional Information of the Acquiring Fund dated
October ___, 1999, the Statement of Additional Information of the Fund (as well
as certain other Firsthand Funds) dated May 11, 1999 and the Statement of
Additional Information relating to this Combined Proxy Statement and Prospectus
of even date herewith are available without charge by writing to Ingenuity
Capital Management, 26888 Almaden Court, Los Altos, California 94022 or by
calling (650) 948-1216.
The Annual Report to Shareholders of the Fund for the fiscal year ended
December 31, 1999 containing audited financial statements of the Fund and the
Semi-Annual Report to Shareholders of the Fund for the fiscal period ended June
30, 1999 containing unaudited financial statements of the Fund have previously
been mailed to each shareholder entitled to vote at the Meeting. Additional
copies of that Annual Report and/or Semi-Annual Report are available without
charge by writing or calling the Trust at its address and telephone number
listed above. The Acquiring Fund is a new series of Ingenuity Trust and has not
commenced operations. Therefore, no Annual Report to Shareholders of the
Acquiring Fund is available. It is expected that this Combined Proxy Statement
and Prospectus will be mailed to shareholders on or about October __, 1999.
The principal executive offices of the Firsthand Trust are located at
101 Park Center Plaza, Suite 1300, San Jose, California 95113 (telephone: (408)
294-2200). The principal executive offices of the Ingenuity Trust are located at
26888 Almaden Court, Los Altos, California 94022 (telephone: (650) 948-1216).
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
TABLE OF CONTENTS
I. INTRODUCTION
A. BACKGROUND AND SUMMARY
B. THE PROPOSAL
C. COMPARISON OF EXPENSES
D. SHARES AND VOTING
II. THE PROPOSAL: APPROVAL OF THE PROPOSED REORGANIZATION
A. DESCRIPTION OF THE PROPOSED REORGANIZATION
1. The Reorganization
2. Effect of the Reorganization
3. Federal Income Tax Consequences
4. Description of the Acquiring Fund Shares
5. Capitalization
B. COMPARISON OF THE FUNDS
1. Investment Objectives and Policies
2. Investment Restrictions
3. Comparative Performance Information
4. Advisory Fees and Other Expenses
5. Distribution and Shareholder Services
6. Distribution Plans
7. Administration, Custody, Fund Accounting and Transfer Agency Services
8. Purchase Procedures
9. Redemption and Exchange Procedures
10. Income Dividends, Capital Gains Distributions and Taxes
11. Portfolio Transactions and Brokerage Commissions
12. Shareholders'Rights
C. RISK FACTORS
D. RECOMMENDATION OF THE BOARD OF TRUSTEES
E. DISSENTERS'RIGHTS OF APPRAISAL
F. FURTHER INFORMATION ABOUT THE FUND AND THE
ACQUIRING FUND
G. VOTE REQUIRED
H. FINANCIAL HIGHLIGHTS
III. MISCELLANEOUS ISSUES
A. OTHER BUSINESS
B. NEXT MEETING OF SHAREHOLDERS
C. LEGAL MATTERS
D. EXPERTS
I. INTRODUCTION
A. BACKGROUND AND SUMMARY
In September this year, shareholders of the Fund were asked to approve
a new investment advisory agreement with Ingenuity Capital Management LLC
("Ingenuity"), an investment advisory firm organized by Mr. Kendrick Kam. Mr.
Kam is, and always has been, the sole portfolio manager of the Firsthand Medical
Specialists Fund. In connection with the reorganization of Interactive Research
Advisers, Inc. ("Interactive Advisers"), Mr. Kendrick Kam ceased to be a
shareholder and officer of Interactive Advisers and as of September 10, 1999,
Mr. Kam continued to advise the Fund under his new investment advisory company -
Ingenuity.
In this combined proxy statement and prospectus, Mr. Kam is seeking
approval by the Fund's shareholders to reorganize the Fund out of the Firsthand
Funds mutual funds group to become a fund in a separate mutual fund family
organized by Mr. Kam. This transfer would be accomplished by reorganizing the
Fund into a new series of Ingenuity Capital Trust (the "Ingenuity Trust") called
the Ingenuity Medical Specialists Fund (the "Acquiring Fund"). Following this
reorganization, the shareholders of the Fund would become shareholders of the
Acquiring Fund. The Acquiring Fund will be the sole initial series of Ingenuity
Trust, a Delaware business trust. The proposed reorganization of the Fund into
the Ingenuity Medical Specialists Fund is called the "Reorganization."
Mr. Kam is seeking shareholders' approval for the Reorganization in
order to allow him, through Ingenuity, to continue managing the Fund in a mutual
fund environment which would allow him to manage the Fund (in its new form)
using the same investment style. Mr. Kam believes that in order to do so, he
would need to be able to advise the Fund in a situation where Mr. Kam could give
more guidance on the investment style and philosophy of the entire trust as well
as the investment advisory entity advising the trust. As of September 9, 1999,
Mr. Kam was no longer a shareholder nor an employee of Interactive Advisers, the
sponsor of the Firsthand Funds (even though he will continue as a consultant for
at least four years). In addition, on September 9, 1999, in connection with the
closing of the reorganization of Interactive Advisers, Mr. Kam resigned as a
Trustee of Firsthand Funds. Mr. Kam anticipates that his resignation as Trustee
and the termination of his employment with Interactive Advisers will diminish
his ability to manage the Fund in the style which he believes will be most
effective. Accordingly, Mr. Kam has proposed, with no objection from Interactive
Advisers or the Trustees of Firsthand Funds, to establish a Acquiring Fund group
to be advised by Mr. Kam's own investment advisory company Ingenuity, a separate
entity of which Mr. Kam will be the sole controlling shareholder. Ingenuity is
not affiliated with Interactive Advisers.
Even though the Ingenuity Trust initially would have only one series --
the Acquiring Fund -- it is anticipated that, in the future, additional series
may be added, each reflecting Mr. Kam's own unique value investment style in the
medical technology area.
The cost of the Reorganization and of the Meeting and solicitation of
proxies therefor, including the cost of copying, printing and mailing of proxy
materials, will be borne by Ingenuity and not by either the Fund or the
Acquiring Fund. In addition to solicitations by mail, proxies may also be
solicited by officers of the Firsthand Trust or Ingenuity Trust, without special
compensation, by telephone, facsimile or otherwise.
B. THE PROPOSAL
At the Meeting, the shareholders of the Fund will be asked to approve
the proposed Reorganization of the Fund into the Acquiring Fund. The
Reorganization will include the transfer of all of the assets and liabilities of
the Fund to the Acquiring Fund in exchange for shares of the Acquiring Fund of
equivalent value, the pro rata distribution of such Acquiring Fund Shares to the
shareholders of the Fund in full redemption of such shareholders' shares in the
Fund, and the immediate liquidation and termination of the Fund.
The Fund and the Acquiring Fund (collectively, the "Funds") have identical
investment objectives and policies. The investment objective of both the Fund
and the Acquiring Fund is long-term growth of capital. Investments in the Funds
are subject to substantially similar risks. See Section II.C. below.
The purchase and redemption arrangements of the Funds are substantially
identical. The Acquiring Fund and the Fund have different distribution and
exchange arrangements which are more fully discussed in Section II.B. below.
Shareholders should note that if the Reorganization is consummated,
shareholders of the Fund will no longer be able to exchange their Fund shares
into shares of another fund in the Firsthand Funds or enjoy any of the other
shareholder privileges associated with being a shareholder of a fund in the
Firsthand Funds. As discussed below, the Board of Trustees of the Trust believes
that the proposed Reorganization is in the best interests of the Fund and its
shareholders, and that the interests of existing shareholders of the Fund will
not be diluted as a result of the proposed Reorganization. See Section II.D.
below.
C. COMPARISON OF EXPENSES
The following table shows the comparative fees and expenses you may pay
if you buy and hold shares of the Fund and the Acquiring Fund (collectively, the
"Funds"). The Funds do not impose any front-end or deferred sales loads and they
do not charge shareholders for exchanging shares or reinvesting dividends.
Fees and Expenses of the Funds
<TABLE>
<S> <C> <C> <C>
Ingenuity
Medical
Firsthand Ingenuity Specialists
Medical Medical Fund
Specialists Fund Specialists Fund (pro forma)
Shareholder Fees (fees paid directly from your investment) None None None
- ----------------------------------------------------------- ----------------- ----------------- ------------
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets)
Management Fee 1.50% 1.50% 1.50%
Distribution/Service (12b-1) Fee 0.00% 0.00% 0.00%
Other Expenses 0.45% 0.45% 0.45%
----- ----- -----
Total Annual Fund Operating Expenses(1) 1.95% 1.95% 1.95%
</TABLE>
(1) The Investment Advisory Agreement for the Fund and the
Acquiring Fund each limits the respective Fund's total annual
operating expenses to 1.95% of the Fund's total 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.
<TABLE>
<S> <C> <C> <C> <C>
Fund 1 Year 3 Years 5 Years 10 Years
- ---------------------------------------- ------------- ------------- -------------- -------------
Firsthand Medical Specialists Fund $198 $612 $1,052 $2,275
- ---------------------------------------- ------------- ------------- -------------- -------------
Ingenuity Medical Specialists Fund $198 $612 $1,052 $2,275
- ---------------------------------------- ------------- ------------- -------------- -------------
Ingenuity Medical Specialists Fund
(pro forma) $198 $612 $1,052 $2,275
- ---------------------------------------- ------------- ------------- -------------- -------------
</TABLE>
D. SHARES AND VOTING
The Firsthand Trust is a Delaware business trust and is registered with
the SEC as an open-end management investment company. The Firsthand Trust
currently has four operating series, or funds, outstanding (and two additional
series currently under registration with the SEC), including the Fund. Each
series or fund has its own investment objective and policies and operates
independently for purposes of investments, dividends, other distributions and
redemptions. The Fund has only one class of shares. The Acquiring Fund also has
designated only one class of shares. The Fund's shareholders will receive shares
of the Acquiring Fund in exchange for their Fund shares if the Reorganization is
approved and consummated. In addition, neither the Acquiring Fund nor the Fund
has a plan of distribution pursuant to Rule 12b-1 as promulgated under the
Investment Company Act of 1940, as amended (the "1940 Act").
