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As filed with the Securities and Exchange Commission on July 29, 1999
File No.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
The NP Comanche Funds
Two Portland Square
Portland, Maine 04101
(207) 879-1900
D. Blaine Riggle, Esq.
Two Portland Square
Portland, Maine 04101
Copies to:
Harold B. Finn III, Esq.
Finn Dixon & Herling LLP
One Landmark Square
Stamford, Connecticut 06901
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EXPLANATORY NOTE
Approximate Date of Proposed Public Offering: As soon as practicable
after the effectiveness of the registration under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
THE NP COMANCHE FUNDS
PROSPECTUS
OCTOBER XX, 1999
THE NP COMANCHE GROWTH FUND
Shares of the Fund are offered to investors
without any sales charge or Rule 12b-1 (distribution) fees.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY................................. 2
FEE TABLES.......................................... 3
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS.......... 4
MANAGEMENT.......................................... 5
YOUR ACCOUNT........................................ 7
How to Contact the Fund 7
General Information 7
Buying Shares 8
Selling Shares 9
Exchange Privileges 11
OTHER INFORMATION................................... 13
<PAGE>
RISK/RETURN SUMMARY
THE NP COMANCHE GROWTH FUND (THE "FUND")
INVESTMENT GOAL Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY The Fund's investment adviser, NewBridge Partners,
LLC (the "Adviser"), intends to follow a long-term investment philosophy by
investing primarily in the equity securities of "Mid Cap" and "Large Cap"
companies which appear to have growth prospects that exceed those of the overall
stock market.
CONCEPTS TO UNDERSTAND
GROWTH INVESTING means to invest in stocks of companies that have
exhibited faster than average earnings growth over the past few years
and are expected to continue to show high levels of profit growth
MID CAP STOCKS mean securities of companies the market value of which
is between $1 billion and $10 billion
LARGE CAP STOCKS mean securities of companies the market value of
which is in excess of $10 billion
PRINCIPAL RISKS OF INVESTING IN THE FUND
You could lose money on your investment in the Fund and the Fund could
under-perform other investments. The principal risks of investing in the Fund
include:
o The stock market goes down
o The stock market undervalues the stocks in the Fund's portfolio
o The Adviser's judgment as to the fundamentals of an issuer proves to
be wrong
o The Fund's particular investment style falls out of favor with the
market
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
WHO MAY WANT TO INVEST IN THE FUND
You may want to purchase shares of the Fund if:
o You are willing to tolerate significant changes in the value of your
investment
o You are pursuing a long-term goal
o You are willing to accept higher short-term risk
The Fund may NOT be appropriate for you if:
o You want an investment that pursues market trends or focuses only on
particular sectors or industries
o You need regular income or stability of principa
o You are pursuing a short-term goal or investing emergency reserves
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FEE TABLES
The following tables describe the fees and expenses that you will pay if you
invest in the Fund.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and Other
Distributions None
Redemption Fee None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Advisory Fees 0.70%
Distribution (12b-1) Fees None
Other Expenses(1) 0.80%
TOTAL ANNUAL FUND OPERATING EXPENSES(2) 1.50%
</TABLE>
(1) Based on estimated expenses for the Fund's first fiscal year ended XXXX.
(2) The Adviser has voluntarily undertaken to waive a portion of its fees and
assume certain expenses of the Fund to the extent that total annual fund
operating expenses exceed 1.50% of net assets. This undertaking may be
terminated by the Adviser at any time.
The following is a hypothetical example intended to help you compare the cost of
investing in the Fund to the cost of investing in other mutual funds. This
example assumes a $10,000 investment in the Fund, a 5% annual return, that the
Fund's operating expenses remain the same as stated in the table above, and
reinvestment of all distributions and redemption at the end of each period.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
After 1 year After 3 years
$XXX $XXX
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INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek superior, long-term capital
appreciation by investing in companies whose growth prospects appear to exceed
those of the overall market. There is no assurance that the Fund will achieve
this objective.
INVESTMENT STRATEGIES
The Fund seeks to achieve its objective by investing primarily in the common
stock, corporate debt instruments, preferred stock or convertible securities of
"Mid Cap" and "Large Cap" companies. The Adviser analyzes the price, earnings,
price histories, balance sheet characteristics, perceived management skills and
perceived prospects for earnings growth when deciding which stocks to buy and
sell for the Fund. The Adviser believes that earnings growth is the primary
determinant of stock prices and that efficient financial markets will reward
consistently above-average earnings growth with greater than average capital
appreciation over the long term. The Fund may also invest in the securities of
foreign issuers directly or indirectly through American Depository Receipts
("ADRs").
CONCEPTS TO UNDERSTAND
COMMON STOCK means an equity or ownership interest in a company
PREFERRED STOCK means stock containing certain rights separate from
those conferred by common stock. Preferred shares seldom carry voting
rights but may pay dividends and have a preference over common
shareholders
CONVERTIBLE SECURITY means a security such as preferred stock or bonds
that may be converted into a specified number of shares of common
stock
AMERICAN DEPOSITORY RECEIPT means a receipt typically issued by a bank
or trust company located in the United States that evidences ownership
of the underlying security of a foreign issuer
INVESTMENT RISKS
GENERALLY
There is no assurance that the Fund will achieve its investment objective, and
the Fund's net asset value and total return will fluctuate based upon changes in
the value of its portfolio securities. Upon redemption, an investment in the
Fund may be worth more or less than its original value. The Fund does not, by
itself, provide a complete investment program.
All investments made by the Fund have some risk. Among other things, the market
value of any security in which the Fund may invest is based upon the market's
perception of value and not necessarily the book value of an issuer or other
objective measure of the issuer's worth. Moreover, the stock markets tend to be
cyclical, with periods of generally rising prices and generally declining
prices. These cycles will affect the value of the Fund.
The Fund may be an appropriate investment if you are seeking long-term growth in
your investment, and are willing to tolerate significant fluctuations in the
value of your investment in response to changes in the market value of the
stocks the Fund holds. This type of market movement may affect the price of the
securities of a single issuer, a segment of the domestic stock market, or the
entire market. The investment style for the Fund could fall out of favor with
the market. In other words, if investors lose interest in "growth" stocks, then
the net asset value of the Fund could also decrease. With respect to corporate
debt securities, preferred stock and convertible securities, an increase in
interest rates typically causes a fall in the value of such instruments. These
investments are also subject to the risk that the financial condition of the
issuer may cause it to default or become unable to pay interest or principal
when due. While the management of the Adviser has a number of years of
experience in managing investment portfolios, including a mutual fund,, this is
its first time managing a mutual fund through the Adviser.
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FOREIGN RISKS
Investments by the Fund in foreign securities involves certain risks not
ordinarily associated with investments in domestic securities. These risks
include fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. In addition, with respect to certain foreign
countries, there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic developments which could
adversely affect investments in those countries. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to or as uniform as those of
U.S.-based companies. Foreign securities markets, while growing in volume, have,
for the most part, substantially less volume than U.S. markets, and securities
of many foreign companies are less liquid and their prices are more volatile
than securities of comparable U.S.-based companies. Transaction costs on foreign
securities markets are generally higher than in the United States. There is
generally less government supervision and regulation of foreign exchanges,
brokers and issuers than there is in the United States and the Fund might have
greater difficulty taking appropriate legal action in a foreign court.
TEMPORARY DEFENSIVE POSITION
The Fund may hold cash or cash equivalents such as high quality money market
instruments pending investment and to retain flexibility to pay redemptions and
expenses. In addition, in order to respond to adverse market, economic or other
conditions, the Fund may assume a temporary defensive position and invest
without limit in these instruments. As a result, the Fund may be unable to
achieve its investment objectives.
MANAGEMENT
The business of the Fund is managed under the direction of the Board of Trustees
of The NP Comanche Funds (the "Board"). The Board formulates the general
policies of the Fund and meets periodically to review the Fund's performance,
monitor investment activities and practices, and discuss other matters affecting
the Fund. Additional information regarding the Board, as well as executive
officers, may be found in the Statement of Additional Information ("SAI").
THE ADVISER
NewBridge Partners, LLC, 535 Madison Avenue, 14th Floor, New York, New York
10022, serves as investment adviser to the Fund. Subject to the general control
of the Board, the Adviser makes investment decisions for the Fund. For its
services, the Adviser receives an advisory fee at an annual rate of 0.70% of the
average daily net assets of the Fund.
The Adviser commenced business on March 15, 1999. As of September XX, 1999, the
Adviser had over $XX of assets under management.
All investment decisions for the Fund are made by a committee of investment
professionals and, no persons are primarily responsible for making
recommendations to that committee.
OTHER SERVICE PROVIDERS
Forum Financial Group, LLC and its affiliates (collectively "Forum"), provide
various services to the Fund. As of September 30, 1999, Forum provided
administration and distribution services to investment companies and collective
investment funds with assets of approximately $XX billion.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of the Fund's shares. The distributor acts as the agent of the Fund
in connection with the offering of shares of the Fund. The distributor may enter
into arrangements with banks, broker-dealers or other financial institutions
through which investors may purchase or redeem shares and may, at its own
5
<PAGE>
expense, compensate persons who provide services in connection with the sale or
expected sale of shares of the Fund.
Forum Shareholder Services, LLC (the "Transfer Agent") is the Fund's transfer
agent.
FUND EXPENSES
The Fund pays for all of its expenses. The Adviser or other service providers
may waive all or any portion of their fees, which are accrued daily and paid
monthly. Any waiver would have the effect of increasing a Fund's performance for
the period during which the waiver was in effect.
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<PAGE>
YOUR ACCOUNT
HOW TO CONTACT THE FUND
Write to us at:
The NP Comanche Funds
P.O. Box 446
Portland, ME 04112
Telephone us Toll-Free at:
(888) XXX-XXXX
Wire investments (or ACH payments) to us at:
Bankers Trust Company
New York, New York
ABA #XXXXXXXXX For Credit to:
Forum Shareholder Services, LLC
Account #XX-XXX-XXX
The NP Comanche Funds
(Your Name)
(Your Account Number)
(Your Social Security number or tax identification number)
GENERAL INFORMATION
You pay no sales charge to purchase or sell (redeem) shares of the Fund. The
Fund purchases and sells shares at the net asset value per share, or NAV, next
calculated after the Transfer Agent receives your transaction request in proper
form. For instance, if the Transfer Agent receives your transaction request in
proper form prior to 4 p.m. (eastern time), your transaction will be priced at
that day's NAV. If the Transfer Agent receives your transaction request after 4
p.m., your transaction will be priced at the next day's NAV. The Fund will not
accept orders that request a particular day or price for the transaction or any
other special conditions.
The Fund does not issue share certificates.
You will receive periodic statements and a confirmation of each transaction. You
should verify the accuracy of all transactions in your account as soon as you
receive your confirmation.
The Fund reserves the right to impose minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
WHEN AND HOW NAV IS DETERMINED. The Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may be changed in case of an emergency or, if the New York Stock
Exchange closes early. The Fund's NAV is determined by taking the market value
of all securities owned by the fund (plus all other assets such as cash),
subtracting all liabilities and then dividing the result (net assets) by the
number of shares outstanding. The Fund values securities for which market
quotations are readily available at current market value. If market quotations
are not readily available, the Fund values securities at fair value as
determined by the Board (or its delegate). If the Fund holds foreign securities,
the Fund's NAV may change on days when shareholders will not be able to purchase
or redeem the Fund's shares.
TRANSACTIONS THROUGH THIRD PARTIES. If you invest through a broker or other
financial institution, the policies and fees charged by that institution may be
different than those of the Fund. Banks, brokers, retirement plans and
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<PAGE>
financial advisers may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution or retirement plan for further information.
BUYING SHARES
All investments must be in U.S. dollars and checks must be drawn on U.S. banks.
CHECKS. For individual accounts or for accounts established pursuant to
a Uniform Gifts to Minors Act ("UMGA") or a Uniform Transfer to Minors
Act ("UTMA"), the check must be made payable to "The NP Comanche Funds"
or to one or more owners of the account and endorsed to "The NP
Comanche Funds." For all other accounts, the check must be made
payable on its face to "The NewBridge Funds." No other method of
check payment is acceptable (for instance, you may not pay by travelers
check).
ACH PAYMENT. Instruct your financial institution to make an ACH
(automated clearinghouse) payment to us. These payments typically take
two days. Your financial institution may charge you a fee for this
service.
WIRES. Instruct your financial institution to make a Federal Funds
wire payment to us. Your financial institution may charge you a fee
for this service.
MINIMUM INVESTMENTS. The Fund accepts payments in the following minimum amounts:
<TABLE>
<S> <C> <C>
MINIMUM INITIAL INVESTMENT MINIMUM ADDITIONAL INVESTMENT
Standard Account $10,000 None
Traditional and Roth IRA Accounts $2,000 None
Electronic Fund Transfers $10,000 $50
Automatic Investment Plans $10,000 $50
</TABLE>
The Adviser or the Fund's administrator may, at their discretion, waive the
above investment minimums.
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<TABLE>
<CAPTION>
ACCOUNT REQUIREMENTS
<S> <C>
TYPE OF ACCOUNT REQUIREMENTS
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INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Joint accounts can have two or more owners
Individual accounts are owned by one person, as are sole (tenants)
proprietorship accounts. o Instructions must be signed by all persons
required to sign (you choose who must sign)
exactly as each name appears on the account
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GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a custodial
These custodial accounts provide a way to give money to a account under the Uniform Gift to Minors
child and obtain tax benefits. You can give up to $10,000 Act or the Uniform Transfers to Minors Act
a year per child without paying Federal gift tax. o The trustee must sign instructions in a manner
indicating trustee capacity
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CORPORATIONS AND PARTNERSHIPS o For corporations, provide a corporate
resolution signed by an authorized person with a
signature guarantee
o For partnerships, provide a certification for
a partnership agreement, or the pages from the
partnership agreement that identify the general
partners
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TRUSTS o The trust must be established before an
account can be opened
o Provide a certification for trust, or the
pages from the trust document that identify the
trustees
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</TABLE>
<TABLE>
<CAPTION>
INVESTMENT PROCEDURES
<S> <C>
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
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BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
o Complete the application confirmation statement Or
o Mail us your application and a check o Write a letter to us
o Write your account number on your check
o Mail us the slip (or your letter) and a check
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BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to us
o Call us and we will assign you an account number
o Mail us your application
o Instruct your bank to wire your money to us
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BY ACH PAYMENT BY AUTOMATIC INVESTMENT
o Call or write us for an account application o Call or write us for an "Automatic Investment"
o Complete the application form
o Call us and we will assign you an account number o Complete the form
o Mail us your application o Attach a voided check to your form
o Make an ACH payment o Mail us the form and the voided check
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
AUTOMATIC INVESTMENTS. You may invest a specified amount of money in the Fund
once or twice a month on specified dates. These payments are taken from your
bank account by ACH payment. Automatic investments must be for at least $50.
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LIMITATIONS ON PURCHASES. The Fund reserves the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Fund or its operations. This includes those from any individual or group
who, in the Fund's view, is likely to engage in excessive trading (usually
defined as more than four or more substantial redemptions or exchanges within a
calendar year).
CANCELED OR FAILED PAYMENTS. The Fund accepts checks and ACH transfers at full
value subject to collection. If your payment for shares is not received or you
pay with a check or ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by the
Fund or the Transfer Agent, and the Fund may redeem shares you own in the
account (or another identically registered account in any other series of The NP
Comanche Funds) as reimbursement. The Fund and its agents have the right to
reject or cancel any purchase, exchange, or redemption due to nonpayment.
SELLING SHARES
The Fund processes redemption orders promptly and you will generally receive
redemption proceeds within a week. Delays may occur in cases of very large
redemptions, excessive trading or during unusual market conditions. If the Fund
has not yet collected payment for the shares you are selling, however, it may
delay sending redemption proceeds for up to 15 calendar days.
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TO SELL SHARES FROM YOUR ACCOUNT
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BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send your proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire requests are only available if:
o You have elected wire redemption privileges AND
o Your request is for $10,000 or more
o Call us with your request (if you have elected telephone redemption
privileges - See "By Telephone") OR
o Mail us your request (See "By Mail")
BY TELEPHONE
o Telephone requests are only available if you have elected telephone
redemption privileges
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
o Your proceeds will be:
o Mailed to you Or
o Wired to you (if you have elected wire redemption privileges - See "By
Wire")
AUTOMATICALLY
o Call or write us for an "Automatic Redemption" form
o Attach a voided check to your form
o Mail us your form and the voided check
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TELEPHONE REDEMPTION PRIVILEGES. You may only request your shares by telephone
if you elect telephone redemption privileges on your account application or a
separate form. You may be responsible for any fraudulent telephone order as long
as the Transfer Agent takes reasonable measures to verify the order.
WIRE REDEMPTION PRIVILEGES. You may only request your shares by wire if you
elect wire redemption privileges on your account application or a separate form.
The minimum amount you may request by wire is $10,000. If you wish to make your
wire request by telephone, you must also elect telephone redemption privileges.
AUTOMATIC REDEMPTION. If you own shares of the Fund with an aggregated value of
at least $10,000, you may request a specified amount of money from your account
once a month or once a quarter on a specified date. These payments are sent from
your account to a designated bank account by ACH payment.
Automatic requests must be for at least $100.
SIGNATURE GUARANTEE REQUIREMENTS. To protect you and the Fund against fraud,
signatures on certain requests must have a "signature guarantee." For requests
made in writing, a signature guarantee is required in order to:
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o Redeem over $50,000 worth of shares
o Change the record name or address of your account
o Redeem from your account if the record name or address of your account
has changed within the last 30 days
o Send proceeds to any person, address, brokerage firm or bank account
not on record
o Send proceeds to an account with a different registration (name or
ownership) from yours
o Change elections relating to automatic investment or redemption,
distribution, telephone requests or any other election in connection
with your account
A signature guarantee verifies the authenticity of your signature. You can
obtain one from most banking institutions or securities brokers, but not from a
notary public.
SMALL ACCOUNTS. If the value of your account falls below $10,000 (not including
IRAs), the Fund may ask you to increase your balance. If the account value is
still below $10,000 after 60 days, the Fund may close your account and send you
the proceeds. The Fund will not close your account if it falls below these
amounts solely as a result of a reduction in your account's market value.
REDEMPTION IN KIND. The Fund reserves the right to make redemptions "in kind" --
payment of redemption proceeds in portfolio securities rather than cash --if the
amount requested is large enough to affect the Fund's operations (for example,
if it represents more than 1% of the Fund's assets).
LOST ACCOUNTS. The Transfer Agent will consider your account "lost" if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is "lost," all
distributions on the account will be reinvested in additional shares of the
Fund. In addition, the amount of any outstanding (unpaid for six months or more)
checks for distributions that have been returned to the Transfer Agent will be
reinvested and the checks will be canceled.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy, also known as an exchange, Investor class
shares of Daily Assets Cash Fund, Daily Assets Government Fund, Daily Assets
Government Obligations Fund, and Investors Bond Fund (series of the Forum
Funds). Because exchanges are treated as a sale and purchase, they may have tax
consequences.