Each share of the Fund, or fraction thereof, is entitled to one vote or
corresponding fraction thereof at the Meeting. At the close of business on
___________, 1999 (the "Record Date"), the record date for the determination of
shareholders entitled to vote at the Meeting, there were _________________
shares outstanding held by _____ record holders (including omnibus accounts
representing multiple underlying beneficial owners).
All shares represented by each properly signed proxy received prior to
the Meeting will be voted at the Meeting. If a shareholder specifies how the
proxy is to be voted on any business properly to come before the Meeting, it
will be voted in accordance with such instruction. A proxy may be revoked by a
shareholder at any time prior to its use by written notice to the Trust, by
submission of a later-dated proxy or by voting in person at the Meeting. If any
other matters come before the Meeting, proxies will be voted by the persons
named therein as proxies in accordance with such persons' best judgment.
The holders of a majority of outstanding shares entitled to vote
present in person or by proxy will constitute a quorum. When a quorum is
present, approval of the proposal will require the affirmative vote of the
lesser of (i) 67% of the shares represented at the Meeting if more than 50% of
the outstanding shares is represented, or (ii) shares representing more than 50%
of the Fund's outstanding shares. The Meeting may be adjourned from time to time
by a majority of the votes properly cast upon the question of adjourning a
Meeting to another date and time, whether or not a quorum is present, and the
Meeting may be held as adjourned without further notice. The persons named in
the proxy will vote in favor of such adjournment those shares which they are
entitled to vote if such adjournment is necessary to obtain a quorum or to
obtain a favorable vote on any proposal.
For purposes of determining the presence of a quorum for transacting
business at the Meeting, abstentions and broker "non-votes" (that is, proxies
from brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote shares
on a particular matter with respect to which the brokers or nominees do not have
discretionary power) will be treated as shares that are present. However, while
broker non-votes are considered "present," they are disregarded in calculating
the percentage of votes cast in favor of or against a proposal by those "voting
securities present" when the voting requirement is based on achieving a
percentage of the voting securities present in person or by proxy at the
Meeting.
As of the Record Date, the Fund's shareholders of record and (to the
Firsthand Trust's knowledge) beneficial owners who owned more than five percent
of the Fund's shares are as follows:
<TABLE>
<S> <C> <C>
Name Shares % Ownership
Charles Schwab & Co. [ ] [ %]
101 Montgomery Street
San Francisco, California 94104
Donaldson, Lufkin & Jenrette Securities Corp. [ ] [ %]
P.O. Box 2052
Jersey City, New Jersey 07303
National Financial Services Corp. [ ] [ %]
One World Financial Center
200 Liberty Street, 5th Floor
New York, New York 10281
</TABLE>
The Acquiring Fund is under registration with the Securities and
Exchange Commission and does not have any public shareholders. Currently,
Kendrick W. Kam and the other two board member of the Ingenuity Trust holds all
the outstanding shares of the Acquiring Fund for organizational purposes only.
The officers and trustees of the Firsthand Trust and Ingenuity Trust,
as a group, owned of record and beneficially 100% of the outstanding voting
securities of the Fund (for organizational purposes only) and [___%] of the
outstanding voting securities of the Acquiring Fund as of the Record Date.
II. THE PROPOSAL: APPROVAL OF THE PROPOSED REORGANIZATION
A. DESCRIPTION OF THE PROPOSED REORGANIZATION
1. The Reorganization
If the Reorganization is approved, each shareholder of the
Fund will become a shareholder of the Acquiring Fund. On the Effective Date, the
Acquiring Fund will acquire the assets and liabilities of the Fund, and will
issue to the Fund the number of Acquiring Fund Shares determined by dividing the
value of the Fund's assets and liabilities so transferred by the net asset value
of one Acquiring Fund Share. The assets and liabilities of the Fund and the net
asset value of the Acquiring Fund will be calculated at the close of business on
the date immediately preceding the Effective Date (the "Valuation Date") in
accordance with the Funds' valuation procedures described in their respective
Prospectuses (in the case of the Acquiring Fund, the preliminary Prospectus
dated October __, 1999 and, in the case of the Fund, the Prospectus dated August
31, 1999). Contemporaneously with that asset transfer, the Fund will distribute
the Acquiring Fund Shares it receives pro rata to each remaining shareholder of
the Fund based on the percentage of the outstanding shares of the Fund held of
record by that shareholder on the Valuation Date.
For example, on June 30, 1999, the value of the aggregate net assets of
the Fund was approximately $6,151,960, the total number of outstanding Fund
shares was 512,542, and the net asset value of each Acquiring Fund Share was
$12.00. Therefore, if the Effective Date had been June 30, 1999, the Acquiring
Fund would have issued a total of 512,542 Acquiring Fund Shares to the Fund, and
the Fund would then have redeemed each of its then outstanding shares in
exchange for one Acquiring Fund Shares.
This distribution of the Acquiring Fund Shares by the Fund to its
shareholders in full redemption of such shareholders' Fund shares will be
accomplished by the establishment of book accounts on the Acquiring Fund's share
records in the name of the respective shareholders of the Fund, representing the
respective pro rata numbers of Acquiring Fund Shares deliverable to the Fund
shareholders. Fractional shares will be carried to the third decimal place.
Certificates evidencing the Acquiring Fund Shares will not be issued to the
Fund's shareholders.
Immediately following the Fund's pro rata liquidating distribution of
the Acquiring Fund Shares to the Fund shareholders, the Fund will liquidate and
terminate.
Consummation of the Reorganization is subject to approval by the
shareholders of the Fund and the satisfaction of certain other conditions. The
Reorganization may be abandoned at any time before the Effective Date upon the
vote of both independent trustees of the Trust's of the Board of Trustees or a
majority of the Board of Trustees of Ingenuity Trust.
Ingenuity and/or Mr. Kam will pay all costs and expenses of the
Reorganization, including those associated with the Meeting, the copying,
printing and distribution of this Combined Proxy Statement and Prospectus, and
the solicitation of proxies for the Meeting.
The above is a summary of the Reorganization. The summary does not
purport to be a complete description of the terms of the Reorganization, which
are set forth in the Agreement and Plan of Reorganization attached as Exhibit A
to this document.
2. Effect of the Reorganization
If the Reorganization is approved and completed, shareholders of the
Fund as of the Effective Date will become shareholders of the Acquiring Fund,
which will acquire the net assets of the Fund. The net asset value of the
Acquiring Fund Shares held by each shareholder of the Fund immediately after
consummation of the Reorganization will be equivalent to the net asset value of
the Fund Shares held by that shareholder immediately before consummation of the
Reorganization.
On or before the Effective Date the Fund intends to distribute all of
its then remaining net investment income and realized capital gain.
Ingenuity, the current investment adviser to the Fund, will, after the
Reorganization, continue to be the investment adviser for the Acquiring Fund.
Interactive Advisers will cease to have any relationship with the operation of
the Fund (in its new form as the Acquiring Fund). Also, after the
Reorganization, Rafferty Capital Markets, Inc. will be distributor of the
Acquiring Fund's shares instead of CW Fund Distributors, Inc., the distributor
of shares of the Fund. It is, however, expected that the Acquiring Fund will be
managed in accordance with its existing investment objective and policies, which
are identical to that of the Fund.
3. Federal Income Tax Consequences
As a condition to the closing of the Reorganization, the Fund and the
Acquiring Fund must receive a favorable opinion from Paul, Hastings, Janofsky &
Walker, LLP, counsel to the Fund, substantially to the effect that, for federal
income tax purposes: (a) The transfer by the Fund of substantially all of its
assets to the Acquiring Fund solely in exchange for the Acquiring Fund Shares,
as described above, is a reorganization within the meaning of Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the "Code"); (b) no gain or
loss is recognized by the Fund upon the transfer of substantially all of its
assets to the Acquiring Fund in exchange solely for shares of the Acquiring Fund
Shares; (c) no gain or loss is recognized by the Acquiring Fund on receipt of
the Fund assets in exchange for the Acquiring Fund Shares; (d) the basis of the
assets of the Fund in the hands of the Acquiring Fund is, in each instance, the
same as the basis of those assets in the hands of the Fund immediately prior to
the transaction; (e) the holding period of the Fund's assets in the hands of the
Acquiring Fund includes the period during which the assets were held by the
Fund; (f) no gain or loss is recognized to the shareholders of the Fund upon the
receipt of the Acquiring Fund Shares solely in exchange for the Fund's shares;
(g) the aggregate basis of the Acquiring Fund Shares received by the Fund
shareholders is, in each instance, the same as the aggregate basis of the Fund
shares surrendered in exchange therefor; and (h) the holding period of the
Acquiring Fund Shares received by the Fund shareholders includes the holding
period during which shares of the Fund surrendered and exchanged therefor was
held, provided that such shares were held as a capital asset in the hands of the
Fund shareholders on the date of the exchange. The Trust does not intend to seek
a private letter ruling from the Internal Revenue Service with respect to the
tax effects of the Reorganization.
4. Description of the Acquiring Fund Shares
Each Acquiring Fund Share issued to Fund shareholders pursuant to the
Reorganization will be duly authorized, validly issued, fully paid and
nonassessable when issued, will be transferable without restriction and will
have no preemptive or conversion rights. Each Acquiring Fund Share will
represent an equal interest in the assets of the Acquiring Fund. The Acquiring
Fund Shares will be sold and redeemed based upon the net asset value of the
Acquiring Fund next determined after receipt of the purchase or redemption
request, as described in the Acquiring Fund's preliminary Prospectus.
5. Capitalization
The capitalization of the Funds as of June 30, 1999 and their pro forma
combined capitalization as of that date after giving effect to the proposed
Reorganization are as follows:
Acquiring The
Fund Fund Pro Forma
(Unaudited) (Unaudited) Combined
-------------- ----------------- --------------
Aggregate net assets $0** $6,151,960 $6,151,960
Shares outstanding* 0** 512,542 512,542
Net asset value per share $0.00** $12.00 $12.00
* Each Fund is authorized to issue an indefinite number of shares.
** The Acquiring Fund is a new series of Ingenuity Capital Trust that is
currently under registration with the SEC. Therefore, it has not
commenced operations.
B. COMPARISON OF THE FUNDS
A brief comparison of the Funds is set forth below. See Section II.F. for more
information.
1. Investment Objectives and Policies
The Fund / The Acquiring Fund. Both the New Fund and the Fund will have
identical investment objectives and policies. The investment objective of both
the Fund and the New Fund is long-term growth of capital. In addition, each of
the Fund and the New Fund seeks to achieve their investment objectives by
investing at least sixty-five percent (65%) of its assets in securities of
companies in the health and biotechnology fields which Ingenuity 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.