REQUIREMENTS. Exchanges may be made only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but the Fund reserves the right to limit exchanges. See "Buying
Shares - Limitations on Purchases."
HOW TO EXCHANGE
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BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The names of the funds from which you are exchanging into and out of
o The dollar amount or number of shares you want to sell (and exchange)
o If opening a new account with different shareholder privileges, complete an
account application o Mail us your request and documentation
BY TELEPHONE
o Telephone exchanges are only available if you have elected telephone
redemption privileges
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
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RETIREMENT ACCOUNTS
The Fund offers IRA accounts, including traditional and Roth IRAs. Fund shares
may also be an appropriate investment for other retirement plans. Before
investing in any IRA or other retirement plan, you should consult your tax
adviser. Whenever making an investment in an IRA, be sure to indicate the year
in which the contribution is made.
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OTHER INFORMATION
DISTRIBUTIONS
Distributions of net investment income are declared and paid quarterly by the
Fund. Any net capital gain realized by the Fund will be distributed at least
annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
The Fund intends to operate in a manner so that it will not be liable for
Federal income or excise tax.
Distributions of net investment income or short-term capital gain are taxable to
you as ordinary income. Distributions of long-term capital gain are taxable to
you as long-term capital gain regardless of how long you have held your shares.
Distributions may also be subject to state and local taxes.
Distributions of capital gain and the Fund's distribution of net investment
income reduce the net asset value of the Fund's shares by the amount of the
distribution. If you purchase shares prior to these distributions, you are taxed
on the distribution even though the distribution represents a return of your
investment.
Dividends and interest payable on the Fund's foreign portfolio securities may be
subject to foreign withholding taxes. To the extent such taxes are not offset by
credits or deductions allowed to investors under the Federal income tax laws,
they may reduce the net return to shareholders of the Fund.
The sale or exchange of Fund shares is a taxable transaction for Federal income
tax purposes.
The Fund will mail reports containing information about the Fund's distributions
during the year to you after December 31 of each year.
Consult your tax adviser about the Federal, state and local tax consequences in
your particular circumstances.
ORGANIZATION
The NP Comanche Funds is a Delaware business trust that is registered with the
SEC as an open-end, management investment company (a "mutual fund"). The Fund is
a series of The NP Comanche Funds. It is not intended that meetings of
shareholders be held except when required by Federal or Delaware law. All
shareholders of The NP Comanche Funds are entitled to vote at shareholders'
meetings unless a matter is determined to affect a series of The NP Comanche
Funds (such as approval of an advisory agreement for the Fund). From time to
time, large shareholders may control the Fund or The NP Comanche Funds.
YEAR 2000
Certain computer systems may not process date-related information properly on
and after January 1, 2000. The Adviser and administrator are addressing this
Year 2000 issue and its possible impact on their systems. The Fund's other
service providers have informed the Fund that they are taking similar measures.
This matter, if not corrected, could adversely affect the services provided to
the Fund or the companies in which the Fund invests and, therefore, could lower
the value of your shares.
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<TABLE>
<S> <C>
FOR MORE INFORMATION
The following documents will be available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS
The Fund will provide annual and semi-annual reports to shareholders that
THE NP COMANCHE GROWTH FUND will provide additional information about the Fund's
investments. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its preceding fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about the Fund and is
incorporated by reference into this Prospectus.
You can get free copies of both reports (when available) and the SAI, request
other information and discuss your questions about the Fund by
contacting your broker or the Fund at:
The NP Comanche Funds
Two Portland Square
Portland, Maine 04101
888-XXX-XXXX
http://www.XXXXXXXXXXXXX.com
You can also review the Fund's reports (when available) and SAIs at the
Public Reference Room of the Securities and Exchange Commission. You can
get copies, for a fee, by writing to or calling the following:
Public Reference Room The NP Comanche Funds
Securities and Exchange Commission P.O. Box 446
Washington, D.C. 20549-6009 Portland, ME 04112
Telephone: 800-SEC-0330 888-XXX-XXXX
Free copies are available from the Commission's Internet
website at http://www.sec.gov.
Investment Company Act File No. XXX-XXXX.
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER XX, 1999
THE NP COMANCHE FUNDS
The NP Comanche Growth Fund
FUND INFORMATION:
The NP Comanche Funds
Two Portland Square
Portland, Maine 04101
(888) XXX-XXXX
INVESTMENT ADVISER:
NewBridge Partners, LLC
535 Madison Avenue, 14th Floor
New York, New York 10022
ACCOUNT INFORMATION AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(888) XXX-XXXX
This Statement of Additional Information, or SAI, supplements the Prospectus
dated October XX, 1999, as may be amended from time to time, offering shares the
NP Comanche Growth Fund (the "Fund"). This SAI is not a prospectus and should
only be read in conjunction with the Prospectus. The Prospectus may be obtained
without charge by contacting shareholder services at the address or telephone
number listed above.
<PAGE>
TABLE OF CONTENTS
Glossary ...................................................... XX
1. Investment Policies and Risks.................................. XX
2. Investment Limitations......................................... XX
3. Performance Data and Advertising............................... XX
4. Management..................................................... XX
5. Portfolio Transactions......................................... XX
6. Additional Purchase and Redemption Information................. XX
7. Taxation ...................................................... XX
8. Other Matters.................................................. XX
Appendix A - Description of Securities Ratings.......................... A-1
<PAGE>
GLOSSARY
"Adviser" means NewBridge Partners, LLC.
"Board" means the Board of Trustees of the Trust.
"CFTC" means the U.S. Commodities Futures Trading Commission.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means the custodian of the Fund's assets.
"FAdS" means Forum Administrative Services, LLC, administrator of the
Fund.
"FAcS" means Forum Accounting Services, LLC, the accountant of the
Fund.
"FFS" means Forum Fund Services, LLC, distributor of the Fund's shares.
"Fund" means the NP Comanche Growth Fund.
"Fitch" means Fitch IBCA, Inc.
"IRS" mean Internal Revenue Service.
"Moody's" means Moody's Investors Service.
"NAV" means net asset value.
"NRSRO" means a nationally recognized statistical rating organization.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's.
"Stock Index Futures" means futures contracts that relate to broadly
based stock indices.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer
agent and distribution disbursing agent of the Fund.
"Trust" means The NP Comanche Funds.
"U.S. Government Securities" means obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"U.S. Treasury Securities" means obligations issued or guaranteed by
the U.S. Treasury.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
<PAGE>
1. INVESTMENT POLICIES AND RISKS
The following discussion supplements the disclosure in the Prospectus about the
Fund's investment techniques, strategies and risks.
A. SECURITY RATINGS INFORMATION
The Fund's investments in fixed income securities are subject to credit risk
relating to the financial condition of the issuers of the securities that the
Fund holds. To limit credit risk, the Fund generally may only invest its assets
in debt securities that, with the exception of convertible securities, are
considered investment grade. Investment grade means rated in the top four
long-term rating categories or top two short-term rating categories by an NRSRO,
or unrated and determined by the Adviser to be of comparable quality. The lowest
long-term ratings that are investment grade for corporate bonds, including
convertible bonds, are "Baa" in the case of Moody's and "BBB" in the case of S&P
and Fitch; for preferred stock are "Baa" in the case of Moody's and "BBB" in the
case of S&P and Fitch; and for short-term debt, including commercial paper, are
"Prime-2 (P-2)" in the case of Moody's, "A-2" in the case of S&P and "F-2" in
the case of Fitch.
Unrated securities may not be as actively traded as rated securities. The Fund
may retain securities whose rating has been lowered below the lowest permissible
rating category (or that are unrated and determined by the Adviser to be of
comparable quality to securities whose rating has been lowered below the lowest
permissible rating category) if the Adviser determines that retaining such
security is in the best interests of the Fund. Because a downgrade often results
in a reduction in the market price of the security, sale of a downgraded
security may result in a loss.
Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The Fund may
use these ratings to determine whether to purchase, sell or hold a security.
Ratings are general and are not absolute standards of quality. Securities with
the same maturity, interest rate and rating may have different market prices. If
an issue of securities ceases to be rated or if its rating is reduced after it
is purchased by the Fund, the Adviser will determine whether the Fund should
continue to hold the obligation. To the extent that the ratings given by a NRSRO
may change as a result of changes in such organizations or their rating systems,
the Adviser will attempt to substitute comparable ratings. Credit ratings
attempt to evaluate the safety of principal and interest payments and do not
evaluate the risks of fluctuations in market value. Also, rating agencies may
fail to make timely changes in credit ratings. An issuer's current financial
condition may be better or worse than a rating indicates.
B. TEMPORARY DEFENSIVE POSITION
The Fund may assume a temporary defensive position and may invest without limit
in money market instruments that are of prime quality. Prime quality instruments
are those instruments that are rated in one of the two highest short-term rating
categories by an NRSRO or, if not rated, determined by the Adviser to be of
comparable quality. Except as noted below with respect to variable master demand
notes, issues of commercial paper normally have maturities of less than nine
months and fixed rates of return.
Money market instruments usually have maturities of one year or less and fixed
rates of return. The money market instruments in which the Fund may invest
include U.S. Government Securities, commercial paper, time deposits, bankers
acceptances and certificates of deposit of banks doing business in the United
States that have, at the time of investment, total assets in excess of one
billion dollars and that are insured by the Federal Deposit Insurance
Corporation, corporate notes and short-term bonds and money market mutual funds.
Some money market instruments in which the Fund may invest have variable or
floating rates of interest. These obligations include master demand notes that
permit investment of fluctuating amounts at varying rates of interest pursuant
to direct arrangement with the issuer of the instrument. The issuer of these
obligations often has the right, after a given period, to prepay the outstanding
principal amount of the obligations upon a specified number of days'
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notice. These obligations generally are not traded, and there is generally no
established secondary market for these obligations. To the extent a demand note
does not have a 7-day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.
C. HEDGING AND OPTION INCOME STRATEGIES
The Fund may seek to hedge against a decline in the value of securities it owns
or an increase in the price of securities that it plans to purchase. The Fund
accomplishes a hedge by purchasing options to acquire securities or writing
(selling) covered options on securities in which it has invested, other than for
bona fide hedging purposes, by buying or selling stock index futures based in
whole or in part on securities in which the Fund may invest, as well as by
buying or selling options on such futures contracts.
The Fund will only invest in futures contracts, options on futures contracts and
other options contracts that are subject to the jurisdiction of the CFTC after
filing a notice of eligibility and otherwise complying with the requirements of
Section 4.5 of the rules of the CFTC. Under that section, the Fund may not enter
into any futures contract or option on a futures contract if, as a result, the
aggregate initial margins and premiums required to establish such other
positions would exceed 5% of the Fund's net assets.
The Fund has no current intention of investing in futures contracts and options
thereon for purposes other than hedging.
These instruments are often referred to as "derivatives," which may be defined
as financial instruments whose performance is derived, at least in part, from
the performance of another asset (such as a security, currency or an index of
securities).
The Fund may write any covered options. An option is covered if, as long as the
Fund is obligated under the option, it owns an offsetting position in the
underlying security or maintains cash, U.S. Government Securities or other
liquid, securities with a value at all times sufficient to cover the Fund's
obligation under the option.
No assurance can be given, however, that any hedging or option income strategy
will succeed in achieving its intended result.
1. IN GENERAL
A call option is a contract pursuant to which the purchaser of the call option,
in return for a premium paid, has the right to buy the security (or index)
underlying the option at a specified exercise price at any time during the term
of the option. The writer of the call option, who receives the premium, has the
obligation upon exercise of the option to deliver the underlying security (or a
cash amount equal to the value of the index) against payment of the exercise
price during the option period.
A put option gives its purchaser, in return for a premium, the right to sell the
underlying security (or index) at a specified price during the term of the
option. The writer of the put option, who receives the premium, has the
obligation to buy the underlying security (or receive a cash amount equal to the
value of the index), upon exercise at the exercise price during the option
period.
The amount of premium received or paid for an option is based upon certain
factors, including the market price of the underlying security or index, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security or index, the option period and interest
rates.
There are a limited number of options contracts on securities indices and option
contracts may not be available on all securities that the Fund may own or seek
to own.
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Bond and stock index futures contracts are bilateral agreements in which two
parties agree to take or make delivery of an amount of cash equal to a specified
dollar amount times the difference between the bond or stock index value at the
close of trading of the contract and the price at which the futures contract is
originally struck. No physical delivery of the securities comprising the index
is made. Generally, these futures contracts are closed out prior to the
expiration date of the contract.
Options on futures contracts are similar to stock options except that an option
on a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract rather than to purchase or sell
stock, at a specified exercise price at any time during the period of the
option. Upon exercise of the option, the delivery of the futures position to the
holder of the option will be accompanied by transfer to the holder of an
accumulated balance representing the amount by which the market price of the
futures contract exceeds, in the case of a call, or is less than, in the case of
a put, the exercise price of the option on the future.
COVERED CALLS AND HEDGING. The Fund may purchase or sell (write) put and call
options on securities to seek to hedge against a decline in the value of
securities owned by it or an increase in the price of securities which it plans
to purchase. Hedging or option income strategies include the writing and
purchase of exchange-traded and over-the-counter options on individual
securities or financial indices and the purchase and sale of financial futures
contracts and related options. Whether or not used for hedging purposes, these
investment techniques involve risks that are different in certain respects from
the investment risks associated with the other investments of the Fund.
Principal among such risks are: (1) the possible failure of such instruments as
hedging techniques in cases where the price movements of the securities
underlying the options or futures do not follow the price movements of the
portfolio securities subject to the hedge; (2) potentially unlimited loss
associated with futures transactions and the possible lack of a liquid secondary
market for closing out a futures position; and (3) possible losses resulting
from the inability of the Adviser to correctly predict the direction of stock
prices, interest rates and other economic factors. To the extent the Fund
invests in foreign securities, it may also invest in options on foreign
currencies, foreign currency futures contracts and options on those futures
contracts. Use of these instruments is subject to regulation by the SEC, the
options and futures exchanges upon which options and futures are traded or the
CFTC.
Except as otherwise noted in this SAI, the Fund will not use leverage in its
options and hedging strategies. In the case of transactions entered into as a
hedge, the Fund will hold securities, currencies or other options or futures
positions whose values are expected to offset ("cover") its obligations
thereunder. The Fund will not enter into a hedging strategy that exposes it to
an obligation to another party unless at least one of the following conditions
is met. The Fund owns either an offsetting ("covered") position; or it owns
cash, U.S. Government Securities or other liquid securities (or other assets as
may be permitted by the SEC) with a value sufficient at all times to cover its
potential obligations. When required by applicable regulatory guidelines, the
Fund will set aside cash, U.S. Government Securities or other liquid securities
(or other assets as may be permitted by the SEC) in a segregated account in the
prescribed amount. Any assets used for cover or held in a segregated account
cannot be sold or closed out while the hedging or option income strategy is
outstanding, unless they are replaced with similar assets. As a result, there is
a possibility that the use of cover or segregation involving a large percentage
of the Fund's assets could impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.
OPTIONS STRATEGIES. The Fund may purchase put and call options written by others
and sell put and call options covering specified individual securities,
securities or financial indices or currencies. A put option (sometimes called a
"standby commitment") gives the buyer of the option, upon payment of a premium,
the right to deliver a specified amount of currency to the writer of the option
on or before a fixed date at a predetermined price. A call option (sometimes
called a "reverse standby commitment") gives the purchaser of the option, upon
payment of a premium, the right to call upon the writer to deliver a specified
amount of currency on or before a fixed date, at a predetermined price. The
predetermined prices may be higher or lower than the market value of the
underlying currency. The Fund may buy or sell both exchange-traded and
over-the-counter ("OTC") options. The Fund will purchase or write an option only
if that option is traded on a recognized U.S. options exchange or if the Adviser
believes that a liquid secondary market for the option exists. When the Fund
purchases an OTC option, it relies on the dealer from whom it has purchased the
OTC option to make or take delivery of the currency underlying the option.
Failure by the dealer to do so would result in the loss of the premium paid by
the Fund as well as the loss of the expected benefit of the
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transaction. OTC options and the securities underlying these options currently
are treated as illiquid securities by the Fund.
Upon selling an option, the Fund receives a premium from the purchaser of the
option. Upon purchasing an option the Fund pays a premium to the seller of the
option. The amount of premium received or paid by the Fund is based upon certain
factors, including the market price of the underlying securities, index or
currency, the relationship of the exercise price to the market price, the
historical price volatility of the underlying assets, the option period, supply
and demand and interest rates.
The Fund may purchase call options on debt securities that the Fund's Adviser
intends to include in the Fund's portfolio in order to fix the cost of a future
purchase. Call options may also be purchased to participate in an anticipated
price increase of a security on a more limited risk basis than would be possible
if the security itself were purchased. If the price of the underlying security
declines, this strategy would serve to limit the potential loss to the Fund to
the option premium paid. Conversely, if the market price of the underlying
security increases above the exercise price and the Fund either sells or
exercises the option, any profit eventually realized will be reduced by the
premium paid. The Fund may similarly purchase put options in order to hedge
against a decline in market value of securities held in its portfolio. The put
enables the Fund to sell the underlying security at the predetermined exercise
price; thus the potential for loss to the Fund is limited to the option premium
paid. If the market price of the underlying security is lower than the exercise
price of the put, any profit the Fund realizes on the sale of the security would
be reduced by the premium paid for the put option less any amount for which the
put may be sold.
The Adviser may write call options when it believes that the market value of the
underlying security will not rise to a value greater than the exercise price
plus the premium received. Call options may also be written to provide limited
protection, to the extent of the call premium received less any transaction
costs, against a decrease in the market price of a security.
The Fund may purchase and write put and call options on fixed income or equity
security indices in much the same manner as the options discussed above, except
that index options may serve as a hedge against overall fluctuations in the
fixed income or equity securities markets (or market sectors) or as a means of
participating in an anticipated price increase in those markets. The
effectiveness of hedging techniques using index options will depend on the
extent to which price movements in the index selected correlate with price
movements of the securities, which are being hedged. Index options are settled
exclusively in cash.
2. RISKS
The Fund's use of options subjects the Fund to certain investment risks and
transaction costs to which it might not otherwise be subject. These risks
include:
o Dependence on the Adviser's ability to predict movements in the prices of
individual securities and fluctuations in the general securities markets.
o Imperfect correlations between movements in the prices of options and
movements in the price of the securities (or indices) hedged or used for
cover, which may cause a given hedge not to achieve its objective.
o The fact that the skills and techniques needed to trade these instruments
are different from those needed to select the securities in which the Fund
invests.
o Lack of assurance that a liquid secondary market will exist for any
particular instrument at any particular time, which, among other things,
may hinder the Fund's ability to limit exposures by closing its positions.
o The possible need to defer closing out of certain options, futures
contracts and related options to avoid adverse tax consequences.