The fundamental investment restrictions of the New Fund are identical
to that of the Current Fund, and cannot be changed without the affirmative vote
of a majority of each Fund's outstanding voting securities as defined in the
Investment Company Act.
2. Investment Restrictions
Both the Acquiring Fund and the Fund have identical fundamental
investment restrictions which cannot be changed without the affirmative vote of
a majority of each Fund's outstanding voting securities as defined in the 1940
Act. Neither the Acquiring Fund nor the Fund may:
a. Underwrite the securities of other issuers, except that each 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;
b. Purchase or sell real estate or interests in real estate, but each Fund may
purchase marketable securities of companies holding real estate or interests in
real estate;
c. Purchase or sell commodities or commodity contracts, including futures
contracts, except that each Fund may purchase and sell futures contracts to the
extent authorized by the Board of Trustees;
d. 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 each 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 each Fund's total assets;
e. Purchase securities on margin, but each Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities;
f. 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 each Fund's total assets at the time any borrowing
is made. While each Fund's borrowings are in excess of 5% of its total assets,
each Fund will not purchase portfolio securities;
g. Purchase or sell puts and calls on securities, except that each Fund may
purchase and sell puts and calls on stocks and stock indices;
h. Make short sales of securities;
i. Participate on a joint or joint and several basis in any securities trading
account; or
j. Purchase the securities of any other investment company except in compliance
with the 1940 Act.
3. Comparative Performance Information
The chart below shows the risks of investing in the Fund and how the
Fund's total return has varied from year-to-year. The table compares each Fund's
performance to the most commonly used index for its market segment. Of course,
past performance is no guarantee of future results. The Acquiring Fund has not
commenced operations.
Therefore, no performance information is available.
Firsthand Medical Specialists Fund*
Return for the Year ended 12/31
*During the period described above in the bar chart, the Fund's best quarter was
Q4 1998 (+31.97%) and its worst quarter was Q2, 1992 (-19.74%). Total return for
1999 through September 30, 1999 was _____%.
The table below indicates the average annual total return (with capital
gains and all dividends and distributions reinvested) for the Fund during the
periods ending December 31, 1998. The Acquiring Fund is a new series that is not
yet in operation. Therefore, no performance information is available.
Average Annual Total Return
One Year1 Since Inception2
Firsthand Medical Specialists Fund -4.55% -3.21%
Ingenuity Medical Specialists Fund N/A N/A
Additional performance information on the Fund may be found in its December 31,
1998 Annual Report to Shareholders and the June 30, 1999 Semi-Annual Report to
Shareholders
1 Reflects return for the one-year period ended December 31, 1998.
2 Reflects return since inception on December 10, 1997.
4. Advisory Fees and Other Expenses
The total advisory fees are identical between the Fund and the
Acquiring Fund. Currently, Ingenuity Capital Management (as defined above,
"Ingenuity") serves as investment adviser to the Fund pursuant to an Investment
Advisory Agreement between the Fund and Ingenuity dated September ___, 1999.
Prior to that day, Interactive Research Advisers served as investment adviser to
the Fund. The Fund has agreed to pay Ingenuity (and, prior to September ___,
1999, Interactive Advisers) a fee, accrued each calendar day (including weekends
and holidays) at the rate of 1.50% per annum of the daily net assets of the
Fund. However, Ingenuity (and, for periods prior to September ___, 1999,
Interactive Advisers) shall reduce such fee or, if necessary, make expense
reimbursements to the Fund to the extent required to limit the total 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. For the fiscal year ended December 31, 1998, the Fund paid advisory
fees of $51,357 to Interactive Advisers.
After the Reorganization, Ingenuity will serve as investment adviser to
the Acquiring Fund pursuant to a new Investment Advisory Agreement with the
Fund. The Acquiring Fund will pay Ingenuity an annual advisory fee in the same
amount and calculated in the same manner as the current fee structure between
the Fund and Ingenuity.
5. Distribution and Shareholder Services
CW Fund Distributors, Inc., an indirect wholly-owned subsidiary of
Countrywide Credit Industries, Inc., a New York Stock Exchange listed company
principally engaged in the business of residential mortgage lending (and which
is unaffiliated with Interactive Research Advisers or Ingenuity), has served as
distributor of the Fund's shares since the Fund's inception. Rafferty Capital
Markets, Inc. (which is also unaffiliated with either Ingenuity or Interactive
Advisers) will serve as distributor of the Acquiring Fund upon the effectiveness
of the Acquiring Fund's registration statement on Form N-1A.
The Acquiring Fund shares to be issued in the Reorganization will be
subject to an identical fee structure as that currently in place for the Fund.
No sales charge is imposed by either the Fund or the Acquiring Fund on either
initial purchase of shares, subsequent redemption (other than a wire transfer
fee in the case of a redemption by wire transfer), or reinvestment of dividends
or capital gains distributions.
6. Distribution Plans
Both the Acquired Fund and the Fund offer only one class of shares and
sell their shares directly to the public at net asset value, without any sales
load or Rule 12b-1 fee. Therefore, neither the Acquiring Fund nor the Fund has
adopted a Rule 12b-1 distribution plan and no distribution fees are charged to
the Fund.
7. Administration, Custody, Fund Accounting and Transfer Agency Services
Pursuant to an Administration Agreement (the "Administration
Agreement") between Ingenuity Trust and the adviser, Ingenuity Capital
Management (as defined above, "Ingenuity"), Ingenuity would act as administrator
for Ingenuity Trust and provide various administrative services including (but
not limited to) arranging for the maintenance of certain books and records of
the Acquiring Fund, preparing and mailing certain documents in connection with
tax and disclosure obligations, preparing agendas and supporting documentation
for, and minutes of, meetings of the Ingenuity Trust Board of Trustees and
meetings of shareholders and coordinating all relationships between the
Acquiring Fund and its other service providers.
The administration services provided to Ingenuity Trust pursuant to the
Administration Agreement are similar in scope to the administration services
provided to the Trust pursuant to its existing administration agreement with
Interactive Research Advisers.
Pursuant to a Custody Agreement (the "Custody Agreement") between
Ingenuity Trust and Firstar Bank, N.A. ("Firstar"), Firstar would act as
custodian of the portfolio securities, cash and other property of the Acquiring
Fund. Firstar also currently serves as custodian to the Fund pursuant to an
existing custody agreement with the Firsthand Trust. The terms of the Custody
Agreement relating to custodial services are similar to the terms of the Trust's
existing custodian arrangement.
Pursuant to a transfer agency agreement (the "Transfer Agency
Agreement") between Ingenuity and Firstar Mutual Fund Services, LLC, Firstar
Mutual Fund Services, LLC would act as the transfer agent for the Acquiring
Fund. The services provided under the Transfer Agency Agreement are similar to
those provided under the Trust's existing transfer agency agreement.
8. Purchase Procedures
The Fund generally requires a minimum initial investment of $10,000 for
regular accounts or $2,000 for Firsthand Funds IRAs, and minimum subsequent
investments of $50 or more. The Acquiring Fund has identical minimum purchase
requirements.
The Fund's shares are purchased at the public offering price, which is
based on the net asset value next determined after the Fund's transfer agent
receives a shareholder's order in proper form. In most cases, in order to
receive that day's public offering price, the Fund's transfer agent must receive
a shareholder's order in proper form before the close of regular trading on the
New York Stock Exchange. If a shareholder buys shares through his or her
investment representative, the representative must receive the shareholder's
order before the close of regular trading on the New York Stock Exchange to
receive that day's public offering price. The Acquiring Fund shares are
purchased using a similar method. To eliminate the need for safekeeping, neither
the Fund nor the Acquiring Fund will issue certificates.
Both Funds have automatic investment plans under which selected amounts
are electronically withdrawn from shareholders' accounts with banks and are
applied to purchase shares of the Funds. Both Funds provide for three methods to
purchase shares -- through an investment representative, through the Fund's
Distributor, and through the Automatic Investment Plan.
9. Redemption and Exchange Procedures
Shareholders of both Funds may redeem their shares at the net asset
value next determined after receipt of a written redemption request or a
telephone redemption order without the imposition of any fee or other charge.
Each Fund may involuntarily redeem a shareholder's shares if at such
time the aggregate net asset value of the shares in a shareholder's account
(other than an IRA account) is less than $10,000 (based on amounts invested,
unaffected by market fluctuations). In the event of any such redemption, a
shareholder will receive at least 60 days' notice prior to the redemption.
The Fund's shareholders may currently exchange their shares for shares
of certain other funds in the Firsthand Funds family at net asset value. Shares
of the Acquiring Fund, however, may not be exchanged into shares of any funds
within the Firsthand Funds family.
10. Income Dividends, Capital Gains Distributions and Taxes
Each of the Fund and the Acquiring Fund distributes substantially all
of its net investment income and net capital gains to shareholders each year.
Both Funds currently intend to distribute at least annually any net investment
income and any net realized capital gains. Both Funds also have identical
distribution options dividends and distributions are automatically reinvested in
additional shares of the Funds unless cash payments are specifically requested.
Shareholders of each of the Fund or the Acquiring Fund can change his or her
distribution option by notifying the transfer agent in writing.
Each Fund intends to qualify as a separate "regulated investment
company" under Subchapter M of the Code for federal income tax purposes and to
meet all other requirements that are necessary for it (but not its shareholders)
to pay no federal taxes on income and capital gains paid to shareholders in the
form of dividends. In order to accomplish this goal, each Fund must, among other
things, distribute substantially all of its ordinary income and net capital
gains on a current basis and maintain a portfolio of investments which satisfies
certain diversification criteria.
11. Portfolio Transactions and Brokerage Commissions
In the case of each of the Fund and the Acquiring Fund, Ingenuity is
responsible for decisions to buy and sell securities, broker-dealer selection,
and negotiation of commission rates through its capacity as adviser. In placing
orders for the Funds' portfolio transactions, Ingenuity will use its best
efforts to seek to execute portfolio transactions in a manner which, under the
circumstances, result in total costs or proceeds being the most favorable to the
Fund. In assessing the best overall terms available for any transaction,
Ingenuity considers all factors it deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commissions, if any, both for the specific transaction and on a continuing
basis. Ingenuity is not required to obtain the lowest commission or the best net
price for the Fund on any particular transaction, and are not required to
execute any order in a fashion either preferential to the Fund relative to other
accounts they manage or otherwise materially adverse to any other accounts.
12. Shareholders' Rights
Both the Firsthand Trust and Ingenuity Trust are Delaware business
trusts. Because the Acquired Fund is a series of the Firsthand Trust and the
Acquiring Fund is a series of Ingenuity Trust, their operations are governed by
their respective Trust's Declaration of Trust and By-laws and applicable
Delaware law.
The Funds normally will not hold meetings of shareholders except as
required under the Investment Company Act and Delaware law. However,
shareholders holding 10% or more of the outstanding shares of either the
Acquiring Fund or the Acquired Fund may call meetings for their respective Trust
for the purpose of voting on the removal of one or more of the Trustees.
Shareholders of each Fund have no preemptive, conversion or
subscription rights. The shares of each Fund have non-cumulative voting rights,
with each shareholder of the Funds entitled to one vote for each full share of
the Funds (and a fractional vote for each fractional share) held in the
shareholder's name on the books of the Funds as of the record date for the
action in question. On any matter submitted to a vote of shareholders, shares of
each Fund will be voted by that Fund's shareholders individually when the matter
affects the specific interest of that Fund only, such as approval of that Fund's
investment management arrangements. The shares of all the Funds will be voted in
the aggregate on other matters, such as the election of trustees and
ratification of the Board of Trustees' selection of the Funds' independent
accountants.
C. RISK FACTORS
The Acquiring Fund's portfolio, like that of the Fund, is subject to
the general risks and considerations associated with equity investing. In
addition, both the Fund and the Acquiring Fund invest primarily in companies
within the health and biotechnology segments. This makes the Funds subject to
greater risk because of their concentration of investment in a single industry
and within certain segments of the industry. For example, investments in the
health and biotechnology segments 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.
Furthermore, some of the securities which both the Acquiring Fund and the Fund
may invest may be of smaller companies. The securities of smaller companies
often trade less frequently and in more limited volume, and may be subject to
more abrupt or erratic price movements, than securities of larger, more
established companies. Such companies may have limited product lines, markets or
financial resources, or may depend on a limited management group. The risks of
investing in the Acquiring Fund are not expected to be greater than investing in
the Fund.
D. RECOMMENDATION OF THE BOARDS OF TRUSTEES
The Boards of Trustees of the Firsthand Trust and Ingenuity Trust
(including a majority of the independent Trustees of each trust), after due
consideration, has unanimously determined that the Reorganization is in the best
interests of the shareholders of the Fund (in the case of the Trust's Trustees)
and the Acquiring Fund (in the case of Ingenuity Trust's Trustees) and that the
interests of the existing shareholders of neither the Fund nor the Acquiring
Fund, as the case may be, would not be diluted thereby. The Boards specifically
considered the following factors:
(1) The favorable efficiencies that could result if Mr. Kam and Ingenuity were
able to continue managing the Fund under a fund complex which reflects his
investment style.
(2) All the expenses of the Reorganization are to be borne by Ingenuity and/or
Mr. Kam and that shareholders of the Fund do not need to bear any expenses.
The Trustees of the Firsthand Trust recommend that shareholders of the Fund vote
for the adoption of the proposal.
E. DISSENTERS' RIGHTS OF APPRAISAL
Shareholders of the Fund who object to the proposed Reorganization will
not be entitled to any "dissenters' rights" under Delaware law. However, those
shareholders have the right at any time up to the Effective Date to redeem
shares of the Fund at net asset value or to exchange such shares for shares of
the other funds offered by the Firsthand Trust without charge. After the
Reorganization, such shareholders will hold shares of the Acquiring Fund, which
may also be redeemed at net asset value in accordance with the procedures
described in the Acquiring Fund's Prospectus dated October __, 1999.
F. FURTHER INFORMATION ABOUT THE FUND AND THE ACQUIRING FUND
Further information about the Fund is contained in its current
Prospectus dated August 31, 1999 and the Statement of Additional Information
dated May 11, 1999, which are incorporated herein by reference. Further
information about the Acquiring Fund is contained in its Prospectus dated
October __, 1999 and the Statement of Additional Information dated October
____________, 1999. Documents that relate to the Fund are available, without
charge, by writing to Firsthand Funds, 101 Park Center Plaza, Suite 1300, San
Jose, California 95113 or by calling (650) 948-1216. Copies of the Fund's
prospectus and the Acquiring Fund's preliminary Prospectus also accompany this
Combined Proxy Statement and Prospectus.
The Firsthand Trust is subject to the informational requirements of the
Securities and Exchange Act of 1934 and the 1940 Act, and in accordance
therewith files reports, proxy materials and other information with the SEC.
Such reports, proxy materials and other information can be inspected and copied
at the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such materials can be obtained at
prescribed rates from the Public Reference Branch, Office of Consumer Affairs
and Information Services, of the SEC, Washington, D.C. 20549.
G. VOTE REQUIRED
Approval of the proposed Reorganization requires the affirmative vote
of the Record Date holders of at least the lesser of (i) sixty seven percent
(67%) of the shares represented at the Meeting if more than fifty percent (50%)
of the outstanding shares is represented, or (ii) shares representing more than
fifty percent (50%) of the Fund's outstanding shares. If the shareholders of the
Fund do not approve the proposed Reorganization, or if the Reorganization is not
consummated for any other reason, then the Board of Trustees will take such
further action as it deems to be in the best interest of the Fund and its
shareholders subject to approval by the shareholders of the Fund if required by
applicable law.
H. FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Fund's financial performance. Certain information reflects financial results for
a single Fund share. The total returns in the tables represent the rate that an
investor would have earned or lost on an investment in the Funds (assuming
reinvestment of all dividends and distributions). The Funds' financial
statements are included in the Statement of Additional Information, which is
available upon request.
<TABLE>
Firsthand Medical Specialists Fund
<S> <C> <C>
Year Period
Ended Ended
12/31/98 12/31/97(A)
------------------------ ---------------------
Net asset value at beginning of period $ 10.12 $10.00
------------------------ ---------------------
Income from investment operations:
Net investment income (loss) (0.10) 0.01
Net realized and unrealized gains (losses) on
investments (0.36) 0.11
------------------------ ---------------------
Total from investment operations (0.46) 0.12
------------------------ ---------------------
Less distributions:
Dividends from net investment income -- --
Distributions from net realized gains -- --
------------------------ ---------------------
Total distributions -- --
------------------------ ---------------------
Net asset value at end of period $9.66 $10.12
------------------------ ---------------------
Total return (4.55%) 1.20%(B)
------------------------ ---------------------
Net assets at end of period (millions) $4.5 $2.4
------------------------ ---------------------
Ratio of expenses to average net assets 1.95% 1.81%(C)
Ratio of net investment income (loss) to average net assets (1.33%) 1.75%(C)
Portfolio turnover rate 160% 0%
</TABLE>
(A) Represents the period from commencement of operations (December 10,
1997) through December 31, 1997.
(B) Not annualized.
(C) Annualized.
III. MISCELLANEOUS ISSUES
A. OTHER BUSINESS
The Board of Trustees of the Trust knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, it is the Board of Trustee's intention that proxies which do not
contain specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named in the enclosed form of proxy.
B. NEXT MEETING OF SHAREHOLDERS
The Trust is not required and does not intend to hold annual or other
periodic meetings of shareholders except as required by the 1940 Act. If the
Reorganization is not consummated, the next meeting of the shareholders of the
Fund will be held at such time as the Board of Trustees may determine or at such
time as may be legally required. Any shareholder proposal intended to be
presented at such meeting must be received by the Trust at its office at a
reasonable time before the meeting, as determined by the Board of Trustees, to
be included in the Trust's proxy statement and form of proxy relating to such
meeting, and must satisfy all other legal requirements.
C. LEGAL MATTERS
Certain legal matters in connection with the issuance of the Acquiring
Fund Shares will be passed upon for the Ingenuity Trust by Roy W. Adams, Jr.,
Attorney at Law.
D. FINANCIAL STATEMENTS AND EXPERTS
The financial statements of the Firsthand Medical Specialists Fund for
the year ended December 31, 1998 contained in the Trust's 1999 Annual Report to
Shareholders, together with the related independent auditors reports, as stated
are incorporated herein by reference.
Please complete, date and sign the enclosed proxy and
return it promptly in the enclosed envelope
EXHIBIT A
Agreement and Plan of Reorganization
FIRSTHAND MEDICAL SPECIALISTS FUND
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is made as of this __th day of _________, 1999, by and between INGENUITY CAPITAL
TRUST ("Ingenuity Capital Trust"), a Delaware business trust, for itself and on
behalf of the Ingenuity Medical Specialists Fund (the "Acquiring Fund"), a
series of Ingenuity Capital Trust, and FIRSTHAND FUNDS ("Firsthand Funds"), a
Delaware business trust, for itself and on behalf of the Firsthand Medical
Specialists Fund (the "Acquired Fund"), a series of Firsthand Funds. Other than
the Acquired Fund, no other series of Firsthand Funds is a party to this
Agreement.
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that all of the assets of the Acquired Fund be
transferred to the Acquiring Fund, and that the Acquiring Fund assume the Stated
Liabilities (as defined in paragraph 1.3) of the Acquired Fund, in exchange for
shares of the Acquiring Fund ("Acquiring Fund Shares"), and that such Acquiring
Fund Shares be distributed immediately after the Closing, as defined in this
Agreement, by the Acquired Fund to its shareholders in liquidation of the
Acquired Fund. This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code").
In consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto, intending to be legally
bound hereby, covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUND
1.1 Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, the Acquired Fund
shall assign, deliver and otherwise transfer its assets as set forth in
paragraph 1.2 (the "Fund Assets") to the Acquiring Fund and the Acquiring Fund
shall assume the Acquired Fund's Stated Liabilities. The Acquiring Fund shall,
as consideration therefor, on the Closing Date (as defined in paragraph 3.1),
deliver to the Acquired Fund full and fractional Acquiring Fund Shares, the
number of which shall be determined by dividing (a) the value of the Acquired
Fund Assets, net of the Acquired Fund's Stated Liabilities, computed in the
manner and as of the time and date set forth in paragraph 2.1, by (b) the net
asset value of one share of the Acquiring Fund computed in the manner and as of
the time and date set forth in paragraph 2.2. Such transfer, delivery and
assumption shall take place at the closing provided for in paragraph 3.1
(hereinafter sometimes referred to as the "Closing"). Immediately following the
Closing, the Acquired Fund shall distribute the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the Acquired Fund as
provided in paragraph 1.4 hereof. Such transactions are hereinafter sometimes
collectively referred to as the "Reorganization."