Other risks include the inability of the Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price, and the possible loss of the entire premium paid for options
purchased by the Fund.
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D. FOREIGN INVESTMENT
1. FOREIGN CURRENCY TRANSACTIONS
The Fund may conduct foreign currency exchange transactions, for hedging
purposes, either on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign exchange market or by entering into a forward foreign currency contract.
A forward foreign currency contract ("forward contract") involves an obligation
to purchase or sell a specific amount of a specific currency at a future date,
which may be any fixed number of days (usually less than one year) from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. Forward contracts are considered to be derivatives. The Fund enters
into forward contracts in order to "lock in" the exchange rate between the
currency it will deliver and the currency it will receive for the duration of
the contract. In addition, the Fund may enter into forward contracts to hedge
against risks arising from securities the Fund owns or anticipates purchasing,
or the U.S. dollar value of interest and dividends paid on those securities. The
Fund will not enter into forward contracts for speculative purposes.
If the Fund makes delivery of the foreign currency at or before the settlement
of a forward contract, it may be required to obtain the currency through the
conversion of assets of the Fund into the currency. The Fund may close out a
forward contract obligating it to purchase a foreign currency by selling an
offsetting contract, in which case it will realize a gain or a loss.
Foreign currency transactions involve certain costs and risks. The Fund incurs
foreign exchange expenses in converting assets from one currency to another.
Forward contracts involve a risk of loss if the Adviser is inaccurate in its
prediction of currency movements. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain. The precise matching of forward contract
amounts and the value of the securities involved is generally not possible.
Accordingly, it may be necessary for the Fund to purchase additional foreign
currency if the market value of the security is less than the amount of the
foreign currency the Fund is obligated to deliver under the forward contract and
the decision is made to sell the security and make delivery of the foreign
currency. The use of forward contracts as a hedging technique does not eliminate
fluctuations in the prices of the underlying securities the Fund owns or intends
to acquire, but it does fix a rate of exchange in advance. Although forward
contracts can reduce the risk of loss due to a decline in the value of the
hedged currencies, they also limit any potential gain that might result from an
increase in the value of the currencies.
In addition, there is no systematic reporting of last sale information for
foreign currencies, and there is no regulatory requirement that quotations
available through dealers or other market sources be firm or revised on a timely
basis. Quotation information available is generally representative of very large
transactions in the interbank market. The interbank market in foreign currencies
is a global around-the-clock market. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, the Fund may
be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
The Fund has no present intention to enter into currency futures contracts or
options thereon, but may do so in the future, particularly in order to hedge
against the risk of foreign exchange fluctuation on foreign securities the Fund
holds in its portfolio or which it intends to purchase.
2. FOREIGN SECURITIES
All investments, domestic and foreign, involve certain risks. Investments in the
securities of foreign issuers may involve risks in addition to those normally
associated with investments in the securities of U.S. issuers. All foreign
investments are subject to risks of foreign political and economic instability,
adverse movements in foreign exchange rates, the imposition or tightening of
exchange controls or other limitations on repatriation of foreign capital, and
changes in foreign governmental attitudes towards private investment, possibly
leading to nationalization, increased taxation or confiscation of foreign
investors' assets.
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Moreover, dividends payable on foreign securities may be subject to foreign
withholding taxes, thereby reducing the income available for distribution to the
Fund's shareholders; commission rates payable on foreign transactions are
generally higher than in the United States; foreign accounting, auditing and
financial reporting standards differ from those in the United States and,
accordingly, less information may be available about foreign companies than is
available about issuers of comparable securities in the United States; and
foreign securities may trade less frequently and with lower volume and may
exhibit greater price volatility than United States securities.
Changes in foreign exchange rates will also affect the value in U.S. dollars of
all foreign currency-denominated securities held by the Fund. Exchange rates are
influenced generally by the forces of supply and demand in the foreign currency
markets and by numerous other political and economic events occurring outside
the United States, many of which may be difficult, if not impossible, to
predict. Income from foreign securities will be received and realized in foreign
currencies, and the Fund is required to compute and distribute income in U.S.
dollars. Accordingly, a decline in the value of a particular foreign currency
against the U.S. dollar occurring after the Fund's income has been earned and
computed in U.S. dollars may require the Fund to liquidate portfolio securities
to acquire sufficient U.S. dollars to make a distribution. Similarly, if the
exchange rate declines between the time the Fund incurs expenses in U.S. dollars
and the time such expenses are paid, the Fund may be required to liquidate
additional foreign securities to purchase the U.S. dollars required to meet such
expenses.
The Fund may purchase foreign bank obligations. In addition to the risks
described above that are generally applicable to foreign investments, the
investments that the Fund makes in obligations of foreign banks, branches or
subsidiaries may involve further risks, including differences between foreign
banks and U.S. banks in applicable accounting, auditing and financial reporting
standards, and the possible establishment of exchange controls or other foreign
government laws or restrictions applicable to the payment of certificates of
deposit or time deposits that may affect adversely the payment of principal and
interest on the securities held by the Fund.
3. DEPOSITORY RECEIPTS
The Fund may invest in the securities of foreign issuers directly or indirectly
through sponsored or unsponsored depositary receipts. A depositary receipt is a
receipt for shares of a foreign-based company that entitles the holder to
distributions on the underlying security. Depositary receipts include sponsored
or unsponsored American Depositary Receipts ("ADRs") or European Depositary
Receipts ("EDRs"), and other similar securities global instruments. ADRs are
typically issued by a U.S. bank or trust company, evidence ownership of
underlying securities issued by a foreign company, and are designed for use in
U.S. securities markets. EDRs are receipts issued by a European financial
institution evidencing an arrangement similar to that of ADRs, and are designed
for use in European securities markets. A fund invests in depository receipts in
order to obtain exposure to foreign securities markets.
Unsponsored depositary receipts may be created without the participation of the
foreign issuer. Holders of these receipts generally bear all the costs of the
depositary receipt facility, whereas foreign issuers typically bear certain
costs in a sponsored depositary receipt. The bank or trust company depository of
an unsponsored depositary receipt may be under no obligation to distribute
shareholder communications received from the foreign issuer or to pass through
voting rights. Accordingly, available information concerning the issuer may not
be current and the prices of unsponsored depositary receipts may be more
volatile than the prices of sponsored depositary receipts.
E. REPURCHASE AGREEMENTS
1. IN GENERAL
Repurchase agreements are transactions in which the Fund purchases securities
from a bank or securities dealer and simultaneously commits to resell the
securities to the bank or dealer at an agreed-upon date and at a price
reflecting a market rate of interest unrelated to the purchased security. During
the term of a repurchase agreement, the Fund's custodian maintains possession of
the purchased securities and any underlying collateral, which is maintained at
not less than 100% of the repurchase price. Repurchase agreements allow the Fund
to earn income on its uninvested cash for periods as short as overnight, while
retaining the flexibility to pursue longer-term investments.
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2. REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are transactions in which the Fund sells a
security and simultaneously commits to repurchase that security from the buyer
at an agreed upon price on an agreed upon future date. The resale price in a
reverse repurchase agreement reflects a market rate of interest that is not
related to the coupon rate or maturity of the sold security. For certain demand
agreements, there is no agreed upon repurchase date and interest payments are
calculated daily, often based upon the prevailing overnight repurchase rate.
F. CONVERTIBLE SECURITIES
1. IN GENERAL
Convertible securities, which include convertible debt, convertible preferred
stock and other securities exchangeable under certain circumstances for shares
of common stock, are fixed income securities or preferred stock which generally
may be converted at a stated price within a specific amount of time into a
specified number of shares of common stock. A convertible security entitles the
holder to receive interest paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed,
converted, or exchanged. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities or preferred equity in
that they ordinarily provide a stream of income with generally higher yields
than do those of common stocks of the same or similar issuers. These securities
are usually senior to common stock in a company's capital structure, but usually
are subordinated to non-convertible debt securities.
Convertible securities have unique investment characteristics in that they
generally have higher yields than common stocks, but lower yields than
comparable non-convertible securities. Convertible securities are less subject
to fluctuation in value than the underlying stock since they have fixed income
characteristics; and they provide the potential for capital appreciation if the
market price of the underlying common stock increases.
A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by the Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
2. RISKS
Investment in convertible securities generally entails less risk than investment
in the issuer's common stock. The extent to which such risk is reduced, however,
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security.
3. VALUE OF CONVERTIBLE SECURITIES
The value of a convertible security is a function of its "investment value" and
its "conversion value". The investment value of a convertible security is
determined by comparing its yield with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege. The
conversion value is the security's worth, at market value, if converted into the
underlying common stock. The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may affect the convertible
security's investment value. The conversion value of a convertible security is
determined by the market price of the underlying common stock. If the conversion
value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value and generally the
conversion value decreases as the convertible security approaches maturity. To
the extent the market price of the underlying common stock approaches or exceeds
the conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. In addition, a convertible security
generally will sell at a premium over its conversion value
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determined by the extent to which investors place value on the right to acquire
the underlying common stock while holding a fixed income security.
G. ILLIQUID AND RESTRICTED SECURITIES
The Fund may not acquire securities or invest in repurchase agreements if, as a
result, more than 15% of the Fund's net assets (taken at current value) would be
invested in illiquid securities.
1. IN GENERAL
The term "illiquid securities" means securities that cannot be disposed of
within seven days in the ordinary course of business at approximately the amount
at which the Fund has valued the securities. Illiquid securities include
repurchase agreements not entitling the holder to payment of principal within
seven days, over-the-counter options, securities which are not readily
marketable and, with certain exceptions, restricted securities. Restricted
securities are securities subject to contractual or legal restrictions on resale
because they have not been registered under the 1933 Act. The Fund may treat
certain restricted securities as liquid pursuant to guidelines adopted by the
Board of Trustees.
2. RISKS
Certain risks are associated with holding illiquid and restricted securities.
For instance, limitations on resale may have an adverse effect on the
marketability of a security and the Fund might also have to register a
restricted security in order to dispose of it, resulting in expense and delay.
The Fund might not be able to dispose of restricted or illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions. There can be no assurance that a liquid market will
exist for any security at any particular time. Any security, including
securities determined by the Adviser to be liquid, can become illiquid.
3. DETERMINING LIQUIDITY
The Board has the ultimate responsibility for determining whether specific
securities are liquid or illiquid and has delegated the function of making
determinations of liquidity to the Adviser, pursuant to guidelines approved by
the Board. The Adviser determines and monitors the liquidity of the portfolio
securities and reports periodically on its decisions to the Board. The Adviser
takes into account a number of factors in reaching liquidity decisions,
including but not limited to: (1) the frequency of trades and quotations for the
security; (2) the number of dealers willing to purchase or sell the security and
the number of other potential buyers; (3) the willingness of dealers to
undertake to make a market in the security; and (4) the nature of the
marketplace trades, including the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of the transfer.
An institutional market has developed for certain restricted securities.
Accordingly, contractual or legal restrictions on the resale of a security may
not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the 1933 Act or other exemptions, the Adviser may determine that the securities
are not illiquid.
H. WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Fund may purchase securities offered on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment and settlement,
no payment is made for the securities purchased by the purchaser and, thus, no
interest accrues to the purchaser from the transaction. At the time the Fund
makes the commitment to purchase securities on a when-issued or delayed delivery
basis, the Fund will record the transaction as a purchase and thereafter reflect
the value each day of such securities in determining its net asset value.
8
<PAGE>
1. RISKS
The use of when-issued transactions and forward commitments enables the Fund to
hedge against anticipated changes in interest rates and prices. For instance, in
periods of rising interest rates and falling bond prices, the Fund might sell
securities that it owned on a forward commitment basis to limit its exposure to
falling prices. In periods of falling interest rates and rising bond prices, the
Fund might sell a security and purchase the same or a similar security on a
when-issued or forward commitment basis, thereby obtaining the benefit of
currently higher cash yields. However, if the Adviser forecasts incorrectly the
direction of interest rate movements, the Fund might be required to complete
such when-issued or forward commitment transactions at prices lower than the
then current market values.
The Fund enters into when-issued and forward commitment transactions only with
the intention of actually receiving or delivering the securities, as the case
may be. If the Fund subsequently chooses to dispose of its right to acquire a
when-issued security or its right to deliver or receive against a forward
commitment before the settlement date, it can incur a gain or loss. When-issued
securities may include bonds purchased on a "when, as and if issued" basis under
which the issuance of the securities depends upon the occurrence of a subsequent
event. Any significant commitment of the Fund's assets to the purchase of
securities on a "when, as and if issued" basis may increase the volatility ofthe
Fund's NAV.
The Fund will establish and maintain a separate account with cash, U.S.
Government Securities and other liquid securities in an amount at least equal to
its commitments to purchase securities on a when-issued or delayed delivery
basis.
2. INVESTMENT LIMITATIONS
For purposes of all fundamental and nonfundamental investment policies of the
Fund, (i) the term 1940 Act includes the rules thereunder, SEC interpretations
and any exemptive order upon which the Fund may rely and (ii) the term Code
includes the rules thereunder, IRS interpretations and any private letter ruling
or similar authority upon which the Fund may rely.
The Fund has adopted the investment policies listed in this section which are
nonfundamental policies unless otherwise noted. Except for its investment
objective (see "Investment Objective, Strategies and Risks" in the Prospectus),
which is fundamental, the Fund has not adopted any fundamental policies except
as required by the 1940 Act.
Except as required by the 1940 Act or the Code, if any percentage restriction on
investment or utilization of assets is adhered to at the time an investment is
made, a later change in percentage resulting from a change in the market values
of a Fund's assets or purchases and redemptions of shares will not be considered
a violation of the limitation.
A fundamental policy cannot be changed without the
affirmative vote of the lesser of (i) more than 50% of the outstanding shares of
the Fund or (ii) 67% of the
shares of the Fund present or represented at a shareholders meeting at which the
holders of more than 50% of the outstanding shares of the Fund are present or
represented.
1. DIVERSIFICATION
The Fund may not, with respect to 75% of its assets, purchase a security (other
than a U.S. Government Security or a security of an investment company) if, as a
result: (i) more than 5% of the Fund's total assets would be invested in the
securities of a single issuer, or (ii) the Fund would own more than 10% of the
outstanding voting securities of any single issuer.
9
<PAGE>
2. INDUSTRY CONCENTRATION
a. The Fund may not purchase a security if, as a result, more than 25% of the
Fund's total assets would be invested in securities of issuers conducting their
principal business activities in the same industry. For purposes of this
limitation, there is no limit on: (i) investments in U.S. Government securities,
in repurchase agreements covering U.S. Government Securities, in tax-exempt
securities issued by the states, territories or possessions of the United States
("municipal securities").
b. For purposes of this policy (i) "mortgage related securities," as that term
is defined in the 1934 Act, are treated as securities of an issuer in the
industry of the primary type of asset backing the security, (ii) financial
service companies are classified according to the end users of their services
(for example, automobile finance, bank finance and diversified finance) and
(iii) utility companies are classified according to their services (for example,
gas, gas transmission, electric and gas, and electric and telephone).
3. BORROWING
The Fund may not borrow money if, as a result, outstanding borrowings would
exceed an amount equal to 10% of the Fund's total assets. For purposes of this
limitation, there is no limit on the following to the extent they are fully
collateralized: (i) the delayed delivery of purchased securities (such as the
purchase of when-issued securities), and (ii) reverse repurchase agreements. The
Fund will not purchase portfolio securities while outstanding borrowings of
money exceed 5% of its total assets.
4. REAL ESTATE
The Fund may not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent the
Fund from investing in securities or other instruments backed by real estate,
securities of companies engaged in the real estate business, or in real estate
investment trusts).
5. LENDING
a. The Fund may not make loans to other parties. For purposes of this
limitation, entering into repurchase agreements, lending securities and
acquiring any debt security are not deemed to be the making of loans.
b. The Fund may not lend a security if, as a result, the amount of loaned
securities would exceed an amount equal to 30% of the Fund's total
assets, as determined by SEC guidelines.
6. COMMODITIES
The Fund may not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent the Fund from purchasing or selling options and futures contracts or
from investing in securities or other instruments backed by physical
commodities).
7. UNDERWRITING
The Fund may not underwrite (as that term is defined in the 1933 Act) securities
issued by other persons except, to the extent that in connection with the
disposition of the Fund's assets, the Fund may be deemed to be an underwriter.
8. SENIOR SECURITIES
The Fund may not issue senior securities except to the extent permitted by the
1940 Act.
9. LIQUIDITY
The Fund may not invest more than 15% of its net assets in illiquid securities
(taken at their current value).
10
<PAGE>
10. EXERCISING CONTROL OF ISSUERS
The Fund may not make investments for the purpose of exercising control of an
issuer. Investments by the Fund in entities created under the laws of foreign
countries solely to facilitate investment in securities in that country will not
be deemed the making of investments for the purpose of exercising control.
11. SHORT SALES AND PURCHASING ON MARGIN
a. The Fund may not sell securities short, unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities
sold short (short sales "against the box"), and provided that
transactions in futures contracts and options are not deemed to
constitute selling securities short.
b. The Fund may not purchase securities on margin, except that the Fund
may use short-term credit for the clearance of the Fund's transactions,
and provided that initial and variation margin payments in connection
with futures contracts and options on futures contracts shall not
constitute purchasing securities on margin.
12. SECURITIES OF INVESTMENT COMPANIES
The Fund may not invest in the securities of any investment company, other than
a money market mutual fund, except in connection with a merger, consolidation,
reorganization, or acquisition of assets or where otherwise permitted by the
1940 Act.
13. OPTIONS, WARRANTS AND FUTURES CONTRACTS
The Fund may invest in futures or options contracts regulated by the CFTC for
(i) bona fide hedging purposes within the meaning of the rules of the CFTC and
(ii) for other purposes if, as a result, no more than 5% of the Fund's net
assets would be invested in initial margin and premiums (excluding amounts
"in-the-money") required to establish the contracts.
3. PERFORMANCE DATA AND ADVERTISING
A. PERFORMANCE DATA
The Fund may quote performance in various ways. All performance information
supplied in advertising, sales literature, shareholder reports or other
materials is historical and is not intended to indicate future returns.
The Fund may compare any of its performance information with:
o Data published by independent evaluators such as Morningstar, Inc., Lipper
Analytical Services, Inc., IBC/Donoghue, Inc., CDA/Wiesenberger or other
companies which track the investment performance of investment companies
("Fund Tracking Companies").
o The performance of other mutual funds.
o The performance of recognized stock, bond and other indices, including but
not limited to the Standard & Poor's 500(R) Index, the Russell 2000(R)
Index, the Russell MidcapTM Index, the Russell 1000(R) Value Index, the
Russell 2500(R) Index, the Morgan Stanley - Europe, Australian and Far East
Index, the Dow Jones Industrial Average, the Salomon Brothers Bond Index,
the Shearson Lehman Bond Index, U.S. Treasury bonds, bills or notes and
changes in the Consumer Price Index as published by the U.S. Department of
Commerce.
11
<PAGE>
Performance information may be presented numerically or in a table, graph, or
similar illustration.
Indices are not used in the management of the Fund but rather are standards by
which the Adviser and shareholders may compare the performance of the Fund to an
unmanaged composite of securities with similar, but not identical,
characteristics as the Fund.
The Fund may refer to: (1) general market performances over past time periods
such as those published by Ibbotson Associates (for instance, its "Stocks,
Bonds, Bills and Inflation Yearbook"); (2) mutual fund performance rankings and
other data published by Fund Tracking Companies; and (3) material and
comparative mutual fund data and ratings reported in independent periodicals,
such as newspapers and financial magazines.
The Fund's performance will fluctuate in response to market conditions and other
factors.
B. PERFORMANCE CALCULATIONS
The Fund's performance may be quoted in terms of yield or total return.
1. SEC YIELD
Standardized SEC yields for the Fund used in advertising are computed by
dividing the Fund's interest income (in accordance with specific standardized
rules) for a given 30 day or one month period, net of expenses, by the average
number of shares entitled to receive income distributions during the period,
dividing this figure by the Fund's net asset value per share at the end of the
period and annualizing the result (assuming compounding of income in accordance
with specific standardized rules) in order to arrive at an annual percentage
rate.
Capital gains and losses generally are excluded from these calculations.
Income calculated for the purpose of determining the Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for the Fund may differ from the rate of
distribution of income from the Fund over the same period or the rate of income
reported in the Fund's financial statements.
Although published yield information is useful to investors in reviewing the
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Financial intermediaries may charge their customers that
invest in the Fund fees in connection with that investment. This will have the
effect of reducing the Fund's after-fee yield to those shareholders.
The yields of the Fund are not fixed or guaranteed, and an investment in the
Fund is not insured or guaranteed. Accordingly, yield information should not be
used to compare shares of the Fund with investment alternatives, which, like
money market instruments or bank accounts, may provide a fixed rate of interest.
Also, it may not be appropriate to compare the Fund's yield information directly
to similar information regarding investment alternatives that are insured or
guaranteed.
Yield is calculated according to the following formula:
a - b
Yield = 2[(------ + 1)6 - 1]
cd
Where:
a = dividends and interest earned during the
period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
12
<PAGE>
2. TOTAL RETURN CALCULATIONS
The Fund's total return shows its overall change in value, including changes in
share price and assuming all of the Fund's distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total
returns, the Fund: (1) determines the growth or decline in value of a
hypothetical historical investment in the Fund over a stated period; and (2)
calculates the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period. For example, a cumulative return of 100% over ten years would produce an
average annual total return of 7.18%. While average annual returns are a
convenient means of comparing investment alternatives, investors should realize
that performance is not constant over time but changes from year to year, and
that average annual returns represent averaged figures as opposed to the actual
year-to-year performance of the Fund.
Average annual total return is calculated according to the following formula:
P (1+T) n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable
period, of a hypothetical $1,000 payment made at the
beginning of the applicable period
Because average annual returns tend to smooth out variations in the Fund's
returns, shareholders should recognize that they are not the same as actual
year-by-year results.
OTHER MEASURES OF TOTAL RETURN. Standardized total return quotes may be
accompanied by non-standardized total return figures calculated by alternative
methods.
o The Fund may quote unaveraged or cumulative total returns, which reflect
the Fund's performance over a stated period of time.
o Total returns may be stated in their components of income and capital
(including capital gains and changes in share price) in order to illustrate
the relationship of these factors and their contributions to total return.
Any total return may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments and/or a series of
redemptions over any time period. Total returns may be quoted with or without
taking into consideration the Fund's front-end sales charge or contingent
deferred sales charge (if applicable).
Period total return is calculated according to the following formula:
PT = (ERV/P-1)
Where:
PT = period total return
The other definitions are the same as in average annual total
return above
13
<PAGE>
C. OTHER MATTERS
The Fund may also include various information in its advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity; (2) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar; (for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively); (5) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar-cost
averaging; (6) biographical descriptions of the Fund's portfolio managers and
the portfolio management staff of the Adviser, summaries of the views of the
portfolio managers with respect to the financial markets, or descriptions of the
nature of the Adviser's and its staff's management techniques; (7) the results
of a hypothetical investment in the Fund over a given number of years, including
the amount that the investment would be at the end of the period; (8) the
effects of earning Federal and, if applicable, state tax-exempt income from the
Fund or investing in a tax-deferred account, such as an individual retirement
account or Section 401(k) pension plan; (9) the net asset value, net assets or
number of shareholders of the Fund as of one or more dates; and (10) a
comparison of the Fund's operations to the operations of other funds or similar
investment products, such as a comparison of the nature and scope of regulation
of the products and the products' weighted average maturity, liquidity,
investment policies, and the manner of calculating and reporting performance.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,188 at the end
of the second year (an increase in $98). The extra $8 that was earned on the $90
interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7.00% and 12.00% annually, $1,000 will grow to $1,967 and $3,106, respectively,
at the end of 10 years and $3,870 and $9,646, respectively, at the end of 20
years. These examples are for illustrative purposes only and are not indicative
of the Fund's performance.
The Fund may advertise information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar cost
averaging. In a dollar-cost averaging program, an investor invests a fixed
dollar amount in the Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in the Fund the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
<TABLE>
<S> <C> <C> <C>
SYSTEMATIC SHARE SHARES
PERIOD INVESTMENT PRICE PURCHASED
------ ---------- ----- ---------
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
---- --- ----
TOTAL AVERAGE TOTAL
INVESTED $600 PRICE $15.17 SHARES 41.81
</TABLE>
14
<PAGE>
In connection with its advertisements, the Fund may provide "shareholder's
letters" which serve to provide shareholders or investors an introduction into
the Fund's, the Trust's or any of the Trust's service provider's policies or
business practices. For instance, advertisements may provide for a message from
the Adviser that it has for more than 25 years been committed to quality
products and outstanding service to assist its customers in meeting their
financial goals and setting forth the reasons that the Adviser believes that it
has been successful as a portfolio manager.
With respect to the Fund that invests in municipal securities and distributes
Federally tax-exempt (and in certain cases state tax-exempt) dividends, the Fund
may advertise the benefits of and other effects of investing in municipal
securities. For instance, the Fund's advertisements may note that municipal
bonds have historically offered higher after tax yields than comparable taxable
alternatives for those persons in the higher tax brackets, that municipal bond
yields may tend to outpace inflation and that changes in tax law have eliminated
many of the tax advantages of other investments. The combined Federal and state
income tax rates for a particular state may also be described and advertisements
may indicate equivalent taxable and tax-free yields at various approximate
combined marginal Federal and state tax bracket rates. All yields so advertised
are for illustration only and not necessarily representative of the Fund's
yield.
4. MANAGEMENT
A. TRUSTEES AND OFFICERS
TRUSTEES AND OFFICERS OF THE TRUST. The business and affairs of the Fund are
managed under the direction of the Board in compliance with the laws of the
state of Delaware. Among its duties, the Board generally meets and reviews on a
quarterly basis the actions of all of the Fund's service providers. This
management also includes a periodic review of the service providers' agreements
and fees charged to the Fund. The names of the Trustees and officers of the
Fund, their position with the Fund, address, date of birth and principal
occupations during the past five years are set forth below. Each Trustee who is
an "interested person" (as defined by the 1940 Act) of the Fund is indicated by
an asterisk.
<TABLE>
<S> <C> <C>
NAME, ADDRESS AND AGE POSITION(S) WITH FUND PRINCIPAL OCCUPATION(S) DURING THE PAST FIVE
YEARS
[INSERT]
</TABLE>
B. COMPENSATION OF TRUSTEES AND OFFICERS
Each Trustee receives an annual fee of $XXXX and is paid $XXX for each Board
meeting attended and $XXX for each committee meeting attended on a date when a
Board meeting is not held.
Trustees are also reimbursed for travel and related expenses incurred in
attending meetings of the Board and any committee thereof.
Trustees that are affiliated with the Adviser or other service provider to the
Fund receive no compensation for their services or reimbursement for their
associated expenses. No officer of the Trust is compensated by the Trust.
The following table sets forth the fees that have been, or will be, paid to each
Trustee by the Trust during the current fiscal year ending XXXXXXXX.
15
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Pension or
Retirement
Aggregate Benefits Accrued Estimated Annual Total
Compensation from as Part of Fund Benefits upon Compensation from
Name, Position Trust Expenses Retirement Trust(1)
- ------------------------------------- ------------------- ------------------- -------------------- -------------------
[insert]
</TABLE>
(1) The total compensation reflects payments made since the Trust's inception on
XXXXX XX, 1999 through the end of the current fiscal year ending XXXXXXXXX.
C. INVESTMENT ADVISER
1. SERVICES OF ADVISER
The Adviser serves as investment adviser to the Fund pursuant to an investment
advisory agreement with the Trust. Under that agreement, the Adviser furnishes
at its own expense all services, facilities and personnel necessary in
connection with managing the Fund's investments and effecting portfolio
transactions for the Fund, other than brokerage expenses.
2. OWNERSHIP OF ADVISER/AFFILIATIONS
The Adviser is 100% owned by James B. Cowperthwait.
3. FEES
The Adviser's fee is calculated as a percentage of the applicable Fund's average
net assets. The fee is accrued daily by the Fund and is paid monthly, equal to
0.70% per annum based on average net assets for the previous month.
In addition to receiving its advisory fee from the Fund, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets that are invested in the Fund. If an investor in the Fund also has a
separately managed account with the Adviser with assets invested in the Fund,
the Adviser will credit an amount equal to all or a portion of the fees received
by the Adviser from the Fund against any investment management fee received from
a client.
4. OTHER PROVISIONS OF ADVISER'S AGREEMENT
The Adviser's agreement must be approved at least annually by the Board or by
vote of the shareholders, and in either case by a majority of the Trustees who
are not parties to the agreement or interested persons of any such party.
The Adviser's agreement is terminable without penalty by the Trust with respect
to the Fund on 30 days' written notice when authorized either by vote of the
Fund's shareholders or by a vote of a majority of the Board, or by the Adviser
on 90 days' written notice to the Trust.
Under its agreement, the Adviser is not liable for any error of judgment,
mistake of law, or for any act or omission in the performance of its duties to
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties under the agreement.
16
<PAGE>
5. EXPENSE LIMITATIONS
FAdS and the Adviser have undertaken to assume certain expenses of the Fund (or
waive its fees). This undertaking is designed to place a maximum limit on
expenses (including all fees to be paid to the Adviser but excluding taxes,
interest, brokerage commissions and other portfolio transaction expenses and
extraordinary expenses) of: XXXXXX
D. DISTRIBUTOR
1. DISTRIBUTOR; SERVICES AND COMPENSATION OF DISTRIBUTOR
FFS, the distributor (also known as principal underwriter) of the shares of the
Fund, is located at Two Portland Square, Portland, Maine 04101. FFS is a
registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc.
FFS, FAdS, FAcS and the Transfer Agent are each controlled indirectly by Forum
Financial Group, LLC. John Y. Keffer controls Forum Financial Group, LLC.
Under its agreement with the Trust, FFS acts as the agent of the Trust in
connection with the offering of shares of the Fund. FFS continuosly distributes
shares of the Fund on a best efforts basis. FFS has no obligation to sell any
specific quantity of Fund shares.
The Fund has a distribution plan adopted under SEC Rule 12b-1 that allows the
Fund to pay asset-based sales charges or distribution fees for the distribution
and sale of its shares. These fees are charged at an annual rate of [XXXX] of
the average daily net assets of the Fund's shares. Because these fees are paid
out of the Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges. These fees are paid to [insert]. For the fiscal year
ending [XXXXX], [insert] waived all of its 12b-1 fees. Absent such waiver,
[insert] is to be reimbursed for the expenses it incurs. [Insert] may incur
expenses for any distribution-related purpose it deems necessary or appropriate,
including the following principal activities: (i) compensation to employees and
expenses, including overhead, travel and telephone and other communication
expenses, of [insert], (ii) the incremental costs of printing and distributing
prospectuses, statements of additional information, annual reports and other
periodic reports for use in connection with the offering for sale of Fund shares
to any prospective investors, (iii) preparing, printing and distributing sales
literature and advertising materials used in connection with the offering of
Fund shares for sale to the public.
2. OTHER PROVISIONS OF DISTRIBUTOR'S AGREEMENT
FFS's distribution agreement must be approved at least annually by the Board or
by vote of the shareholders, and in either case by a majority of the Trustees
who are not parties to the agreement or interested persons of any such party.
FFS's agreement is terminable without penalty by the Trust with respect to the
Fund on 60 days' written notice when authorized either by vote of the Fund's
shareholders or by a vote of a majority of the Board, or by FFS on 60 days'
written notice to the Trust.
Under its agreement, FFS is not liable for any error of judgment or mistake of
law or for any act or omission in the performance of its duties to the Fund,
except for willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of reckless disregard of its obligations and duties
under the agreement.
Under its agreement, FFS and certain related parties (such as FFS's officers and
persons that control FFS) are indemnified by the Trust against any and all
claims and expenses in any way related to FFS's actions (or failures to act)
that are consistent with FFS's contractual standard of care. This means that as
long as FFS satisfies its contractual duties, the Trust is responsible for the
costs of: (1) defending FFS against claims that FFS breached a duty it owed to
the Trust; and (2) paying judgments against FFS. The Trust is not required to
indemnify FFS if the Trust does not receive written notice of and reasonable
opportunity to defend against a claim against FFS in the Trust's own name or in
the name of FFS.
17
<PAGE>
FFS may enter into agreements with selected broker-dealers, banks, or other
financial institutions for distribution of shares of the Fund. These financial
institutions may charge a fee for their services and may receive shareholders
service fees even though shares of the Fund are sold without sales charges or
distribution fees. These financial institutions may otherwise act as processing
agents, and will be responsible for promptly transmitting purchase, redemption
and other requests to the Fund.
Investors who purchase shares in this manner will be subject to the procedures
of the institution through which they purchase shares, which may include
charges, investment minimums, cutoff times and other restrictions in addition
to, or different from, those listed herein. Information concerning any charges
or services will be provided to customers by the financial institution.
Investors purchasing shares of the Fund in this manner should acquaint
themselves with their institution's procedures and should read the Prospectus
and this SAI in conjunction with any materials and information provided by their
institution. The financial institution and not its customers will be the
shareholder of record, although customers may have the right to vote shares
depending upon their arrangement with the institution.
E. OTHER FUND SERVICE PROVIDERS
1. ADMINISTRATOR
As administrator, pursuant to an agreement with the Trust, FAdS is responsible
for the supervision of the overall management of the Trust, providing the Trust
with general office facilities and providing persons satisfactory to the Board
to serve as officers of the Trust.
For its services, FAdS receives a fee from the Fund at an annual rate as
follows: 0.15% of the average daily net assets under $50 million of the Fund,
0.10% of the average daily net assets over $50 million and under $100 million
and 0.05% of the average daily net assets over $100 million of the Fund.
Notwithstanding the above, the minimum fee for the Fund shall be $25,000 per
year. The fee is accrued daily by the Fund and is paid monthly based on average
net assets for the previous month.
Table 2 in Appendix B shows the dollar amount of the fees payable by the Trust
to FAdS, the amount of the fee waived by FAdS and the actual fee received by
FAdS.
FAdS's agreement is terminable without penalty by the Trust or by FAdS with
respect to the Fund on 60 days' written notice. Under the agreement, FAdS is not
liable for any error of judgment or mistake of law or for any act or omission in
the performance of its duties to the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the agreement.
2. FUND ACCOUNTANT
As fund accountant, pursuant to an agreement with the Trust, FAcS provides fund
accounting services to the Fund. These services include calculating the NAV per
share of the Fund and preparing the Fund's financial statements and tax returns.
For its services, FAcS receives a fee from the Fund at an annual rate of $36,000
plus surcharges of $6,000 to $24,000 for specified asset levels. FAcS is paid
additional surcharges of $12,000 per year for each of the following: a portfolio
with more than a specified number of securities positions and/or international
positions; investments in derivative instruments; percentages of assets invested
in asset backed securities; and, a monthly portfolio turnover rate of 10% or
greater. The fee is accrued daily by the Fund and is paid monthly based on the
transactions and positions for the previous month.
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FAcS's agreement is terminable without penalty by the Trust or by FAcS with
respect to the Fund on 60 days' written notice. Under the agreement, FAcS is not
liable for any error of judgment or mistake of law or for any act or omission in
the performance of its duties to the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties or by reason of
reckless disregard of its obligations and duties under the agreement. Under the
agreement, in calculating the Fund's NAV per share, FAcS is deemed not to have
committed an error if the NAV per share it calculates is within 1/10 of 1% of
the actual NAV per share (after recalculation). In addition, in calculating NAV
per share FAcS is not liable for the errors of others, including the companies
that supply securities prices to FAcS and the Fund.
3. TRANSFER AGENT
As transfer agent and distribution paying agent, pursuant to an agreement with
the Trust, the Transfer Agent maintains an account for each shareholder of
record of the Fund and is responsible for processing purchase and redemption
requests and paying distributions to shareholders of record. The Transfer Agent
is located at Two Portland Square, Portland, Maine 04101 and is registered as a
transfer agent with the SEC.
For its services, the Transfer Agent receives a fee from the Fund at an annual
rate of $24,000 (waived to $18,000 for the first year) and $15.00 per open
shareholder account, $12.00 per open networked shareholder account, $5.00 per
closed shareholder account and $12,000 per additional share class. The fee is
accrued daily by the Fund and is paid monthly. Table 4 in Appendix B shows the
dollar amount of the fees payable by the Trust to the Transfer Agent, the amount
of the fee waived by the Transfer Agent and the actual fee received by the
Transfer Agent.
The Transfer Agent's agreement is terminable without penalty by the Trust or by
the Transfer Agent with respect to the Fund on 60 days' written notice. Under
the agreement, the Transfer Agent is not liable for any error of judgment or
mistake of law or for any act or omission in the performance of its duties to
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties under the agreement.
4. CUSTODIAN
As custodian, pursuant to an agreement with the Trust, Forum Trust, LLC (the
"Custodian") safeguards and controls the Fund's cash and securities, determines
income and collects interest on Fund investments. The Custodian may employ
subcustodians. The Custodian is located at Two Portland Square, Portland, Maine
04101. The Custodian has hired Bankers Trust Company, 130 Liberty Street, New
York, New York, 10006, to serve as subcustodian for the Fund.
For its services, the Custodian receives a fee from the Fund at an annual rate
as follows: (1) 0.01% for the first $1 billion in Fund assets ; (2) 0.0075% for
Fund assets between $1-$2 billion; and (3) 0.005% for Fund assets greater than
$2 billion. The Custodian is also paid certain transaction fees. These fees are
accrued daily by the Fund and are paid monthly based on average net assets and
transactions for the previous month.
5. LEGAL COUNSEL
Legal matters in connection with the issuance of shares of the Trust are passed
upon by the law firm of Finn Dixon & Herling LLP, One Landmark Square, Stamford,
CT 06901.