1.2 (a) With respect to the Acquired Fund, the Fund Assets shall consist of
all property and assets of any nature whatsoever, including, without limitation,
all cash, cash equivalents, securities, claims and receivables (including
dividend and interest receivables) owned by the Acquired Fund, and any prepaid
expenses shown as an asset on the Acquired Fund's books on the Closing Date.
(b) Before the Closing Date, the Acquired Fund will provide
the Acquiring Fund with information regarding its assets and its known
liabilities. The Acquired Fund reserves the right to sell or otherwise dispose
of any of the securities or other assets shown on the list of the Acquired
Fund's Assets prior to the Closing Date but will not, without the prior approval
of the Acquiring Fund, acquire any additional securities other than securities
which the Acquiring Fund is permitted to purchase in accordance with its stated
investment objective and policies.
1.3 The Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. The Acquiring Fund will
assume all liabilities and obligations reflected on an unaudited statement of
assets and liabilities of the Acquired Fund prepared by the Administrator of the
Acquired Fund as of the Applicable Valuation Date (as defined in paragraph 2.1),
in accordance with generally accepted accounting principles consistently applied
from the prior audited period ("Stated Liabilities"). The Acquiring Fund shall
assume only the Stated Liabilities of the Acquired Fund, and no other
liabilities or obligations, whether absolute or contingent, known or unknown,
accrued or unaccrued.
1.4 Immediately following the Closing, the Acquired Fund will distribute
the Acquiring Fund Shares received by the Acquired Fund pursuant to paragraph
1.1 pro rata to its shareholders of record determined as of the close of
business on the Closing Date ("Acquired Fund Investors") in complete liquidation
of the Acquired Fund. Such distribution will be accomplished by an instruction,
signed by an appropriate officer of Ingenuity Capital Trust, to transfer the
Acquiring Fund Shares then credited to the Acquired Fund's account on the books
of the Acquiring Fund to open accounts on the books of the Acquiring Fund
established and maintained by the Acquiring Fund's transfer agent in the names
of record of the Acquired Fund Investors and representing the respective pro
rata number of shares of the Acquiring Fund due such Acquired Fund Investor.
All issued and outstanding shares of the Acquired Fund will be canceled
simultaneously therewith on the Acquired Fund's books, and any outstanding
share certificates representing interests in the Acquired Fund will represent
only the right to receive such number of Acquiring Fund Shares after the
Closing as determined inaccordance with paragraph 1.1.
1.5 If any request shall be made for a change of the registration of shares
of the Acquiring Fund to another person from the account of the stockholder in
which name the shares are registered in the records of the Acquired Fund, it
shall be a condition of such registration of shares that there be furnished to
the Acquiring Fund an instrument of transfer properly endorsed, accompanied by
appropriate signature guarantees and otherwise in proper form for transfer and
that the person requesting such registration shall pay to the Acquiring Fund any
transfer or other taxes required by reason of such registration or establish to
the reasonable satisfaction of the Acquiring Fund that such tax has been paid or
is not applicable.
1.6 Following the transfer of assets by the Acquired Fund to the Acquiring
Fund, the assumption of the Acquired Fund's Stated Liabilities by the Acquiring
Fund, and the distribution by the Acquired Fund of the Acquiring Fund Shares
received by it pursuant to paragraph 1.4, the Administrator of the Acquired Fund
shall terminate the qualification, classification and registration of the
Acquired Fund with all appropriate federal and state agencies. Any reporting or
other responsibility of the Acquired Fund is and shall remain the responsibility
of the Acquired Fund and its Administrator up to and including the date on which
the Acquired Fund is terminated and deregistered, subject to any reporting or
other obligations described in paragraph 4.9.
2. VALUATION
2.1 The value of the Acquired Fund's Fund Assets shall be the value of
such assets computed as of the time at which its net asset value is calculated
pursuant to the valuation procedures set forth in the Acquiring Fund's then
current Prospectus and Statement of Additional Information (which are expected
to be similar in all material respects to the valuation procedures utilized by
the Acquired Fund) on the business day immediately preceding the Closing Date,
or at such time on such earlier or later date as may mutually be agreed upon in
writing among the parties hereto (such time and date being herein called the
"Applicable Valuation Date").
2.2 The net asset value of each share of the Acquiring Fund shall be
the net asset value per share computed on the Applicable Valuation Date, using
the market valuation procedures set forth in the Acquiring Fund's then current
Prospectus and Statement of Additional Information.
2.3 All computations of value contemplated by this Article 2 shall be
made by the Acquired Fund's Custodian in accordance with its regular practice as
pricing agent and reviewed by its independent auditors. The Acquired Fund shall
cause its Administrator to deliver a copy of its valuation report to the
Acquiring Fund at the Closing.
3. CLOSING(S) AND CLOSING DATE
3.1 The Closing for the Reorganization shall occur on ___________, 1999
and/or on such other date(s) as may be mutually agreed upon in writing by the
parties hereto (each, a "Closing Date"). The Closing(s) shall be held at the
offices of Firsthand Funds or at such other location as is mutually agreeable to
the parties hereto. All acts taking place at the Closing(s) shall be deemed to
take place simultaneously as of 10:00 a.m., local time on the Closing Date
unless otherwise provided.
3.2 The Acquiring Fund's custodian shall deliver at the Closing a
certificate of an authorized officer stating that: (a) the Fund Assets have been
delivered in proper form to the Acquiring Fund on the Closing Date and (b) all
necessary taxes including all applicable federal and state stock transfer
stamps, if any, have been paid, or provision for payment shall have been made,
by the Acquired Fund in conjunction with the delivery of portfolio securities.
3.3 Notwithstanding anything herein to the contrary, in the event that
on the Applicable Valuation Date (a) the New York Stock Exchange shall be closed
to trading or trading thereon shall be restricted or (b) trading or the
reporting of trading on such exchange or elsewhere shall be disrupted so that,
in the judgment of either Ingenuity Capital Trust or Firsthand Funds, accurate
appraisal of the value of the net assets of the Acquiring Fund or the Acquired
Fund is impracticable, the Applicable Valuation Date shall be postponed until
the first business day after the day when trading shall have been fully resumed
without restriction or disruption and reporting shall have been restored.
4. COVENANTS WITH RESPECT TO THE ACQUIRING FUND AND THE ACQUIRED FUND
4.1 With respect to the Acquired Fund, Firsthand Funds has called or
will call a meeting of Acquired Fund shareholders to consider and act upon this
Agreement and to take all other actions reasonably necessary to obtain the
approval of the transactions contemplated herein, including approval for the
Acquired Fund's liquidating distribution of Acquiring Fund Shares contemplated
hereby, and for Firsthand Funds to terminate the Acquired Fund's qualification,
classification and registration if requisite approvals are obtained with respect
to the Acquired Fund. Firsthand Funds, on behalf of the Acquired Fund, shall
prepare the notice of meeting, form of proxy and proxy statement (collectively,
"Proxy Materials") to be used in connection with such meeting. Each of Firsthand
Funds and Ingenuity Capital Trust have cooperated and shall continue to
cooperate with the other, and have furnished and shall continue to furnish the
other with the information relating to itself, and respectively, the Acquired
Fund and the Acquiring Fund, that is required by the 1933 Act, the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act and the rules and
regulations thereunder, to be included in the proxy statement.
4.2 Firsthand Funds, on behalf of the Acquired Fund, covenants that the
Acquiring Fund Shares to be issued hereunder are not being acquired for the
purpose of making any distribution thereof, other than in accordance with the
terms of this Agreement.
4.3 Firsthand Funds, on behalf of the Acquired Fund, will assist the
Acquiring Fund in obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of shares of the Acquired Fund.
4.4 Subject to the provisions hereof, Ingenuity Capital Trust, Trust on
its own behalf and on behalf of the Acquiring Fund, and Firsthand Funds, on its
own behalf and on behalf of the Acquired Fund, will take, or cause to be taken,
all actions, and do, or cause to be done, all things reasonably necessary,
proper or advisable to consummate and make effective the transactions
contemplated herein.
4.5 Firsthand Funds, on behalf of the Acquired Fund, shall furnish to
the Acquiring Fund on the Closing Date, a final statement of the total amount of
the Acquired Fund's assets and liabilities as of the Closing Date.
4.6 Ingenuity Capital Trust, on behalf of the Acquiring Fund, has
prepared and filed, or will prepare and file, with the Securities and Exchange
Commission (the "SEC") a registration statement or an amendment to an existing
registration statement on Form N-1A under the Securities Act of 1933, as amended
(the "1933 Act") and the Investment Company Act of 1940 (the "1940 Act"),
relating to the Acquiring Fund Shares.
4.7 As soon after the Closing Date as is reasonably practicable,
Firsthand Funds, on behalf of the Acquired Fund: (a) shall prepare and file all
federal and other tax returns and reports of the Acquired Fund required by law
to be filed with respect to all periods ending on or before the Closing Date but
not theretofore filed and (b) shall pay all federal and other taxes shown as due
thereon and/or all federal and other taxes that were unpaid as of the Closing
Date.
4.8 Following the transfer of assets by the Acquired Fund to the
Acquiring Fund and the assumption of the Stated Liabilities of the Acquired Fund
in exchange for Acquiring Fund Shares as contemplated herein, Firsthand Funds
will file any final regulatory reports, including but not limited to any Form
N-SAR and Rule 24f-2 filings with respect to the Acquired Fund, after the
Closing Date but prior to the date of any applicable statutory or regulatory
deadlines and also will take all other steps as are necessary and proper to
effect the termination or declassification of the Acquired Fund in accordance
with the laws of the State of Delaware and other applicable requirements.