6. INDEPENDENT AUDITORS
[XXXXXXXX], [address] independent auditors, have been selected as auditors for
the Fund. The auditors audit the annual financial statements of the Fund and
provide the Fund with an audit opinion. The auditors also review certain
regulatory filings of the Fund and the Fund's tax returns.
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5. PORTFOLIO TRANSACTIONS
A. HOW SECURITIES ARE PURCHASED AND SOLD
Purchases and sales of portfolio securities that are fixed income securities
(for instance, money market instruments and bonds, notes and bills) usually are
principal transactions. In a principal transaction, the party from whom the Fund
purchases or to whom the Fund sells is acting on its own behalf (and not as the
agent of some other party such as its customers). These securities normally are
purchased directly from the issuer or from an underwriter or market maker for
the securities. There usually are no brokerage commissions paid for these
securities.
Purchases and sales of portfolio securities that are equity securities (for
instance common stock and preferred stock) are generally effected: (1) if the
security is traded on an exchange, through brokers who charge commissions; and
(2) if the security is traded in the "over-the-counter" markets, in a principal
transaction directly from a market maker. In transactions on stock exchanges,
commissions are negotiated. When transactions are executed in an
over-the-counter market, the Adviser will seek to deal with the primary market
makers; but when necessary in order to obtain best execution, the Adviser will
utilize the services of others.
Purchases of securities from underwriters of the securities include a disclosed
fixed commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers include the spread between the
bid and asked price.
In the case of fixed income and equity securities traded in the over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup.
B. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
The Adviser places orders for the purchase and sale of securities with brokers
and dealers selected by and in the discretion of the Adviser. The Fund has no
obligation to deal with any specific broker or dealer in the execution of
portfolio transactions. Allocations of transactions to brokers and dealers and
the frequency of transactions are determined by the Adviser in its best judgment
and in a manner deemed to be in the best interest of the Fund rather than by any
formula.
The Adviser seeks "best execution" for all portfolio transactions. This means
that the Adviser seeks the most favorable price and execution available. The
Adviser's primary consideration in executing transactions for the Fund is prompt
execution of orders in an effective manner and at the most favorable price
available.
1. CHOOSING BROKER-DEALERS
The Fund may not always pay the lowest commission or spread available. Rather,
in determining the amount of commissions (including certain dealer spreads) paid
in connection with securities transactions, the Adviser takes into account
factors such as size of the order, difficulty of execution, efficiency of the
executing broker's facilities (including the research services described below)
and any risk assumed by the executing broker.
2. OBTAINING RESEARCH FROM BROKERS
The Adviser may give consideration to research services furnished by brokers to
the Adviser for its use and may cause the Fund to pay these brokers a higher
amount of commission than might be charged by other brokers. These services,
which augment the Adviser's own internal research capabilities,include industry
research reports and periodicals, quotation systems, software for portfolio
management and formal databases. They may be used by the Adviser in connection
with services to clients other than the Fund, and not all research services may
be used by the Adviser in connection with the Fund. The Adviser's fees are not
reduced by reason of the Adviser's receipt of research services.
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3. COUNTERPARTY RISK
The Adviser monitors the creditworthiness of counterparties to the Fund's
transactions and intends to enter into a transaction only when it believes that
the counterparty presents minimal and appropriate credit risks.
4. TRANSACTIONS THROUGH AFFILIATES
The Adviser may not effect brokerage transactions through affiliates of the
Adviser (or affiliates of those persons). The Board has not adopted respective
procedures.
5. OTHER ACCOUNTS OF THE ADVISER
Investment decisions for the Fund are made independently from those for any
other account or investment company that is or may in the future become managed
by the Adviser of the Fund. Investment decisions are the product of many
factors, including basic suitability for the particular client involved. Thus, a
particular security may be bought or sold for certain clients even though it
could have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
clients are selling the security. There are occasions on which portfolio
transactions may be executed as part of concurrent authorizations to purchase or
sell the same securities for more than one account served by the Adviser, some
of which accounts may have similar investment objectives. Such concurrent
authorizations will be effected only when the Adviser believes that to do so
will be in the best interest of all the affected accounts. When such concurrent
authorizations occur, the objective will be to allocate the execution in a
manner, which is deemed equitable to the accounts involved. Clients are
typically allocated securities with prices averaged on a per-share or per-bond
basis.
6. PORTFOLIO TURNOVER
The frequency of portfolio transactions of the Fund (the portfolio turnover
rate) will vary from year to year depending on many factors. From time to time
the Fund may engage in active short-term trading to take advantage of price
movements affecting individual issues, groups of issues or markets. An annual
portfolio turnover rate of 100% would occur if all of the securities in the Fund
were replaced once in a period of one year. Higher portfolio turnover rates may
result in increased brokerage costs to the Fund and a possible increase in
short-term capital gains or losses.
C. SECURITIES OF REGULAR BROKER-DEALERS
From time to time the Fund may acquire and hold securities issued by its
"regular brokers and dealers" or the parents of those brokers and dealers. For
this purpose, regular brokers and dealers means the 10 brokers or dealers that:
(1) received the greatest amount of brokerage commissions during the Fund's last
fiscal year; (2) engaged as principal in the largest dollar amount of portfolio
transactions of the Fund during the Fund's last fiscal year; or (3) sold the
largest dollar amount of the Fund's shares during the Fund's last fiscal year.
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A. GENERAL INFORMATION
Shareholders may effect purchases or redemptions or request any shareholder
privilege in person at the Transfer Agent's offices located at Two Portland
Square, Portland, Maine 04101.
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The Fund accepts orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
B. ADDITIONAL PURCHASE INFORMATION
Shares of the Fund are sold on a continuous basis by FFS at NAV per share
without any sales charge. Accordingly, the offering price per share is the same
as the NAV per share. That information will be contained in the Fund's financial
statements (specifically, in the statements of assets and liabilities).
The Fund reserves the right to refuse any purchase request in excess of 1%.
The Fund may be a suitable investment vehicle for part or all of the assets held
in traditional or Roth individual retirement accounts (collectively, "IRAs").
Call the Fund at 1-888-XXXXXXX to obtain an IRA account application. Generally,
investment earnings in an IRA will be tax-deferred until withdrawn. If certain
requirements are met, investment earnings held in a Roth IRA will not be taxed
even when withdrawn. You may contribute up to $2,000 annually to an IRA. Only
contributions to traditional IRAs are tax-deductible. However, that deduction
may be reduced if you or your spouse is an active participant in an
employer-sponsored retirement plan and you or your spouse have adjusted gross
income above certain levels. Your ability to contribute to a Roth IRA also may
be restricted if you or, if you are married, you and your spouse have adjusted
gross income above certain levels.
Your employer may also contribute to your IRA as part of a Savings Incentive
Match Plan for Employees, or "SIMPLE plan," established after December 31, 1996.
Under a SIMPLE plan, you may contribute up to $6,000 annually to your IRA, and
your employer must generally match such contributions up to 3% of your annual
salary. Alternatively, your employer may elect to contribute to your IRA 2% of
the lesser of your earned income or $160,000.
This information on IRAs is based on regulations in effect as of January 1, 1999
and summarizes only some of the important federal tax considerations affecting
IRA contributions. These comments are not meant to be a substitute for tax
planning. Consult your tax advisors about your specific tax situation.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The Fund will
only accept securities that: (1) are not restricted as to transfer by law and
are not illiquid; and (2) have a value that is readily ascertainable (and not
established only by valuation procedures).
IRAS
Shareholders of the Fund's shares may purchase, with the proceeds from a
redemption of all or part of their shares, shares of the same class of any other
Fund of the Trust.
All contributions into an IRA through the automatic investing service are
treated as IRA contributions made during the year the investment is received.
2. UGMAS/UTMAS
If the trustee's name is not in the account registration of a gift or transfer
to minor ("UGMA/UTMA") account, the investor must provide a copy of the trust
document.
PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. The Fund's transfer agent and distributor or
financial institutions. These financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to the Fund.
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If you purchase shares through a financial institution, you will be subject to
the financial institution's procedures, which may include charges, limitations,
investment minimums, cutoff times and restrictions in addition to, or different
from, those applicable when you invest in the Fund directly. When you purchase
the Fund's shares through a financial institution, you may or may not be the
shareholder of record and, subject to your institution's procedures, you may
have Fund shares transferred into your name. There is typically a three-day
settlement period for purchases and redemptions through broker-dealers. Certain
financial institutions may also enter purchase orders with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a financial institution. Contact your financial institution for
further information. If you hold shares through a financial institution, the
Fund may confirm purchases and redemptions to the financial institution, which
will provide you with confirmations and periodic statements. The Fund is not
responsible for the failure of any financial institution to carry out its
obligations.
C. ADDITIONAL REDEMPTION INFORMATION
The Fund may redeem shares involuntarily to reimburse the Fund for any loss
sustained by reason of the failure of a shareholder to make full payment for
shares purchased by the shareholder or to collect any charge relating to
transactions effected for the benefit of a shareholder which is applicable to
the Fund's shares as provided in the Prospectus.
1. SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may not be suspended, except for any period during
which: (1) the New York Stock Exchange is closed (other than customary weekend
and holiday closings) or during which the SEC determines that trading thereon is
restricted; (2) an emergency (as determined by the SEC) exists as a result of
which disposal by the Fund of its securities is not reasonably practicable or as
a result of which it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or (3) the SEC may by order permit for
the protection of the shareholders of the Fund.
2. REDEMPTION-IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if the Board determines conditions
exist which would make payment in cash detrimental to the best interests of the
Fund. If redemption proceeds are paid wholly or partly in portfolio securities,
brokerage costs may be incurred by the shareholder in converting the securities
to cash. The Trust has filed an election with the SEC pursuant to which the Fund
may only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's total net
assets, whichever is less, during any 90-day period.
INVOLUNTARY REDEMPTIONS
In addition to the situations described in the Prospectus with respect to the
redemptions of shares, the Trust may redeem shares involuntarily to reimburse
the Fund for any loss sustained by reason of the failure of a shareholder to
make full payment for shares purchased by the shareholder or to collect any
charge relating to transactions effected for the benefit of a shareholder which
is applicable to the Fund's shares as provided in the Prospectus from time to
time.
D. NAV DETERMINATION
In determining the Fund's NAV per share, securities for which market quotations
are readily available are valued at current market value using the last reported
sale price. If no sale price is reported, the average of the last bid and ask
price is used. If no average price is available, the last bid price is used. If
market quotations are not readily available, then securities are valued at fair
value as determined by the Board (or its delegate).
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E. DISTRIBUTIONS
Distributions of net investment income will be reinvested at the Fund's NAV per
share as of the last day of the period with respect to which the distribution is
paid. Distributions of capital gain will be reinvested at the NAV per share of
the Fund on the payment date for the distribution. Cash payments may be made
more than seven days following the date on which distributions would otherwise
be reinvested.
The per share NAV of any other class of shares of the Fund are expected to be
substantially the same. Under certain circumstances, however, the per share NAV
of each class may vary. The per share NAV of each class of the Fund eventually
will tend to converge immediately after the payment of dividends, which will
differ by approximately the amount of the expense accrual differential among the
classes.
F. EXCHANGES
Shareholders may sell their Fund shares, and buy shares in one of the series of
the Forum Funds (see "Exchange Privileges" in the Prospectus). The exchange
procedures (as described in the Prospectus) may be modified or terminated at any
time upon appropriate notice to shareholders. For Federal income tax purposes,
exchanges are treated as sales on which a purchaser will realize a capital gain
or loss depending on whether the value of the shares redeemed is more or less
than the shareholder's basis in such shares at the time of such transaction.
7. TAXATION
The tax information set forth in the Prospectus and the information in this
section relates solely to U.S. federal income tax law and assumes that the Fund
qualifies as a regulated investment company (as discussed below). Such
information is only a summary of certain key federal income tax considerations
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt has been made to present a complete explanation of the
federal tax treatment of the Fund or the implications to shareholders. The
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
This "Taxation" section is based on the Code and applicable regulations in
effect on the date hereof. Future legislative or administrative changes or court
decisions may significantly change the tax rules applicable to the Fund and its
shareholders. Any of these changes or court decisions may have a retroactive
effect.
ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX PROVISIONS APPLICABLE TO THEM.
A. QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund intends for each tax year to qualify as a "regulated investment
company" under the Code. This qualification does not involve governmental
supervision of management or investment practices or policies of the Fund.
The tax year-end of the Fund is XXXXXXXXX (the same as the Fund's fiscal year
end).
1. MEANING OF QUALIFICATION
As a regulated investment company, the Fund will not be subject to federal
income tax on the portion of its investment company taxable income (i.e.,
taxable interest, dividends, net short-term capital gains and other taxable
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ordinary income, net of expenses) and net capital gain (i.e., the excess of net
long-term capital gains over net short-term capital losses) that it distributes
to shareholders. In order to qualify as a regulated investment company the Fund
must satisfy the following requirements:
o The Fund must distribute at least 90% of its investment company taxable
income for the tax year. (Certain distributions made by the Fund after
the close of its tax year are considered distributions attributable to
the previous tax year for purposes of satisfying this requirement.)
o The Fund must derive at least 90% of its gross income from certain
types of income derived with respect to its business of investing in
securities.
o The Fund must satisfy the following asset diversification test at the
close of each quarter of the Fund's tax year: (1) at least 50% of the
value of the Fund's assets must consist of cash and cash items, U.S.
government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in
securities of the issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of the issuer); and (2)
no more than 25% of the value of the Fund's total assets may be
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which
are engaged in the same or similar trades or businesses.
o The Fund generally intends to operate in a manner such that it will not
be liable for federal income tax.
2. FAILURE TO QUALIFY
If for any tax year the Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) will be subject to
tax at regular corporate rates without any deduction for dividends to
shareholders, and the dividends will be taxable to the shareholders as ordinary
income to the extent of the Fund's current and accumulated earnings and profits.
A portion of these distributions generally may be eligible for the
dividends-received deduction in the case of corporate shareholders.
Failure to qualify as a regulated investment company would thus have a negative
impact on the Fund's income and performance. It is possible that the Fund will
not qualify as a regulated investment company in any given tax year.
B. FUND DISTRIBUTIONS
The Fund anticipates distributing substantially all of its investment company
taxable income for each tax year. These distributions are taxable to
shareholders as ordinary income. A portion of these distributions may qualify
for the 70% dividends-received deduction for corporate shareholders.
The Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions generally are made only once a year, usually
in November or December, but the Fund may make additional distributions of net
capital gain at any time during the year. These distributions are taxable to
shareholders as long-term capital gain, regardless of how long a shareholder has
held shares and do not qualify for the dividends-received deduction.
The Fund may have capital loss carryovers (unutilized capital losses from prior
years). These capital loss carryovers (which can be used for up to eight years)
may be used to offset any current capital gain (whether short- or long-term).
All capital loss carryovers are listed in the Fund's financial statements. Any
such losses may not be carried back.
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Distributions by the Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions reduce the shareholder's tax basis in the shares and are treated
as gain from the sale of the shares to the extent the shareholder's basis would
be reduced below zero.
All distributions by the Fund will be treated in the manner described above
regardless of whether the distribution is paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
A shareholder may purchase shares whose NAV at the time reflects undistributed
net investment income or recognized capital gain, or unrealized appreciation in
the value of the assets of the Fund. Distributions of these amounts are taxable
to the shareholder in the manner described above, although the distribution
economically constitutes a return of capital to the shareholder.
Shareholders purchasing shares of the Fund just prior to the ex-dividend date of
a distribution will be taxed on the entire amount of the distribution received,
even though the NAV per share on the date of the purchase reflected the amount
of the distribution.
Ordinarily, shareholders are required to take distributions by the Fund into
account in the year in which they are made. A distribution declared in October,
November or December of any year and payable to shareholders of record on a
specified date in those months, however, is deemed to be received by the
shareholders (and made by the Fund) on December 31 of that calendar year if the
distribution is actually paid in January of the following year.
Shareholders will be advised annually as to the U.S. federal income tax
consequences of distributions made (or deemed made) to them during the year.
C. CERTAIN TAX RULES APPLICABLE TO THE FUND'S TRANSACTIONS
For federal income tax purposes, when put and call options purchased by the Fund
expire unexercised, the premiums paid by the Fund give rise to short- or
long-term capital losses at the time of expiration (depending on the length of
the respective exercise periods for the options). When put and call options
written by the Fund expire unexercised, the premiums received by the Fund give
rise to short-term capital gains at the time of expiration. When the Fund
exercises a call, the purchase price of the underlying security is increased by
the amount of the premium paid by the Fund. When the Fund exercises a put, the
proceeds from the sale of the underlying security are decreased by the premium
paid. When a put or call written by the Fund is exercised, the purchase price
(selling price in the case of a call) of the underlying security is decreased
(increased in the case of a call) for tax purposes by the premium received.
Certain listed options, regulated futures contracts and forward currency
contracts are considered "Section 1256 contracts" for federal income tax
purposes. Section 1256 contracts held by the Fund at the end of each tax year
are "marked to market" and treated for federal income tax purposes as though
sold for fair market value on the last business day of the tax year. Gains or
losses realized by the Fund on Section 1256 contracts generally are considered
60% long-term and 40% short-term capital gains or losses. The Fund can elect to
exempt its Section 1256 contracts, which are part of a "mixed straddle" (as
described below) from the application of Section 1256.
Any option, futures contract, or other position entered into or held by the Fund
in conjunction with any other position held by the Fund may constitute a
"straddle" for federal income tax purposes. A straddle of which at least one,
but not all, the positions are Section 1256 contracts, may constitute a "mixed
straddle". In general, straddles are subject to certain rules that may affect
the character and timing of the Fund's gains and losses with respect to straddle
positions by requiring, among other things, that: (1) the loss realized on
disposition of one position of a straddle may not be recognized to the extent
that the Fund has unrealized gains with respect to the other position in such
straddle; (2) the Fund's holding period in straddle positions be suspended while
the straddle exists (possibly resulting in gain being treated as short-term
capital gain rather than long-term capital gain); (3) the losses recognized with
respect to certain straddle positions which are part of a mixed straddle and
which are non-Section
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1256 positions be treated as 60% long-term and 40% short-term capital loss; (4)
losses recognized with respect to certain straddle positions which would
otherwise constitute short-term capital losses be treated as long-term capital
losses; and (5) the deduction of interest and carrying charges attributable to
certain straddle positions may be deferred. Various elections are available to
the Fund, which may mitigate the effects of the straddle rules, particularly
with respect to mixed straddles. In general, the straddle rules described above
do not apply to any straddles held by the Fund all of the offsetting positions
of which consist of Section 1256 contracts.
D. FEDERAL EXCISE TAX
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to: (1) 98% of its
ordinary taxable income for the calendar year; and (2) 98% of its capital gain
net income for the one-year period ended on October 31 (or December 31, if
elected by the Fund) of the calendar year. The balance of the Fund's income must
be distributed during the next calendar year. The Fund will be treated as having
distributed any amount on which it is subject to income tax.