5. REPRESENTATIONS AND WARRANTIES
5.1 Ingenuity Capital Trust, on behalf of the Acquiring Fund,
represents and warrants to Firsthand Funds and the Acquired Fund as follows:
(a) Ingenuity Capital Trust was duly created pursuant to its Agreement and
Declaration of Trust by its Trustees (the "Ingenuity Trustees") for the purpose
of acting as a management investment company under the 1940 Act and is validly
existing and in good standing under the laws of the State of Delaware, and the
Agreement and Declaration of Trust directs the Ingenuity Trustees to manage the
affairs of Ingenuity Capital Trust and grants them all powers necessary or
desirable to carry out such responsibility, including administering Ingenuity
Capital Trust's business as currently conducted by Ingenuity Capital Trust and
as described in the current Prospectuses of Ingenuity Capital Trust. Ingenuity
Capital Trust is registered as an investment company classified as an open-end
management company, under the 1940 Act and its registration with the SEC as an
investment company is in full force and effect;
(b) The Acquiring Fund is not in violation of, and the execution, delivery
and performance of this Agreement by Ingenuity Capital Trust for itself and on
behalf of the Acquiring Fund does not and will not (i) violate Ingenuity Capital
Trust's Agreement and Declaration of Trust or By-Laws, or (ii) result in a
breach or violation of, or constitute a default under, any material agreement or
material instrument, to which Ingenuity Capital Trust is a party or by which its
properties or assets are bound.
(c) Except as previously disclosed in writing to the Acquired Fund, no
litigation or administrative proceeding or investigation of or before any court
or governmental body is presently pending or, to Ingenuity Capital Trust's
knowledge, threatened against Ingenuity Capital Trust or its business, the
Acquiring Fund or any of its properties or assets, which, if adversely
determined, would materially and adversely affect Ingenuity Capital Trust or the
Acquiring Fund's financial condition or the conduct of their business, Ingenuity
Capital Trust knows of no facts that might form the basis for the institution of
any such proceeding or investigation, and the Acquiring Fund is not a party to
or subject to the provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects, or is reasonably
likely to materially and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
(d) All issued and outstanding shares, including shares to be issued in
connection with the Reorganization, of the Acquiring Fund will, as of the
Closing Date, be duly authorized and validly issued and outstanding, fully paid
and nonassessable; the shares of each class of the Acquiring Fund issued and
outstanding prior to the Closing Date were offered and sold, and all shares to
be issued in connection with the Reorganization will be offered and sold, in
compliance with the applicable registration requirements, or exemptions
therefrom, of the 1933 Act, and all applicable state securities laws, and the
regulations thereunder; and the Acquiring Fund does not have outstanding any
option, warrants or other rights to subscribe for or purchase any of its shares
nor is there outstanding any security convertible into any of its shares;
(e) The execution, delivery and performance of this Agreement on behalf of
the Acquiring Fund will have been duly authorized prior to the Closing Date by
all necessary action on the part of Ingenuity Capital Trust, the Ingenuity
Trustees and the Acquiring Fund, and this Agreement will constitute a valid and
binding obligation of Ingenuity Capital Trust and the Acquiring Fund enforceable
in accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other similar laws of
general applicability relating to or affecting creditors, rights and to general
equity principles;
(f) On the effective date of the proxy statement, at the time of the
meeting of the Acquired Fund shareholders and on the Closing Date, any written
information furnished by Ingenuity Capital Trust with respect to the Acquiring
Fund for use in the proxy statement or any other materials provided in
connection with the Reorganization does not and will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the information provided not misleading; and
(g) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or Delaware law for the
execution of this Agreement by Ingenuity Capital Trust, for itself and on behalf
of the Acquiring Fund, or the performance of the Agreement by Ingenuity Capital
Trust for itself and on behalf of the Acquiring Fund, except for such consents,
approvals, authorizations and filings as have been made or received, and except
for such consents, approvals, authorizations and filings as may be required
subsequent to the Closing Date.
5.2 Firsthand Funds, on behalf of the Acquired Fund, represents and
warrants to Ingenuity Capital Trust and the Acquiring Fund as follows:
(a) Firsthand Funds was duly created pursuant to its Declaration of Trust
by the Trustees (the "Firsthand Trustees") for the purpose of acting as a
management investment company under the 1940 Act and is validly existing and in
good standing under the laws of the State of Delaware, and the Agreement and
Declaration of Trust directs the Firsthand Trustees to manage the affairs of
Firsthand Funds and grants them all powers necessary or desirable to carry out
such responsibility, including administering Firsthand Funds' business as
currently conducted by Firsthand Funds and as described in the current
Prospectuses of Firsthand Funds. Firsthand Funds is registered as an investment
company classified as an open-end management company under the 1940 Act and its
registration with the SEC as an investment company is in full force and effect;
(b) All of the issued and outstanding shares of the Acquired Fund have been
offered and sold in compliance in all material respects with applicable
registration requirements of the 1933 Act and state securities laws; all issued
and outstanding shares of each class of the Acquired Fund are, and on the
Closing Date will be, duly authorized and validly issued and outstanding, and
fully paid and non-assessable, and the Acquired Fund does not have outstanding
any options, warrants or other rights to subscribe for or purchase any of its
shares, nor is there outstanding any security convertible into any of its
shares;
(c) The Acquired Fund is not in violation of, and the execution, delivery
and performance of this Agreement by Firsthand Funds for itself and on behalf of
the Acquired Fund does not and will not (i) violate Firsthand Funds' Agreement
and Declaration of Trust or By-Laws, or (ii) result in a breach or violation of,
or constitute a default under, any material agreement or material instrument to
which Firsthand Funds is a party or by its properties or assets are bound;
(d) Except as previously disclosed in writing to the Acquiring Fund, to
Firsthand Funds' knowledge, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or, threatened against the Acquired Fund or any of its properties or assets
which, if adversely determined, would materially and adversely affect the
Acquired Fund's financial condition or the conduct of its business; Firsthand
Funds knows of no facts that might form the basis for the institution of any
such proceeding or investigation, and the Acquired Fund is not a party to or
subject to the provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects, or is, reasonably
likely to materially and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
(e) To Firsthhand Funds' knowledge, the Statement of Assets and
Liabilities, Statements of Operations and Statements of Changes in Net Assets of
the Acquired Fund as of and for the period ended December 31, 1998, audited by
Tait, Weller & Baker (copies of which have been or will be furnished to the
Acquiring Fund) fairly present, in all material respects, the Acquired Fund's
financial condition as of such date and its results of operations for such
period in accordance with generally accepted accounting principles consistently
applied, and as of such date there were no liabilities of the Acquired Fund
(contingent or otherwise) known to Firsthand Funds that were not disclosed
therein but that would be required to be disclosed therein in accordance with
generally accepted accounting principles;
(f) All federal and other tax returns and reports of Firsthand Funds and
the Acquired Fund required by law to be filed on or before the Closing Date
shall have been filed, and all taxes owed by Firsthand Funds or the Acquired
Fund shall have been paid so far as due, and, to Firsthand Funds' knowledge, no
such return is currently under audit and no assessment has been asserted with
respect to any such return;
(g) To Firsthand Funds' knowledge, for each full and partial taxable year
from its inception through the Closing Date, the Acquired Fund has qualified as
a separate regulated investment company under the Code and has taken all
necessary and required actions to maintain such status;
(h) To Firsthand Funds' knowledge, at the Closing Date, the Acquired Fund
will have good and marketable title to the Fund Assets and full right, power and
authority to assign, deliver and otherwise transfer such Fund Assets hereunder,
and upon delivery and payment for such Fund Assets as contemplated herein, the
Acquiring Fund will acquire good and marketable title thereto, subject to no
restrictions on the ownership or transfer thereof other than such restrictions
as might arise under the 1933 Act;
(i) The execution, delivery and performance of this Agreement on behalf of
the Acquired Fund will have been duly authorized prior to the Closing Date by
all necessary action on the part of Firsthand Funds, the Firsthand Trustees and
the Acquired Fund, and this Agreement will constitute a valid and binding
obligation of Firsthand Funds and the Acquired Fund enforceable in accordance
with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors, rights and to general equity
principles;
(j) From the effective date of the proxy statement, through the time of the
meeting of the Acquired Fund Investors, and on the Closing Date: (i) the proxy
materials will comply in all material respects with the applicable provisions of
the 1933 Act, the 1934 Act and the 1940 Act and the regulations thereunder and
(ii) any written information furnished by Firsthand Funds, on behalf of the
Acquired Fund, for use in the proxy statement or in any other manner that may be
necessary in connection with the transactions contemplated hereby does not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the information provided not misleading; and
(k) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or Delaware law for the
execution of this Agreement by Firsthand Funds, for itself and on behalf of the
Acquired Fund, or the performance of the Agreement by Firsthand Funds for itself
and on behalf of the Acquired Fund, except for such consents, approvals,
authorizations and filings as have been made or received, and except for such
consents, approvals, authorizations and filings as may be required subsequent to
the Closing Date.
(l) The phrase "to Firsthand Funds' knowledge" means the actual, present
knowledge of the officers of Firsthand Funds, excluding Kendrick W. Kam.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUND
The obligations of Firsthand Funds to consummate the
Reorganization with respect to the Acquired Fund shall be subject to the
performance by Ingenuity Capital Trust, for itself and on behalf of the
Acquiring Fund, of all the obligations to be performed by it hereunder on or
before the Closing Date and, in addition thereto, the following conditions with
respect to the Acquiring Fund (except as may be waived in writing by Firsthand
Funds):
6.1 All representations and warranties of Ingenuity Capital Trust with
respect to the Acquiring Fund contained herein shall be true and correct in all
material respects as of the date hereof and, except as they may be affected by
the transactions contemplated herein, as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
6.2 Ingenuity Capital Trust, on behalf of the Acquiring Fund, shall
have delivered to the Acquired Fund at the Closing a certificate executed on
behalf of the Acquiring Fund by Ingenuity Capital Trust's President, Secretary
or Assistant Secretary in a form reasonably satisfactory to the Acquired Fund
and dated as of the Closing Date, to the effect that, to the best of such
officer's knowledge and belief, the factual representations and warranties of
Ingenuity Capital Trust with respect to the Acquiring Fund made herein are true
and correct in all material respects at and as of the Closing Date, except as
they may be affected by the transactions contemplated herein, and as to such
other matters as the Acquired Fund shall reasonably request.
6.3 As of the Closing Date, there shall have been no material change in
the investment objective, policies and restrictions nor any material change in
the investment management fees, other fees payable for services provided to the
Acquiring Fund, fee waiver or expense reimbursement undertakings, or sales loads
of the Acquiring Fund from those fee amounts, undertakings and sales load
amounts described in the Prospectus of the Acquiring Fund delivered to the
Acquired Fund pursuant to paragraph 4.1.