For purposes of calculating the excise tax, the Fund: (1) reduces its capital
gain net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year and (2) excludes foreign currency gains and
losses incurred after October 31 of any year (or December 31 if it has made the
election described above) in determining the amount of ordinary taxable income
for the current calendar year. The Fund will include foreign currency gains and
losses incurred after October 31 in determining ordinary taxable income for the
succeeding calendar year.
The Fund intends to make sufficient distributions of its ordinary taxable income
and capital gain net income prior to the end of each calendar year to avoid
liability for the excise tax. Investors should note, however, that the Fund
might in certain circumstances be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability.
E. SALE OR REDEMPTION OF SHARES
In general, a shareholder will recognize gain or loss on the sale or redemption
of shares of the Fund in an amount equal to the difference between the proceeds
of the sale or redemption and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases (for example, by reinvesting dividends) other shares of
the Fund within 30 days before or after the sale or redemption (a so called
"wash sale"). If disallowed, the loss will be reflected in an upward adjustment
to the basis of the shares purchased. In general, any gain or loss arising from
the sale or redemption of shares of the Fund will be considered capital gain or
loss and will be long-term capital gain or loss if the shares were held for
longer than one year. Any capital loss arising from the sale or redemption of
shares held for six months or less, however, is treated as a long-term capital
loss to the extent of the amount of capital gain received on such shares. In
determining the holding period of such shares for this purpose, any period
during which a shareholder's risk of loss is offset by means of options, short
sales or similar transactions is not counted. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income.
F. BACKUP WITHHOLDING
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, and the proceeds of redemptions of shares paid to
any shareholder: (1) who has failed to provide its correct taxpayer
identification number; (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend income properly; or (3)
who has failed to certify to the Fund that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient." Backup
withholding is not an additional tax; any amounts so withheld may be credited
against a shareholder's federal income tax or refunded.
27
<PAGE>
G. FOREIGN TAXES
Income received by the Fund may also be subject to foreign income taxes,
including withholding taxes. It is impossible to determine the effective rate of
foreign tax in advance since the amount of the Fund's assets to be invested
within various countries is not known. In the case of the Fund, if more than 50%
of the value of the Fund's total assets at the close of its taxable year
consists of stocks or securities of foreign corporations, the Fund will be
eligible and intends to file an election with the Internal Revenue Service to
pass through to its shareholders the amount of foreign taxes paid by the Fund.
However, there can be no assurance that the Fund will be able to do so. Pursuant
to this election a shareholder will be required to (i) include in gross income
(in addition to taxable dividends actually received) his pro rata share of
foreign taxes paid by the Fund, (ii) treat his pro rata share of such foreign
taxes as having been paid by him, and (iii) either deduct such pro rata share of
foreign taxes in computing his taxable income or treat such foreign taxes as a
credit against United States federal income taxes. Shareholders who are not
liable for federal income taxes, such as retirement plans qualified under
section 401 of the Code, will not be affected by any such pass-through of taxes
by the Fund. No deduction for foreign taxes may be claimed by an individual
shareholder who does not itemize deductions. In addition, certain shareholders
may be subject to rules which limit or reduce their ability to fully deduct, or
claim a credit for, their pro rata share of the foreign taxes paid by the Fund.
A shareholder's foreign tax credit with respect to a dividend received from the
Fund will be disallowed unless the shareholder holds shares in the Fund on the
ex-dividend date and for at least 15 other days during the 30-day period
beginning 15 days prior to the ex-dividend date. Each shareholder will be
notified within 60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will pass through for that year and, if so, such
notification will designate (i) the shareholder's portion of the foreign taxes
paid to each such country and (ii) the portion of dividends that represents
income derived from sources within each such country.
The federal income tax status of each year's distributions by the Fund will be
reported to shareholders and to the Internal Revenue Service. The foregoing is
only a general description of the treatment of foreign taxes under the United
States federal income tax laws. Because the availability of a foreign tax credit
or deduction will depend on the particular circumstances of each shareholder,
potential investors are advised to consult their own tax advisers.
H. FOREIGN SHAREHOLDERS
Taxation of a shareholder who under the Code is a nonresident alien individual,
foreign trust or estate, foreign corporation, or foreign partnership ("foreign
shareholder"), depends on whether the income from the Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from the Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, distributions of ordinary income
(and short-term capital gains) paid to a foreign shareholder will be subject to
U.S. withholding tax at the rate of 30% (or lower applicable treaty rate) upon
the gross amount of the distribution. The foreign shareholder generally would be
exempt from U.S. federal income tax on gain realized on the sale of shares of
the Fund and distributions of net capital gain from the Fund.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income
distributions, capital gain distributions, and any gain realized upon the sale
of shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or U.S. corporations.
In the case of a noncorporate foreign shareholder, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty might be different from those described herein.
The tax rules of other countries with respect to distributions from the Fund can
differ from the U.S. federal income taxation rules described above. These
foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisers as to the consequences of foreign tax rules with
respect to an investment in the Fund.
28
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I. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from the Fund can differ from the U.S. federal
income taxation rules described above. These state and local rules are not
discussed herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax rules with respect to an investment in the
Fund.
8. OTHER MATTERS
GENERAL INFORMATION
The Trust was organized as a business trust under the laws of the State of
Delaware on XXXXXXXXX, 1999 pursuant to a trust instrument dated XXXXXXX, 1999
(the "Trust Instrument"). The Trust has operated under that name and as an
investment company since that date.
The Trust is registered as an open-end, management investment company under the
1940 Act. The Trust offers shares of beneficial interest in the Fund, which is
the first in what may be a series of funds. The Trust has an unlimited number of
authorized shares of beneficial interest. The Board may, without shareholder
approval, divide the authorized shares into an unlimited number of separate
series and may divide series into classes of shares; the costs of doing so will
be borne by the Trust.
The Trust and the Fund will continue indefinitely until terminated.
2. SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of each series of the Trust and each class of shares has equal
dividend, distribution, liquidation and voting rights, and fractional shares
have those rights proportionately, except that expenses related to the
distribution of the shares of each class (and certain other expenses such as
transfer agency, shareholder service and administration expenses) are borne
solely by those shares and each class votes separately with respect to the
provisions of any Rule 12b-1 plan which pertains to the class and other matters
for which separate class voting is appropriate under applicable law. Generally,
shares will be voted in the aggregate without reference to a particular series
or class, except if the matter affects only one series or class or voting by
series or class is required by law, in which case shares will be voted
separately by series or class, as appropriate. Delaware law does not require the
Trust to hold annual meetings of shareholders, and it is anticipated that
shareholder meetings will be held only when specifically required by federal or
state law.
There are no conversion or preemptive rights in connection with shares of the
Trust.
All shares, when issued in accordance with the terms of the offering, will be
fully paid and nonassessable.
A shareholder in a series is entitled to the shareholder's pro rata share of all
distributions arising from that series' assets and, upon redeeming shares, will
receive the portion of the series' net assets represented by the redeemed
shares.
Shareholders representing 10% or more of the Trust's (or the Fund's) outstanding
shares may, as set forth in the Trust Instrument, call meetings of the Trust (or
Fund) for any purpose related to the Trust (or Fund), including, in the case of
a meeting of the Trust, the purpose of voting on removal of one or more
Trustees.
3. CERTAIN REORGANIZATION TRANSACTIONS
The Trust or any Fund may be terminated upon the sale of its assets to, or
merger with, another open-end, management investment company or series thereof,
or upon liquidation and distribution of its assets. Generally such terminations
must be approved by the vote of the holders of a majority of the outstanding
shares of the Trust or the Fund. The Trustees may, without prior shareholder
approval, change the form of organization of the Trust by merger, consolidation
or incorporation. Under the Trust Instrument, the Trustees may, without
shareholder vote, cause the Trust to merge or consolidate into one or more
trusts, partnerships or corporations or cause the Trust to be
29
<PAGE>
incorporated under Delaware law, so long as the surviving entity is an open-end,
management investment company that will succeed to or assume the Trust's
registration statement.
B. FUND OWNERSHIP
As of XXXXX, 1999, the percentage of shares owned by all officers and trustees
of the Fund as a group was as follows. To the extent officers and trustees own
less than 1% of the Fund, the table reflects "N/A" for not applicable.
PERCENTAGE OF SHARES
OWNED
The Fund XXX
From time to time, certain shareholders may own a large percentage of the shares
of the Fund. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote. As of XXXXXXXXX, 1999, and
prior to the public offering of the Fund, Forum Financial Group, LLC,
beneficially owned 100% of and may be deemed to control the Fund. It is
unlikely, however, that Forum Financial Group, LLC, a limited liability company
organized under the laws of Delaware, will continue to control the Fund.
"Control" for these purposes is the ownership of 25% or more the Fund's voting
securities.
C. LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' LIABILITY
Delaware law provides that Fund shareholders are entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. In the past, the securities regulators of some states,
however, have indicated that they and the courts in their state may decline to
apply Delaware law on this point. The Trust Instrument contains an express
disclaimer of shareholder liability for the debts, liabilities, obligations and
expenses of the Trust and requires that a disclaimer be given in each contract
entered into or executed by the Trust or the Trustees. The Trust Instrument
provides for indemnification out of each series' property of any shareholder or
former shareholder held personally liable for the obligations of the series. The
Trust Instrument also provides that each series shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation of
the series and satisfy any judgment thereon. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which Delaware law does not apply, no contractual limitation of
liability was in effect, and the portfolio is unable to meet its obligations.
The Trust Instrument provides that the Trustees shall not be liable to any
person other than the Trust or its shareholders. In addition, the Trust
Instrument provides that the Trustees shall not be liable for any conduct
whatsoever, provided that a Trustee is not protected against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
D. REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Trust's registration statement filed with the SEC under the 1933 Act with
respect to the securities offered hereby. The registration statement, including
the exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents are not necessarily complete, and, in each instance,
are qualified by, reference is made to the copy of such contract or other
documents filed as exhibits to the registration statement.
E. FINANCIAL STATEMENTS
Because the Fund has not commenced operations as of the date of this SAI,
financial statements for the Fund are not yet available.
30
<PAGE>
APPENDIX A - DESCRIPTION OF SECURITIES RATINGS
A. CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
1. MOODY'S INVESTORS SERVICE
AAA Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present that make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
BAA Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
CAA Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds that are rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have other
marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
NOTE Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
a ranking in the lower end of that generic rating category.
A-1
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2. STANDARD AND POOR'S CORPORATION
AAA An obligation rated AAA has the highest rating assigned by Standard
& Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations
only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is still
strong.
BBB An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
NOTE Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least
degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, large
uncertainties or major exposures to adverse conditions may outweigh
these.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the
obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or economic
conditions, the obligor is not likely to have the capacity to meet
its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to nonpayment.
C The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard
& Poor's believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a
bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
NOTE Plus (+) or minus (-). The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing
within the major rating categories.
The `r' symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or
volatility of expected returns that are not addressed in the credit
rating. Examples include: obligations linked or indexed to equities,
A-2
<PAGE>
currencies, or commodities; obligations exposed to severe prepayment
risk-such as interest-only or principal-only mortgage securities;
and obligations with unusually risky interest terms, such as inverse
floaters.
3. DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest
AA but may vary slightly from time to time because of economic
conditions.
A+,A, Protection factors are average but adequate. However, risk factors
A- are more variable in periods of greater economic stress.
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors fluctuate
BB- according to industry conditions. Overall quality may move up or
down frequently within this category.
B+ Below investment grade and possessing risk that obligations will not
B be met when due. Financial protection factors will fluctuate widely
B- according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating
within this category or into a higher or lower rating grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
DP Preferred stock with dividend arrearages.
4. FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong
capacity for timely payment of financial commitments. This capacity is
highly unlikely to be adversely affected by foreseeable events.
AA Very high credit quality. `AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely payment
of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more vulnerable
to changes in circumstances or in economic conditions than is the case
for higher ratings.
A-3
<PAGE>
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit risk
is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.
CCC, High default risk. Default is a real possibility. Capacity for
CC, C meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal
imminent default.
DDD, Default. Securities are not meeting current obligations and are
DD, D extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For U.S.
corporates, for example, `DD' indicates expected recovery of 50% -
90% of such outstandings, and `D' the lowest recovery potential, i.e.
below 50%.
PREFERRED STOCK
1. MOODY'S INVESTORS SERVICE
AAA An issue that is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and
the least risk of dividend impairment within the universe of
preferred stocks.
AA An issue that is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance
the earnings and asset protection will remain relatively well
maintained in the foreseeable future.
A An issue that is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat
greater than in the "aaa" and "aa" classification, earnings and
asset protection are, nevertheless, expected to be maintained at
adequate levels.
BAA An issue that is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured.
Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
BA An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings
and asset protection may be very moderate and not well safeguarded
during adverse periods. Uncertainty of position characterizes
preferred stocks in this class.
B An issue that is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and
maintenance of other terms of the issue over any long period of
time may be small.
CAA An issue that is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the
future status of payments.
A-4
<PAGE>
CA An issue that is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of
eventual payments.
C This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor
prospects of ever attaining any real investment standing.
NOTE Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: the modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
2. STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated AA also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for
issues rated AAA.
A An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.
BBB An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this category
than for issues in the A category.
BB, Preferred stock rated BB, B, and CCC is regarded, on balance,
B, CCC as predominantly speculative with respect to the issuer's capacity
to pay preferred stock obligations. BB indicates the lowest degree
of speculation and CCC the highest. While such issues will likely
have some quality and protective characteristics, large
uncertainties or major risk exposures to adverse conditions outweigh
these.
CC The rating CC is reserved for a preferred stock issue that is in
arrears on dividends or sinking fund payments, but that is currently
paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard
& Poor's does not rate a particular type of obligation as a matter
of policy.
NOTE Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing
within the major rating categories.
C. SHORT TERM RATINGS
1. MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by many of the following characteristics:
A-5
<PAGE>
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
NOT
PRIME Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest
category by Standard & Poor's. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within
this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories.
However, the obligor's capacity to meet its financial commitment
on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having
significant speculative characteristics. The obligor currently
has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation.
D A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not
made on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
A-6
<PAGE>
FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for
timely repayment under Fitch IBCA's national rating scale for that
country, relative to other obligations in the same country. This
rating is automatically assigned to all obligations issued or
guaranteed by the sovereign state. Where issues possess a
particularly strong credit feature, a "+" is added to the assigned
rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the
relative degree of risk is slightly higher than for issues
classified as `A1' and capacity for timely repayment may be
susceptible to adverse changes in business, economic, or financial
conditions.
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is
more susceptible to adverse changes in business, economic, or
financial conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is
uncertain relative to other obligors in the same country. The
capacity for timely repayment is susceptible to adverse changes in
business, economic, or financial conditions.
C Obligations for which there is a high risk of default to other
obligors in the same country or which are in default.
A-7
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrant (filed herewith).
(b) None.
(c) See Sections 2.02, 2.04, and 2.06 of the Trust Instrument filed as
Exhibit (a).
(d) Investment Advisory Agreement between Registrant and NewBridge
Partners, LLC (filed herewith).
(e) Distribution Agreement with FFS*
(f) None.
(g) Custodian Agreement; Transfer Agency and Services Agreement;
Administration Agreement*
(h) None.
(i) Legal Opinion*
(j) None.
(k) None.
(l) None
(m) 12b-1 Plan*
(n) Not Applicable.
(o) None.
*To be filed by amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 25. INDEMNIFICATION
In accordance with Section 3803 of the Delaware Business
Trust Act, Section 9.02 of the Registrant's Trust instrument provides as
follows:
Section 9.02 Indemnification.
(a) Subject to the exceptions and limitations contained in Subsection
9.02(b): (i) every Person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit, proceeding or investigation in which he becomes involved as a
party or otherwise by virtue of his being or having been a Trustee or officer
and against amounts paid or incurred by him in the settlement thereof; (ii) the
words "claim," "action," "suit," "proceeding" or "investigation" shall apply to
all claims, actions, suits, proceedings or investigations (civil, criminal or
other, including appeals), formal or informal, actual or threatened while in
office or thereafter, and the words "liability" and "expenses" shall include,
without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or (ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, (x) by the court or other body approving
the settlement; (y) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(z) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a Person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other Persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit, proceeding or investigation of the character
described in Subsection 9.02(a) may be paid by the Trust or Series from time to
time prior to final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to the
Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 9.02; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found entitled to
indemnification under this Section 9.02.
Section 5 of the Investment Advisory Agreement provides as follows:
Section 5. Standard of Care
(a) The Trust shall expect of the Adviser, and the Adviser will give
the Trust the benefit of, the Adviser's best judgment and efforts in rendering
its services to the Trust. The Adviser shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to protect,
the Adviser against any liability to the Trust or to the Trust's security
holders to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the Adviser's
duties hereunder, or by reason of the Adviser's reckless disregard of its
obligations and duties hereunder.
(b) The Adviser shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties (other than those related to the Adviser's
employees), fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The description of NewBridge Partners, LLC contained in Parts A and B
of this registration statement is incorporated by reference herein.
The following are the directors and principal executive officers of
NewBridge Partners, LLC, including their business connections, which
are of a substantial nature. The address of NewBridge Partners, LLC is
535 Madison Avenue, 14th Floor, New York, NY 10022.
<TABLE>
<S> <C> <C>
------------------------------------- ---------------------------------- -----------------------------------
Name Title Business Connection
------------------------------------- ---------------------------------- -----------------------------------
------------------------------------- ---------------------------------- -----------------------------------
James B. Cowperthwait Sole Owner NewBridge Partners, LLC
---------------------------------- -----------------------------------
Managing Director United States Trust Company of
New York (until 3/99)
------------------------------------- ---------------------------------- -----------------------------------
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Forum Fund Services, LLC, Registrant's underwriter serves as
underwriter for the following investment companies registered under the
Investment Company Act of 1940, as amended:
The Cutler Trust Monarch Funds
Forum Funds Norwest Advantage Funds
Memorial Funds Norwest Select Funds
Sound Shore Fund, Inc.
(b) The following officers of Forum Fund Services, LLC, the Registrant's
underwriter, hold the following position with the Registrant. Each
officer's business address is Two Portland Square, Portland, Maine
04101.
<PAGE>
<TABLE>
<S> <C> <C>
Name Position with Underwriter Position with Registrant
---- ------------------------- ------------------------
David I. Goldstein Secretary Trustee
Sara M. Morris Treasurer Treasurer
</TABLE>
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder are maintained at the offices of Forum
Administrative Services, LLC and Forum Shareholder Services, LLC, Two
Portland Square, Portland, Maine 04101. The records required to be
maintained under Rule 31a-1(b)(1) with respect to journals of receipts
and deliveries of securities and receipts and disbursements of cash are
maintained at the offices of Registrant's custodian's master
subcustodian, Bankers Trust Company, 16 Wall Street, New York, New York
10005. The records required to be maintained under Rule 31a-1(b)(5),
(6) and (9) are maintained at the offices of the Registrant's adviser,
NewBridge Partners, LLC.
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, duly
authorized in the City of Portland, State of Maine on July 29, 1999.
THE NP COMANCHE FUNDS
By:/s/ Stephen J. Barrett
------------------------------
Stephen J. Barrett, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on July
29, 1999.
(a) Principal Executive Officer
/s/ Stephen J. Barrett
---------------------------------
Stephen J. Barrett, President
(b) Principal Financial Officer
/s/ Sara M. Morris
---------------------------------
Sara M. Morris, Treasurer
(c) All of the Trustees
/s/ D. Blaine Riggle
---------------------------------
D. Blaine Riggle, Trustee
/s/ Stephen J. Barrett
---------------------------------
Stephen J. Barrett, Trustee
/s/ David I. Goldstein
---------------------------------
David I. Goldstein, Trustee
<PAGE>
INDEX TO EXHIBITS
(a) Trust Instrument of Registrant.
(d) Investment Advisory Agreement between Registrant and NewBridge Partners,
LLC.
THE NP COMANCHE FUNDS
TRUST INSTRUMENT
DATED
JULY 29, 1999
<PAGE>
THE NP COMANCHE FUNDS
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name 1..............................................................................
Section 1.02 Definitions.........................................................................2
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest.......................................................2
Section 2.02 Issuance of Shares..................................................................2
Section 2.03 Register of Shares and Share Certificates...........................................3
Section 2.04 Transfer of Shares..................................................................3
Section 2.05 Treasury Shares.....................................................................4
Section 2.06 Establishment of Series or Class....................................................4
Section 2.07 Investment in the Trust.............................................................4
Section 2.08 Assets and Liabilities of Series....................................................5
Section 2.09 No Preemptive Rights................................................................6
Section 2.10 No Personal Liability of Shareholders...............................................6
Section 2.11 Assent to Trust Instrument and Disclosure...........................................6
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust ............................................................6
Section 3.02 Number of Trustees..................................................................7
Section 3.03 Term of Office......................................................................7
Section 3.04 Vacancies and Appointments..........................................................7
Section 3.05 Temporary Absence...................................................................8
Section 3.06 Effect of Ending of a Trustee's Service.............................................8
Section 3.07 Ownership of Assets of the Trust....................................................8
Section 3.08 Action and Meetings of Trustees.....................................................8
Section 3.09 Quorum..............................................................................9
Section 3.10 Meeting Actions.....................................................................9
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers..............................................................................9
Section 4.02 Issuance and Repurchase of Shares...................................................10
Section 4.03 Trustees and Officers as Shareholders...............................................10
Section 4.04 Principal Transactions..............................................................10
Section 4.05 Delegations and Committees..........................................................10
<PAGE>
ARTICLE V NET ASSET VALUE AND EXPENSES
Section 5.01 Determination of Net Asset Value....................................................10
Section 5.02 Expenses............................................................................11
ARTICLE VI INVESTMENT ADVISERS, UNDERWRITERS AND CUSTODIANS
Section 6.01 Investment Advisers.................................................................11
Section 6.02 Underwriters........................................................................12
Section 6.03 Custodians..........................................................................12
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers.......................................................................12
Section 7.02 Meetings............................................................................13
Section 7.03 Notices.............................................................................13
Section 7.04 Quorum and Required Vote............................................................13
Section 7.05 Voting-Proxies......................................................................14
Section 7.06 Action Without a Meeting............................................................14
Section 7.07 Establishment of Record Dates.......................................................14
ARTICLE VIII DISTRIBUTIONS AND REDEMPTIONS
Section 8.01 Distributions.......................................................................15
Section 8.02 Redemptions.........................................................................15
Section 8.03 Suspension of the Right of Redemption...............................................16
Section 8.04 Redemption of Shares for Tax Purposes...............................................16
ARTICLE IX LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 9.01 Limitation of Liability.............................................................16
Section 9.02 Indemnification.....................................................................16
Section 9.03 Shareholders........................................................................18
Section 9.04 Insurance...........................................................................18
ARTICLE X OFFICERS
Section 10.01Officers and Appointment............................................................18
Section 10.02Resignations........................................................................19
Section 10.03Surety Bonds........................................................................19
Section 10.04Removal.............................................................................20
<PAGE>
ARTICLE XI MISCELLANEOUS
Section 11.01Trust Not a Partnership.............................................................20
Section 11.02Trustee's Good Faith Action, Expert Advice, No Bond or Surety.......................20
Section 11.03Reorganization .....................................................................20
Section 11.04Termination of Trust, Series or Class...............................................21
Section 11.05Derivative Actions..................................................................22
Section 11.06Parties to Contract.................................................................22
Section 11.07Filing of Copies, References, Headings..............................................22
Section 11.08Governing Law.......................................................................22
Section 11.09Amendments..........................................................................23
Section 11.10Fiscal Year.........................................................................23
Section 11.11Provisions in Conflict with Law.....................................................23
Section 11.12Execution via Facsimile.............................................................23
Section 11.13Principal Office....................................................................24
Section 11.14Inspection of Books.................................................................24
Section 11.15Seal 24.............................................................................
</TABLE>
<PAGE>
THE NP COMANCHE FUNDS
TRUST INSTRUMENT, made by the persons executing this Trust Instrument
below, as Trustees.
WHEREAS, the Trustees desire to establish a business trust for the
investment and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust hereunder shall be held and managed in trust under this
Trust Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "The NP
Comanche Funds".
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise
required by the context or specifically provided:
(a) "Bylaws" means the Bylaws of the Trust as may be adopted by
the Trustees.
(b) "Class" means the class of Shares of a Series established in
accordance with the provisions of Section 2.06.
(c) "Commission" shall have the meaning given it in the 1940 Act.
(d) "Delaware Act" means Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as amended from time to
time.
(e) "Interested Person" shall have the meaning given it in the 1940
Act.
(f) "Net Asset Value" means the net asset value of each Series of the
Trust or Class thereof determined in the manner provided in Section 5.01.
(g) "Outstanding Shares" means those Shares shown from time to time in
the books of the Trust or a Transfer Agent as then issued and outstanding, but
shall not include Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the treasury of the Trust.
(h) "Person" shall have the meaning given it in the 1940 Act.
<PAGE>
(i) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Section 2.06.
(j) "Shareholder" means a record owner of Outstanding Shares of
the Trust;
(k) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series of the
Trust or Class thereof shall be divided and may include fractions of Shares as
well as whole Shares.
(l) "Transfer Agent" means the transfer agent of the Trust or such
officer or agent of the Trust as shall maintain the register of a Series.
(m) "Trust" means the trust created hereby and reference to the
Trust, when applicable to one or more Series of the Trust, shall refer to any
such Series.
(n) "Trustees" means each person who has signed this Trust Instrument,
so long as that person shall continue in office in accordance with the terms
hereof, and each other Person who may from time to time be duly qualified and
serving as a Trustee in accordance with the provisions of Article III hereof.
Reference herein to a Trustee or to the Trustees shall refer to the individual
Trustees in their capacity as Trustees hereunder.
(o) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or any Series, or the Trustees on behalf of the Trust or any Series.
(p) "1940 Act" means the Investment Company Act of 1940, as amended
from time to time, and all terms that are defined herein by reference to the
1940 Act shall be interpreted as such term has been modified by or interpreted
by applicable orders of the Commission or any rules or regulations adopted by or
interpretive releases of the Commission or its staff, or "no-action" or other
interpretive letters issued by the staff, under the 1940 Act.
ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in
the Trust shall be divided into such transferable Shares of one or more separate
and distinct Series or Classes of a Series as the Trustees shall from time to
time create and establish. The number of Shares of each Series, and Class
thereof, authorized hereunder is unlimited. All Shares issued hereunder shall be
fully paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. The Trustees in their discretion may,
from time to time issue Shares, in addition to the then issued and Outstanding
Shares and Shares held in the treasury of the Trust, to such party or parties
and for such amount and type of consideration, including cash or securities, at
such time or times and on such terms as the Trustees may deem
<PAGE>
appropriate, and may in such manner acquire other assets (including the
acquisition of assets subject to, and in connection with, the assumption of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares and Shares held in the treasury of the
Trust. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as1/1,000th of a Share or integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES.
(a) A register shall be kept at the principal office of the Trust or an
office of a Transfer Agent which shall contain the names and addresses of the
Shareholders of each Series and Class thereof, the number of Shares of that
Series and any Classes thereof held by each Shareholder and a record of all
transfers thereof. No Shareholder shall be entitled to receive payment of any
distribution, nor to have notice given to the Shareholder as herein provided,
until the Shareholder has given its address to the Transfer Agent.
(b) All shares shall be uncertificated except as the Trustees may
otherwise authorize. The Trustees may issue certificates to a Shareholder of any
Series or Class thereof for any purpose and the issuance of a certificate to one
or more Shareholders shall not require the issuance of certificates generally.
As to Shares for which no certificate has been issued, each Shareholder shall be
entitled to receive distributions or otherwise to exercise or enjoy the rights
of Shareholders. Share certificates shall be in the form prescribed from time to
time by the Trustees and shall be signed by the President or a Vice President
and by the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary.
Such signatures may be facsimiles if the certificate is signed by a Transfer
Agent or shareholder services agent or by a registrar, other than a Trustee,
officer or employee of the Trust. In case any officer who has signed or whose
facsimile. signature has been placed on a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if the person were such officer at the time of its
issue.
(c) In the case of the alleged loss or destruction or the mutilation of
a Share certificate, a duplicate certificate may be issued in place thereof,
upon such terms as the Trustees may prescribe or upon the terms generally
employed by the Transfer Agent. The Trustees may at any time discontinue the
issuance of Share certificates and may, by written notice to each Shareholder,
require the surrender of Share certificates to the Trust for cancellation. Such
surrender and cancellation shall not affect the ownership of Shares in the
Trust.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust only by the
record holder thereof or by that holder's agent thereunto duly authorized in
writing, upon delivery to the Trustees or the Transfer Agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees
or Transfer Agent. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such
<PAGE>
Shares for all purposes hereunder and neither the Trustees nor the Trust, nor
any Transfer Agent or registrar nor any officer, employee or agent of the Trust
shall be affected by any notice of the proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until
reissued pursuant to Section 2.02 hereof, not confer any voting rights on the
Trustees, nor shall such Shares be entitled to any distributions declared with
respect to the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES OR CLASS. The Trust created hereby
shall consist of one or more Series. Separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees may divide the Shares of any Series into
Classes. The Trustees shall have full power and authority in their sole
discretion to establish and designate and to change in any manner any such
Series or Class and to fix such preferences, voting powers, rights and
privileges of such Series or Classes as the Trustees may from time to time
determine, to divide or combine the Shares or any Series or Classes into a
greater or lesser number, to classify or reclassify any issued Shares of any
Series or Classes into one or more Series or Classes, and to take such other
action with respect to the Shares of any Series or Class as the Trustees may
deem desirable. The establishment and designation of any Series or Class shall
be effective when specified in the resolution of the Trustees setting forth such
establishment and designation and the relative rights and preferences of the
Shares of such Series or Class.
All references to Shares in this Trust Instrument shall be deemed to be
Shares of any or all Series or Classes, as the context may require. All
provisions herein relating to the Trust shall apply equally to each Series and
each Class, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series subject to Section 2.08 and the
preferences, rights and privileges of each Class of that Series. Each holder of
Shares of a Series or Class thereof shall be entitled to receive the holder's
pro rata share of all distributions made with respect to such Series or Class.
Upon redemption of Shares, such Shareholder shall be paid solely out of the
funds and property of such Series of the Trust.
Each Series and Class thereof of the Trust and their attributes will be
set forth in Annex A to this Trust Instrument.
SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept
investments in any Series or Class thereof as the Trustees may from time to time
authorize. At the Trustees' discretion, such investments may be in the form of
cash, securities or other assets in which the affected Series is authorized to
invest, valued as provided in Section 5.01. Investments in a Series shall be
credited to each Shareholder's account in the form of full and fractional Shares
at the Net Asset Value per Share next determined after the investment is
received or accepted as may be determined by the Trustees; provided, however,
that the Trustees may, in their sole discretion, (a) fix the Net Asset Value per
Share of the initial capital contribution or (b) impose a
<PAGE>
sales or other charge upon investments in the Trust in such manner and at such
time as may be determined by the Trustees. The Trustees shall have the right to
refuse to accept any investment in any Series at any time with or without cause
and for any reason whatsoever.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall be held and accounted for separately from the other assets of
the Trust and of every other Series and may be referred to herein as "assets
belonging to" that Series. The assets belonging to a particular Series shall
belong to that Series for all purposes, and to no other Series, subject only to
the rights of creditors of that Series. In addition, any assets, income,
earnings, profits or funds, or payments and proceeds with respect thereto, which
are not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as the Trustees, in their sole discretion, deem fair and equitable. Each
such allocation shall be conclusive and binding upon the Shareholders of all
Series for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to the
Series to which allocated. The assets belonging to a particular Series shall be
so recorded upon the books of the Trust, and shall be held by the Trustees in
trust for the benefit of the Shareholders of that Series. The assets belonging
to a Series shall be charged with the liabilities of that Series and all
expenses, costs, charges and reserves attributable to that Series, except that
liabilities, expenses, costs, charges and reserves allocated to a particular
Class shall be borne by that Class, as may be determined by the Trustees in
their sole discretion as they deem fair and equitable. Any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series or Class shall be allocated
and charged by the Trustees between or among any one or more of the Series of
Classes in such manner as the Trustees in their sole discretion deem fair and
equitable. Each such allocation shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
Without limitation of the foregoing, but subject to the right of the
Trustees in their discretion to allocate general liabilities, expenses, costs,
changes or reserves as herein provided, the debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular Series shall be enforceable against the assets of such Series only,
and not against the assets of the Trust generally. Notice of this contractual
limitation on inter-Series liabilities may, in the Trustee's sole discretion, be
set forth in the certificate of trust of the Trust (whether originally or by
amendment) as filed or to be filed in the Office of the Secretary of State of
the State of Delaware pursuant to the Delaware Act, and upon the giving of such
notice in the certificate of trust, the statutory provisions of Section 3804 of
the Delaware Act relating to limitations on inter-Series liabilities of any
other Series (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.
<PAGE>
All Persons extending credit to, contracting with or having any claim
against the Trust or the Trustees shall look only to the assets of the
appropriate Series or (if the Trustees shall have yet to have established
Series) of the Trust for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of their agents, whether
past, present or future, shall be personally liable therefor. No Shareholder or
former Shareholder of any Series shall have a claim on or any right to any
assets allocated or belonging to any other Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no
preemptive or other right to subscribe to any additional Shares or other
securities issued by the Trust or the Trustees, whether of the same or other
Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDERS. No Shareholder of
the Trust or of any Series shall be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for, or otherwise
existing with respect to, the Trust or any Series. The Trustees shall have no
power to bind any Shareholder personally or to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription for
any Shares or otherwise. Every note, bond, contract or other undertaking issued
by or on behalf of the Trust or the Trustees relating to the Trust or to a
Series shall include a recitation limiting the obligation represented thereby to
the Trust or to one or more Series and its or their assets (but the omission of
such a recitation shall not operate to bind any Shareholder or Trustee of the
Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT AND DISCLOSURE. Every
Shareholder, by virtue of having purchased a Share shall become a Shareholder
and shall be held to have expressly assented and agreed (i) to be bound by the
terms hereof and (ii) upon demand to disclose to the Trustees in writing such
information with respect to the direct and indirect ownership of Shares as the
Trustees deem necessary to comply with the requirements of any taxing authority.
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right but with unlimited powers of delegation. The
Trustees shall have full power and authority to conduct the business of the
Trust and carry on its operations and maintain offices in any governmental
jurisdiction within or without the State of Delaware. The Trustees shall have
full power and authority to do any and all acts and to make and execute any and
all contracts and instruments that the Trustees may consider necessary, proper,
desirable or appropriate in connection with the management of the Trust although
such things are not herein specifically mentioned. Any determination as to what
is in the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Trust Instrument, the
presumption shall be in favor of a grant of power to the Trustees.
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The enumeration of any specific power in this Trust Instrument shall
not be construed as limiting the aforesaid power. The powers of the Trustees may
be exercised without order of or resort to any court.
Any action by one or more of the Trustees in their capacity as such
hereunder shall be deemed an action on behalf of the Trust or the applicable
Series and not an action in an individual capacity.
Each Trustee and each committee member may receive such compensation
for his services and reimbursement for his expenses as may be fixed from time to
time by the Trustees.
When and if elected by Shareholders, a Trustee shall be elected by the
Shareholders owning a plurality of the Shares voting at a meeting of
Shareholders.
A Trustee shall be deemed to be a Trustee hereunder upon accepting this
trust.
SECTION 3.02 NUMBER OF TRUSTEES. The initial Trustees shall be the
persons initially signing this Trust Instrument. On a date fixed by the
Trustees, the Shareholders shall elect at least one (1) Trustee. The number of
Trustees shall be fixed from time to time by the Trustees, provided, however,
that the number of Trustees shall in no event be less than two (2).
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the
lifetime of this Trust and until its termination as herein provided; except that
(a) any Trustee may resign by written instrument signed by the Trustee and
delivered to the other Trustees, which shall take effect upon such delivery or
upon such later date as is specified therein; (b) that any Trustee may be
removed at any time by written instrument, signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) that any Trustee who requests in writing to be
retired, has become physically or mentally incapacitated by reason of disease or
otherwise, or is otherwise unable to serve, may be retired by written instrument
signed by a majority of the other Trustees, specifying the date of his
retirement; (d) that a Trustee shall be removed upon attaining any retirement
age for Trustees specified by resolution of the Trustees and (e) that a Trustee
may be removed at any meeting of the Shareholders of the Trust by a vote of
Shareholders owning at least two-thirds of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the death,
resignation, retirement or removal, or a Trustee is otherwise unable to serve,
or if there is an increase in the number of Trustees, a vacancy shall occur.
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is
filled, the other Trustees shall have all the powers hereunder. In the case of a
vacancy, the remaining Trustees shall fill such vacancy by appointing such other
Person as they in their discretion shall see fit. Such appointment shall take
effect upon the execution of a written instrument signed by a majority of the
Trustees in office or by resolution of the Trustees.
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An appointment of a Trustee may be made by the Trustees then in office
in anticipation of a vacancy to occur at a later date, provided that said
appointment shall become effective only at or after the effective date of said
vacancy. As soon as any Trustee appointed pursuant to this Section 3.04 shall
have accepted this trust, the trust estate shall vest in the new Trustee,
together with the continuing Trustees, without any further act or conveyance,
and the new Trustee shall be deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney,
delegate his power for a period not exceeding six months at any time to any
other Trustee or Trustees, provided that at least one Trustee must personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
SECTION 3.06 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The death,
resignation, retirement or removal or inability to serve of the Trustees, or any
one of them, shall not operate to terminate the Trust or to revoke any existing
agency created pursuant to the terms of this Trust Instrument.