6.4 The Acquired Fund shall have received at the Closing a favorable
opinion of Roy W. Adams, Jr., counsel to Ingenuity Capital Trust, dated as of
the Closing Date, in a form reasonably satisfactory to the Acquired Fund,
substantially to the effect that:
(a) Ingenuity Capital Trust is a duly registered, open-end, management
investment company, and its registration with the SEC as an investment company
under the 1940 Act is in full force and effect; (b) Ingenuity Capital Trust is a
business trust duly created pursuant to its Agreement and Declaration of Trust,
is validly existing and in good standing under the laws of the State of
Delaware, and the Agreement and Declaration of Trust directs the Ingenuity
Trustees to manage the affairs of Ingenuity Capital Trust and grants them all
powers necessary or desirable to carry out such responsibility, including
administering the Acquiring Fund's business as described in the current
preliminary Prospectus of the Acquiring Fund; (c) the Acquiring Fund is a
validly established separate series of Ingenuity Capital Trust, (d) this
Agreement has been duly authorized, executed and delivered by Ingenuity Capital
Trust on behalf of the Acquiring Fund and, assuming due authorization, execution
and delivery of this Agreement on behalf of the Acquired Fund, is a valid and
binding obligation of Ingenuity Capital Trust, enforceable against Ingenuity
Capital Trust in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, arrangement, moratorium and other
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles; (e) the Acquiring Fund Shares to be issued to
the Acquired Fund and then distributed to the Acquired Fund Investors pursuant
to this Agreement are duly registered under the 1933 Act on the appropriate
form, and are duly authorized and upon such issuance will be validly issued and
outstanding, fully paid and non-assessable; and (f) a Registration Statement of
Ingenuity Capital Trust has been filed with the SEC with respect to the
Acquiring Fund and has become effective and, to the best of such counsel's
knowledge, no stop order suspending the effectiveness thereof has been issued
and no proceedings for that purpose have been instituted or are pending or
threatened.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUND
The obligations of Ingenuity Capital Trust to consummate the
Reorganization with respect to the Acquiring Fund shall be subject to the
performance by Firsthand Funds of all the obligations to be performed by it
hereunder, with respect to the Acquired Fund, on or before the Closing Date and,
in addition thereto, the following conditions (except as may be waived in
writing by Ingenuity Capital Trust):
7.1 All representations and warranties of Firsthand Funds with respect
to the Acquired Fund contained herein shall be true and correct in all material
respects as of the date hereof and, except as they may be affected by the
transactions contemplated by this Agreement, as of the Closing Date, with the
same force and effect as if made on and as of the Closing Date.
7.2 Firsthand Funds, on behalf of the Acquired Fund, shall have
delivered to the Acquiring Fund at the Closing a certificate executed on behalf
of the Acquired Fund, by Firsthand Funds' President, Secretary or Assistant
Secretary, in form and substance reasonably satisfactory to the Acquiring Fund
and dated as of the Closing Date, to the effect that the representations and
warranties of Firsthand Funds with respect to the Acquired Fund made herein are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated herein and as to such other matters as the
Acquiring Fund shall reasonably request.
7.3 With respect to the Acquired Fund, the Board of Trustees of
Firsthand Funds shall have determined that the Reorganization is in the best
interests of the Acquired Fund and shall have made all the determinations
required by Rule 17a-8 under the 1940 Act.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE ACQUIRING FUND AND THE ACQUIRED FUND.
The obligations of the Acquiring Fund and of the Acquired Fund
herein are each subject to the further conditions that on or before the Closing
Date with respect to the Acquiring Fund and the Acquired Fund:
8.1 This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Acquired Fund in accordance with the provisions of Firsthand Funds'
Declaration of Trust and the requirements of the 1940 Act, and certified copies
of the resolutions evidencing such approval shall have been delivered to the
Acquiring Fund.
8.2 On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or any of the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory authorities
(including, without limitation, those of the SEC) deemed necessary by Ingenuity
Capital Trust, on behalf of the Acquiring Fund, or Firsthand Funds, on behalf of
the Acquired Fund, to permit consummation, in all material respects, of the
transactions contemplated herein shall have been obtained, except where failure
to obtain any such consent, order or permit would not, in the opinion of the
party asserting that the condition to closing has not been satisfied, involve a
risk of a material adverse effect on the assets or properties of the Acquiring
Fund or the Acquired Fund.
8.4 The registration statement of Ingenuity Capital Trust registering
shares of the Acquiring Fund shall have become effective under the 1933 Act and
the 1940 Act, no stop orders suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the 1933 Act or the 1940 Act.
8.5 The Acquired Fund shall have declared and paid a dividend or
dividends which, together with all previous such dividends, shall have the
effect of distributing to the Acquired Fund's shareholders substantially all of
the Acquired Fund's investment company taxable income for all taxable years
ending on or prior to the Closing Date (computed without regard to any deduction
for dividends paid) and substantially all of its net capital gain realized in
all taxable years ending on or prior to the Closing Date (after reduction for
any capital loss carryover).
8.6 Ingenuity Capital Trust and Firsthand Funds shall have received the
opinion of legal counsel to Firsthand Funds (based on customary certificates and
representations from Ingenuity Capital Trust and Firsthand Funds, the Acquiring
Fund and the Acquired Fund) substantially to the effect that, for federal income
tax purposes:
(a) The transfer by the Acquired Fund of substantially all of its assets to
the Acquiring Fund solely in exchange for the Acquiring Fund Shares, as
described above, is a reorganization within the meaning of Section 368(a)(1) of
the Internal Revenue Code of 1986, as amended (the "Code");
(b) no gain or loss is recognized by the Acquired Fund upon the transfer of
substantially all of its assets to the Acquiring Fund in exchange solely for
shares of the Acquiring Fund Shares;
(c) no gain or loss is recognized by the Acquiring Fund on receipt of the
Acquired Fund assets in exchange for the Acquiring Fund Shares;
(d) the basis of the assets of the Acquired Fund in the hands of the
Acquiring Fund is, in each instance, the same as the basis of those assets in
the hands of the Acquired Fund immediately prior to the transaction;
(e) the holding period of the Acquired Fund's assets in the hands of the
Acquiring Fund includes the period during which the assets were held by the
Acquired Fund;
(f) no gain or loss is recognized to the shareholders of the Acquired Fund
upon the receipt of the Acquiring Fund Shares solely in exchange for the
Acquired Fund's shares;
(g) the basis of the Acquiring Fund Shares received by the Acquired Fund
shareholders is, in each instance, the same as the basis of the Acquired Fund
shares surrendered in exchange therefor;
(h) the holding period of the Acquiring Fund Shares received by the
Acquired Fund shareholders includes the holding period during which shares of
the Acquired Fund surrendered and exchanged therefor was held, provided that
such shares were held as a capital asset in the hands of the Acquired Fund
shareholders on the date of the exchange.
Notwithstanding anything herein to the contrary, neither the
Acquiring Fund, nor the Acquired Fund may waive the condition set forth in this
paragraph 8.6.
8.7 Prior to the Closing, the unamortized organization expenses of the
Acquired Fund as of the Applicable Valuation Date shall have been removed from
the books of the Acquired Fund.
9. INDEMNIFICATION
9.1 Ingenuity Capital Management and Ingenuity Capital Trust each agree
severally to indemnify Firsthand Funds, its officers, trustees and their agents
(the "Firsthand indemnified parties"), and Firsthand Funds agrees to indemnify
Ingenuity Capital Trust, its officers, trustees and their agents (the "Ingenuity
indemnified parties") from any and all claims, losses, judgments, liabilities,
fines, penalties and interest (including all reasonable attorneys' fees and
disbursements) that directly result from any actual breach or, in the case of
claims by a third party only, any alleged breach by the other party of any
representation, warranty or covenant set forth in this Agreement. No party shall
be entitled to indemnification under this Agreement unless written notice of the
events or circumstances giving rise to such claim for indemnification has been
provided to the indemnifying party or parties not later than two (2) years after
the date of the Closing. Notwithstanding the above, no indemnification is hereby
given for any act occurring after the Closing for which notice is not given
within one (1) year after the date of such Closing.
10. EXPENSES
10.1 The Acquiring Fund and the Acquired Fund shall each be reimbursed
for any expenses incurred in connection with entering into and carrying out of
the provisions of this Agreement, whether or not the transactions contemplated
are consummated. Ingenuity Capital Management LLC has agreed to bear all
expenses incurred in connection with the transactions contemplated in this
Agreement, regardless whether or not the transactions contemplated are
consummated.
11. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
11.1 This Agreement constitutes the entire agreement between the parties
and supersedes any prior or contemporaneous understanding or arrangement with
respect to the subject matter hereof.
11.2 The representations, warranties, covenants, indemnifications and
agreement as to expenses contained in this Agreement or in any document
delivered pursuant hereto or in connection herewith shall survive the
consummation and termination of this Agreement.
12. TERMINATION
12.1 This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time before the Closing by the mutual written
consent of Acquiring Fund and the Acquired Fund.
12.2 This Agreement may be terminated and the transactions contemplated
hereby abandoned if approval of the Reorganization is revoked before the Closing
by the Firsthand Trustees who are not interested persons of Firsthand Funds
within the meaning of Section 2(a)(19) of the 1940 Act.
12.3 This Agreement will terminate if the Closing does not occur before
November 15, 1999, unless extended by mutual consent of the parties.
13. AMENDMENTS
This Agreement may be amended, modified or supplemented in
such manner as may be mutually agreed upon in writing by the authorized officers
of Firsthand Funds, acting on behalf of the Acquired Fund and the authorized
officers of Ingenuity Capital Trust, acting on behalf of the Acquiring Fund;
provided, however, that following the meeting of the shareholders of the
Acquired Fund, no such amendment may have the effect of changing the provisions
for determining the number of shares of the Acquiring Fund to be issued to the
Acquired Fund Investors under this Agreement to the detriment of such Acquired
Fund Investors, or otherwise materially and adversely affecting the Acquired
Fund, without the Acquired Fund obtaining the Acquired Fund Investors' further
approval except that nothing in this paragraph 13 shall be construed to prohibit
the Acquiring Fund and the Acquired Fund from amending this Agreement to change
the Closing Date or Applicable Valuation Date by mutual agreement.
14. NOTICES
Any notice, report, statement or demand required or permitted
by any provision of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy, certified mail or overnight express courier
addressed to:
For Ingenuity Capital Trust, on behalf of itself and the Acquiring Fund:
Ingenuity Capital Trust, LLC
26888 Almaden Court
Los Altos, California 94022
Attention: Kendrick W. Kam
Fax: (650) 649-2651
With copies to:
Roy W. Adams, Jr., Esq.
1024 Country Club Drive, Suite 135
Moraga, California 94556
Fax: (925) 631-0999
For Firsthand Funds, on behalf of itself and the Acquired Fund:
Interactive Research Advisers, Inc.
101 Park Center Plaza, Suite 1300
San Jose, California 95113
Attention: Kevin M. Landis
Omar N. Billawala
Fax: (408) 490-0291
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
15.1 The article and paragraph headings contained herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. All references herein to Articles, paragraphs, subparagraphs or
Exhibits shall be construed as referring to Articles, paragraphs or
subparagraphs hereof or Exhibits hereto, respectively. Whenever the terms
"hereto", "hereunder", "herein" or "hereof" are used in this Agreement, they
shall be construed as referring to this entire Agreement, rather than to any
individual Article, paragraph, subparagraph or sentence.
15.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
15.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other parties. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed by its authorized officer, and attested by its
Secretary.
INGENUITY CAPITAL TRUST,
for itself and on behalf of
Ingenuity Medical Specialists Fund
By:
Title:
FIRSTHAND FUNDS,
for itself and on behalf of
Firsthand Medical Specialists Fund
By:
Title:
Consented to (regarding Sections 9 and 10 only) by:
INGENUITY CAPITAL MANAGEMENT LLC
By:
Title:
-----------------------------------------
PART B
STATEMENT OF ADDITIONAL INFORMATION
FOR THE REORGANIZATION OF
FIRSTHAND MEDICAL SPECIALISTS FUND
INTO
INGENUITY MEDICAL SPECIALISTS FUND
-----------------------------------------
INGENUITY CAPITAL TRUST
------------------------------
26888 Almaden Court
Los Altos, CA 94022
(650) 948-1216
--------------------------------
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER, 1999
FOR REGISTRATION STATEMENT ON FORM N-14
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Combined Proxy Statement and Prospectus dated
October __, 1999, which has been filed by Ingenuity Capital Trust
("Ingenuity Trust") in connection with a Special Meeting of Shareholders of
Firsthand Medical Specialists Fund of Firsthand Funds that has been called to
vote on an Agreement and Plan of Reorganization (and the transactions
contemplated thereby). Copies of the Combined Proxy Statement and Prospectus may
be obtained at no charge by writing to Ingenuity Capital Trust at 26888 Almaden
Court, Los Altos, California 94022 or by calling (650) 948-1216 or Firsthand
Funds at 101 Park Center Plaza, Suite 1300, San Jose, California 95113 or by
calling (408) 294-2200.
Unless otherwise indicated, capitalized terms used herein and
not otherwise defined have the same meanings as are given to them in the
Combined Proxy Statement and Prospectus.
Further information about Ingenuity Medical Specialists Fund
(the "Acquiring Fund") is contained in the Acquiring Fund's Prospectus dated
October __, 1999. The Acquiring Funds' Statement of Additional Information,
dated October __, 1999, is incorporated by reference in this Statement of
Additional Information and is available without charge by calling Ingenuity
Capital Trust at (650) 948-1216.
Further information about Firsthand Medical Specialists Fund
(the "Acquired Fund") is contained in the Acquired Fund's Prospectus dated
August 31, 1999, and the Annual Report of the Acquired Fund for the fiscal year
ended December 31, 1998. The Acquired Funds' Statement of Additional Information
(and other series of Firsthand Funds), dated May 11, 1999, is incorporated by
reference in this Statement of Additional Information and is available without
charge by calling the Firsthand Funds at (408) 294-2200.
TABLE OF CONTENTS
Page
General Information B-2
Documents Incorporated by reference B-2
GENERAL INFORMATION
The shareholders of Firsthand Medical Specialists Fund (the
"Acquired Fund") are being asked to approve a form of Agreement and Plan of
Reorganization (the "Plan") combining the Firsthand Medical Specialists Fund
(the "Acquired Fund") into Ingenuity Medical Specialists Fund (the "Acquiring
Fund") (and the transactions contemplated thereby). The Plan contemplates the
transfer of all or substantially all of the assets and liabilities of the
Acquired Fund as of the Effective Date to the Acquiring Fund, and the assumption
by the Acquiring Fund of the liabilities of the Acquired Fund, in exchange for
shares of the Acquiring Fund. Immediately after the Effective Date, the Acquired
Fund will distribute to its shareholders of record as of the close of business
on the Effective Date the shares of the Acquiring Fund received. The shares of
the Acquiring Fund that will be issued for distribution to the Acquired Fund's
Shareholders will have an aggregate net asset value equal to the aggregate net
asset value of the shares of the Acquired Fund held as of the Closing Date.
Firsthand Funds will then take all necessary steps to terminate the
qualification, registration and classification of the Acquired Fund. All issued
and outstanding shares of the Acquired Fund will be canceled on the Acquired
Fund's books. Shares of the Acquiring Fund will be represented only by book
entries; no share certificates will be issued.
A Special Meeting of the Acquired Fund's shareholders to
consider the transactions will be held at the offices of Rickey's Hyatt Hotel,
located at 4219 El Camino Real, Palo Alto, California 94306 on October __, 1999,
at 10:00 a.m., local time.
DOCUMENTS INCORPORATED BY REFERNECE
For further information about the transaction, see the
Combined Proxy Statement and Prospectus. For further information about Ingenuity
Capital Trust, Firsthand Funds, the Acquiring Fund and the Acquired Fund, see
(1) the preliminary Statement of Additional Information relating to Ingenuity
Medical Specialists Fund dated October __, 1999, and (2) the Combined Statement
of Additional Information for the Firsthand Medical Specialists Fund (and other
series of Firsthand Funds) dated May 11, 1999, which are incorporated herein by
reference and are available without charge by calling Ingenuity Capital Trust at
(650) 948-1216 or Firsthand Funds at (408) 294-2200.
-----------------------------------------
PART C
INGENUITY CAPITAL TRUST
OTHER INFORMATION
-----------------------------------------
INGENUITY CAPITAL TRUST
-------------------------------
FORM N-14
-------------------------------
PART C
-------------------------------
ITEM 15. INDEMNIFICATION
Article VII of the Agreement and Declaration of Trust empowers the
Trustees of the Trust, to the full extent permitted by law, to purchase, with
Trust assets, insurance for indemnification from liability and to pay for all
expenses reasonably incurred or paid or expected to be paid by a Trustee or
officer in connection with any claim, action, suit or proceeding in which he or
she becomes involved by virtue of his or her capacity or former capacity with
the Trust.
Article VI of the By-Laws of the Trust provides that the Trust shall
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding by reason of the fact that such person is and other amounts or
was an agent of the Trust, against expenses, judgments, fines, settlement and
other amounts actually and reasonable incurred in connection with such
proceeding if that person acted in good faith and reasonably believed his or her
conduct to be in the best interests of the Trust. Indemnification will not be
provided in certain circumstances, however, including instances of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the duties
involved in the conduct of the particular office involved.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "33 Act") may be permitted to the 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 33 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 33 Act
and will be governed by the final adjudication of such issue.
ITEM 16 EXHIBITS
(1) Amended and Restated Agreement and Declaration of Trust - Filed
herewith.
(2) By-Laws - Filed herewith.
(3) Voting Trust Agreement - Not Applicable.
(4) Form of Agreement and Plan of Reorganization is included in Part A.
(5) Specimen Share Certificate - Not Applicable.
(6) Investment Advisory Contracts - Filed herewith.
(7) Underwriting Contracts - (b).
(8) Bonus or Profit Sharing Contracts--Not Applicable.
(9) Custodian Agreement - Filed herewith.
(10) Rule 12b-1 plan and Rule 18f-3 plan - Not applicable.
(11) Consent and Opinion of Counsel as to legality of shares. - (b).
(12) Opinion and Consent as to Tax Matters - to be filed by
Pre-Effective Amendment.
(13) Other Material Contracts - Administration Agreement - Filed herewith.
(14) Independent Auditors' Consent - (b).
(15) Not Applicable.
(16) Power of Attorney - Filed herewith.
(17) Not Applicable.
(a) Incorporated by reference to the Form N-1A Registration Statement
filed on July 14, 1999.
(b) To be filed by post-effective amendment to the Form N-1A Registration
Statement.
ITEM 17. UNDERTAKINGS.
(1) Registrant agrees that, prior to any public
reoffering of the securities registered through the
use of a prospectus which is part of this
registration statement by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c) of the Securities Act of 1933, the
reoffering prospectus will contain the information
called for by the applicable registration form for
the reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other items of the applicable.
(2) The undersigned Registrant agrees that every
prospectus that is filed under paragraph (a) above
will be filed as part of an amendment to the
Registration Statement and will not be used until the
amendment is effective, and that, in determining any
liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new
registration statement for the securities offered
therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide
offering of them.
SIGNATURES
As required by the Securities Act of 1933, this registration
statement has been signed on behalf of the Registrant, in the City of Los Altos
and State of California, on the 16th day of September, 1999.
INGENUITY CAPITAL TRUST
/s/ Kendrick W. Kam*
Kendrick W. Kam
President
As required by the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
Kendrick W. Kam* President, Treasurer, Trustee September 16, 1999
- ------------------------ of Trustees
Kendrick W. Kam
Arthur L. Roth* Chairman of the Board September 16, 1999
- ------------------------ of Trustees
Arthur L. Roth
William J. Scilacci* Trustee September 16, 1999
- ------------------------
William J. Scilacci
* By: /s/ Elaine E. Richards.
- ----------------------------------------------------
Elaine E. Richards, pursuant to a Power of Attorney filed herewith.
INGENUITY CAPITAL TRUST
FORM N-14
EXHIBIT INDEX
Number Exhibit
- --------- -------------
1 Amended and Restated Declaration of Trust
2 Bylaws
6 Investment Advisory Contract
8 Custodian Agreement
13 Administration Agreement
16 Power of Attorney
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
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 Trust
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.
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.
INGENUITY CAPITAL TRUST
By:____________________________
Arthur Roth, Chairman
INGENUITY CAPITAL MANAGEMENT, LLC.
By: ____________________________
Kendrick Kam, President
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. Scillacci Trustee
- ------------------------
William J. Scillacci
/s/ Kendrick W. Kam President, Trustee
- -------------------
Kendrick W. Kam