SECTION 3.07 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust
and of each Series shall be held separate and apart from any assets now or
hereafter held in any capacity other than as Trustee hereunder by the Trustees
or any successor Trustees. Legal title in all of the assets of the Trust and the
right to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any Person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
SECTION 3.08 ACTION AND MEETINGS OF TRUSTEES. The Trustees shall act by
majority vote (unless a greater amount is specified in this Trust Instrument or
applicable law) at a meeting duly called at which a quorum is present or by
unanimous written consent without a meeting. Notice of the time, date and place
of all meetings of the Trustees shall be given by the party calling the meeting
to each Trustee by telephone, facsimile or other electronic mechanism sent to
his home or business address at least twenty-four hours in advance of the
meeting or by written notice mailed to his home or business address at least
seventy-two hours in advance of the meeting. Notice need not be given to any
Trustee who attends the meeting without objecting to the lack of notice or who
executes a written waiver of notice with respect to the meeting. Written
consents or waivers of the Trustees may be executed in one or more counterparts.
Meetings of the Trustees may be held at such places and at such times as the
Trustees may from time to time determine; each Trustee present at such
determination shall be deemed a party calling the meeting and no call or notice
will be required to such Trustee provided that any Trustee who is absent when
such determination is made shall be given notice of the determination by the
Chairman of the Board of Trustees or any two other Trustees. Any meeting may
adjourn to any place. Meetings of the Trustees may be called orally or in
writing by the Chairman of the Board
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of Trustees or any two other Trustees. Except as otherwise provided, notice of
any meeting of the Trustees shall be given by the party calling the meeting to
each Trustee.
SECTION 3.09 QUORUM. One-third of the Trustees shall constitute a
quorum for the transaction of business and an action of a majority of the quorum
shall constitute action of the Trustees except to the extent otherwise provided
for in this Trust Instrument.
SECTION 3.10 MEETING ACTIONS. When all the Trustees shall be present at
any meeting, however called or wherever held, or shall assent to the holding of
the meeting without notice, or shall sign a written assent thereto filed with
the record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held. Any action by the Trustees may be taken without
a meeting if a written consent thereto is signed by all the Trustees and filed
with the records of the Trustees' meeting. Such consent shall be treated, for
all purposes, as a vote at a meeting of the Trustees held at the principal place
of business of the Trustees. Trustees may participate in a meeting of Trustees
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting. Any meeting
conducted by telephone shall be deemed to take place at and from the principal
office of the Trust.
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS.
(a) The Trustees shall have the power and authority under this Trust
Instrument to conduct any business and to act in any manner not prohibited by
this Trust Instrument or applicable law. The Trustees also shall have any power
or authority under this Trust Instrument the Trustees may possess under
applicable law, including the power and authority to act on any matter without
and in place of Shareholder approval, if applicable law permits the Trust
Instrument to provide Trustees such power and authority. Powers of the Trustees
specifically enumerated in other sections of this Trust Instrument shall not
limit or restrict in any manner the power and authority of the Trustees provided
by this Section 4.01.
(b) The Trustees in all instances shall act as principals, free from
the control of the Shareholders.
(c) The Trustees shall not in any way be bound or limited by present or
future laws or customs in regard to trust investment from making any investment
which the Trustees, in their sole discretion, shall deem proper to accomplish
the purpose of this Trust. The Trustees shall not be limited to investing in
obligations maturing before the possible termination of the Trust.
(d) No Person dealing with the Trustees shall be under any obligation
to make any inquiry concerning the authority of the Trustees, or to oversee the
application of any payments made or property transferred to the Trustees or upon
their order.
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SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Article II and Article IX, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or the particular Series of the Trust, with
respect to which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee,
officer or other agent of the Trust may acquire, own and dispose of Shares to
the same extent as if the Trustee, officer or other agent were not a Trustee,
officer or agent; and the Trustees may issue and sell or cause to be issued and
sold Shares to and buy such Shares from any such trustee, officer or other agent
or any Person in which the Trustee, officer or other agent is interested,
subject only to the general limitations herein contained as to the sale and
purchase of such Shares.
SECTION 4.04 PRINCIPAL TRANSACTIONS. The Trustees may, on behalf of the
Trust, buy any securities from, sell any securities to, lend any assets of the
Trust to, or contract in any way, whether orally or written, with any Trustee or
officer of the Trust or any other Person, however related to the Trust; or have
any dealings of any kind with any Person.
SECTION 4.05 DELEGATIONS AND COMMITTEES. The Trustees may delegate to
any one or more of their number the authority to approve particular actions on
behalf of the Trust. The Trustees may establish one or more committees
consisting of one or more Trustees, delegate any of the powers of the Trustees
to any committee and adopt a committee charter providing for the
responsibilities, membership (including Trustees, officers or other agents of
the Trust therein) and any other characteristics of a committee as the Trustees
may deem proper. The Trustees may by resolution appoint a committee consisting
of less than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to any
and all matters as the Trustees may deem proper.
All members of each committee shall hold such offices at the pleasure
of the Trustees. The Trustees may abolish any committee at any time. Any
committee to which the Trustees delegate any of their powers or duties shall
keep records of its meetings and shall report its actions to the Trustees. The
Trustees shall have power to rescind any action of any committee, but no such
rescission shall have retroactive effect.
ARTICLE V
NET ASSET VALUE AND EXPENSES
SECTION 5.01 DETERMINATION OF NET ASSET VALUE. The "Net Asset Value" of
any Series shall be the amount by which the assets of that Series exceed its
liabilities, all as determined by or under the direction of the Trustees in any
manner the Trustees deem appropriate. The Net Asset Value of any Class shall be
the amount by which the net assets attributable to that Class
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exceed any liabilities attributed to that Class as determined by or under the
direction of the Trustees in any manner the Trustees deem appropriate.
SECTION 5.02 EXPENSES. Subject to the provisions of Section 2.08, the
Trustees shall be reimbursed from the estate or the assets belonging to the
appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; insurance premiums; applicable fees,
interest charges and expenses of third parties, including the Trust's investment
advisers, managers, administrators, distributors, custodians, transfer agents
and fund accountants; fees of pricing, interest, dividend, credit and other
reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining its existence;
costs of preparing and printing the Trust's prospectuses, statements of
additional information and shareholder reports and delivering them to
Shareholders or others; expenses of meetings of Shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trust;
compensation of the Trust's officers and employees and costs of other personnel
performing services for the Trust; costs of Trustees' meetings; registration
fees and related expenses; for such non-recurring items as may arise, including
litigation to which the Trust (or a Trustee acting as such) is a party, and for
all losses and liabilities incurred by any Trustee in administering the Trust,
and for the payment of such expenses, disbursements, losses and liabilities the
Trustees shall have a lien on the assets belonging to the appropriate Series, or
in the case of an expense allocable to more than one Series, on the assets of
each such Series, prior to any rights or interests of the Shareholders thereto.
This section shall not preclude the Trust from directly paying any of the
aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISERS, UNDERWRITERS AND CUSTODIANS
SECTION 6.01 INVESTMENT ADVISERS. The Trustees may in their discretion,
from time to time, enter into one or more investment advisory contracts on
behalf of the Trust or any Series whereby the other party or parties to such
contract or contracts shall undertake to furnish the Trustees with such
investment advisory and other facilities and services upon such terms and
conditions as may be prescribed by the Trustees. Notwithstanding any other
provision of this Trust Instrument, the Trustees may authorize any investment
adviser to effect purchases, sales or exchanges of portfolio securities, other
investment instruments of the Trust, or other Trust Property on behalf of the
Trustees, or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser. Any such purchases, sales and exchanges shall be deemed to have been
authorized by all of the Trustees.
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The Trustees may authorize an investment adviser to employ, from time
to time, with the approval of the Trustees, one or more sub-advisers to perform
such of the acts and services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and
sub-adviser. Any reference in this Trust Instrument to an investment adviser
shall be deemed to include such sub-advisers, unless the context otherwise
requires.
SECTION 6.02 UNDERWRITERS. The Trustees may in their discretion from
time to time enter into an exclusive or non-exclusive underwriting contract or
contracts providing for the sale of Shares, whereby the Trust may either agree
to sell Shares to the other party to the contract or appoint such other party
the Trust's sales agent for such Shares. In either case, the contract shall be
on such terms and conditions as may be prescribed by the Trustees; and such
contracts may also provide for the purchase of Shares by such other party as
principal or as agent of the Trust.
SECTION 6.03 CUSTODIANS. The Trustees shall at all times employ one or
more persons permitted to act as custodian for assets of the Trust under
applicable law as custodian with authority as the Trust's agent: (a) to hold the
securities owned by the Trust and deliver the same upon written order or oral
order confirmed in writing; (b) to receive and receipt for any moneys due to the
Trust and deposit the same in the custodian's banking department or elsewhere as
the Trustees may direct; and (c) to disburse such funds upon orders or vouchers.
The Trustees may also authorize the custodian to employ from time to
time one or more sub-custodians permitted to act as a custodian for assets of
the Trust under applicable law to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote
only (a) for the election of Trustees as provided in Sections 3.01 and 3.02, (b)
for the removal of Trustees as provided in Section 3.03(e), (c) to amend this
Trust Instrument as provided for in Section 11.09 and (d) with respect to such
additional matters relating to the Trust as may be required by law or by this
Trust Instrument. The Shareholders shall have no right or power to vote for any
other matter, whether referenced in this Trust Instrument or not, including the
accomplishment of a merger or consolidation within the meaning of Section 3815
of the Delaware Act, or any successor provision.
On any matter submitted to a vote of the Shareholders, all Shares shall
be voted separately by individual Series, except (i) when required by applicable
law, Shares shall be voted in the aggregate and not by individual Series; (ii)
when the Trustees have determined that the matter affects the interests of more
than one Series, the Shareholders of all such Series shall be entitled to vote
thereon; and (iii) when the Trustees have determined that the matter affects the
interests of one of more classes, the Shareholders of all such classes shall be
entitled to vote. Each whole Share shall be entitled to one vote as to any
matter on which a Shareholder is entitled
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to vote, and each fractional Share shall be entitled to a proportionate
fractional vote. Each whole dollar of Net Asset Value of a Share shall be
entitled to one vote as to any matter on which a Shareholder is entitled to
vote, and any fraction of a dollar of Net Asset Value of a Share shall be
entitled to a proportionate fractional vote. Notwithstanding anything else
herein , in the event a proposal by anyone other than the officers or Trustees
of the Trust is submitted to a vote of the Shareholders of one or more Classes,
one or more Series or of the Trust, or in the event of any proxy contest or
proxy solicitation or proposal in opposition to any proposal by the officers or
Trustees of the Trust, Shares may be voted only in person or by written proxy.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required or permitted by law, this Trust Instrument to
be taken by Shareholders.
SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in
order to elect Trustees as specified in Section 3.02. Meetings may be held
within or without the State of Delaware as specified by the Trustees. A meeting
of Shareholders shall be called by the Secretary whenever (i) ordered by the
Trustees or (ii) requested in writing by the holder or holders of at least one
third of the Outstanding Shares entitled to vote. If the Secretary, when so
ordered or requested, refuses or neglects for more than 30 days to call a
meeting, the Trustees or the Shareholders so requesting, may call the meeting in
the name of the Secretary by giving notice thereof in the manner required when
notice is given by the Secretary. If the meeting is a meeting of the
Shareholders of one or more Series or Classes, but not a meeting of all
Shareholders of the Trust, then only special meetings of the Shareholders of
such one or more Series or Classes shall be called and only the shareholders of
such one or more Series or Classes shall be entitled to notice of and to vote at
such meeting.
SECTION 7.03 NOTICES. Except as provided in Section 7.02, notices of
any meeting of the Shareholders shall be given by the Secretary by any method
authorized by law and the Trustees. In the case of delivering or mailing written
or printed notification, postage prepaid, such notice shall be given to each
Shareholder entitled to vote at said meeting at least ten (10) days before the
meeting, to such address as may be registered with the Trust by the Shareholder.
Notice of any Shareholder meeting need not be given to any Shareholder if a
waiver of notice (in the form required by law) executed before or after such
meeting, is filed with the record of such meeting, or to any Shareholder who
shall attend such meeting in person or by proxy. Notice of adjournment of a
Shareholder's meeting to another time or place need not be given, if such time
and place are announced at the meeting or reasonable notice is given to Persons
present at the meeting and the adjourned meeting is held within a reasonable
time after the date set for the original meeting.
SECTION 7.04 QUORUM AND REQUIRED VOTE. One-third (or such higher
proportion as the Trustees, in their sole discretion, may determine with respect
to a meeting) of Shares entitled to vote in person or by proxy shall be a quorum
for the transaction of business at a Shareholders' meeting, except that when any
provision of law or of this Trust Instrument permits or requires that holders of
any Series shall vote as a Series (or that holders of a Class shall vote as a
Class), then one-third (or such higher proportion as the Trustees, in their sole
discretion, may determine with respect to a meeting) of the aggregate number of
Shares of that Series (or that Class) entitled to vote shall be necessary to
constitute a quorum for the transaction of business by that
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Series (or that Class). Any lesser number shall be sufficient only for holding a
vote to adjourn the meeting. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original meeting, without
the necessity of further notice. Except when a larger vote is required by law or
by any provision of this Trust Instrument or the Bylaws, a majority of the
Shares voted in person or by proxy shall decide any questions and a plurality
shall elect a Trustee, provided that when any provision of law or of this Trust
Instrument permits or requires that the holders of any Series shall vote as a
Series (or that the holders of any Class shall vote as a Class), then a majority
of the Shares present in person or by proxy of that Series (or Class), voted on
the matter in person or by proxy shall decide that matter insofar as that Series
(or Class) is concerned.
SECTION 7.05 VOTING-PROXIES. Shares may be voted in person or by proxy
or in any manner provided for in this Trust Instrument except as otherwise
required by Section 7.01. Shareholders entitled to vote may vote either in
person or by proxy, provided that either (a) an instrument authorizing such
proxy to act is executed by the Shareholder in writing and dated not more than
eleven (11) months before the meeting, unless the instrument specifically
provides for a longer period or (b) the Trustees or the President of the Trust
authorize an electronic, telephonic, computerized or other alternative to
execution of a written instrument authorizing the proxy to act and authorization
pursuant to that alternative is received not more than eleven (11) months before
the meeting. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to Shares held in the name of two or more Persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise, and the burden or proving invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting. Except as otherwise provided
herein, all matters relating to the giving, voting or validity of proxies shall
be governed by the General Corporation Law of the State of Delaware relating to
proxies, and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Shareholders were shareholders of a Delaware
corporation.
SECTION 7.06 ACTION WITHOUT A MEETING. Any action to be taken by
Shareholders of the Trust or any Series or Class may be taken without a meeting
if Shareholders holding at least the percentage of Outstanding Shares of the
Trust, Series or Class that would be required to approve the action at a meeting
of those Shareholders called to vote on the matter consent to the action in
writing, which may be in one or more counterparts, and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting of the Shareholders
held at the principal place of business of the Trust.
SECTION 7.07 ESTABLISHMENT OF RECORD DATES. The Trustees may close the
Share transfer books of the Trust for a period not exceeding one hundred twenty
(120) days preceding
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the date of any meeting of Shareholders, or the date for the payment of any
distributions, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect; or in lieu of
closing the stock transfer books as aforesaid, the Trustees may fix in advance a
date, not exceeding one hundred twenty (120) days preceding the date of any
meeting of Shareholders, or the date for payment of any distribution, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of Shares shall go into effect, as a record date for the determination
of the Shareholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such distribution, or to any such allotment
of rights, or to exercise the rights in respect of any such change, conversion
or exchange of Shares, and in such case such Shareholders and only those
Shareholders as shall be Shareholders on the date so fixed shall be entitled to
such notice of, and to vote at, such meeting, or to receive payment of such
distribution, or to receive such allotment or rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any Shares on the
books of the Trust after the date so fixed.
ARTICLE VIII
DISTRIBUTIONS AND REDEMPTIONS
SECTION 8.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay distributions
with respect to any Series or Class. The amount of such distributions, the
conditions to and timing of their payment and whether they are in cash or any
other Trust Property shall be wholly in the discretion of the Trustees or their
delegates.
(b) Distributions may be paid or made to Shareholders when declared or
the Shareholders of record at such other date or time or dates or times and
subject to such conditions as the Trustees shall determine, which distributions,
at the election of the Trustees, may be paid pursuant to a standing resolution
or resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such reinvestment
plans, cash payout plans or related plans with respect to distributions as the
Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding,
the Trustees may at any time declare and distribute a Share distribution pro
rata among the Shareholders of a particular Series, or Class thereof, as of the
record date of that Series or Class as provided in Subsection 8.01(b).
SECTION 8.02 REDEMPTIONS. In case any Shareholder of a particular
Series desires to dispose of the Shareholder's Shares or any portion thereof,
the Shareholder may deposit at the office of the Transfer Agent or other
authorized agent of that Series a written request or such other form of request
as the Trustees may from time to time authorize, requesting that the Series
purchase the Shares in accordance with this Section 8.02; and the Shareholder so
requesting shall be entitled to require the Series to purchase, and the Series
or the principal underwriter of the
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Series shall purchase the Shares, but only at the Net Asset Value thereof (as
described in Section 5.01) reduced by the amount of any sales or other charges
applicable to the Shares. The Series shall make payment for any such Shares to
be redeemed, as aforesaid, in cash or property from the assets of that Series
and payment for such Shares shall be made by the Series or the principal
underwriter of the Series to the Shareholder within such time as the Trustees
determine after the date upon which the request is effective. Upon redemption,
Shares shall become treasury Shares and may be re-issued from time to time.
SECTION 8.03 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may
declare a suspension of the right of redemption or postpone the date of payment
with respect to the Trust or any Series or Class thereof. Such suspension shall
take effect at such time as the Trustees shall specify but not later than the
close of business on the business day next following the declaration of
suspension, and thereafter there shall be no right of redemption or payment
until the Trustees shall declare the suspension at an end. In the case of a
suspension of the right of redemption, a Shareholder may either withdraw the
request for redemption or receive payment based on the Net Asset Value next
determined after the termination of the suspension.
SECTION 8.04 REDEMPTION OF SHARES FOR TAX PURPOSES. If the Trustees
shall, at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares of any Series has disqualified or may disqualify any Series
as a regulated investment company under the Internal Revenue Code of 1986, as
amended, then the Trustees shall have the power (but not the obligation) by lot
or other means deemed equitable by them (a) to call for redemption by any such
Person of a number, or principal amount, of Shares sufficient to maintain or
bring the direct or indirect ownership of Shares into conformity with the
requirements for such qualification and (b) to refuse to transfer or issue
Shares to any Person whose acquisition of Shares in question would result in
such disqualification. The redemption shall be effected at the redemption price
and in the manner provided in this Article VIII.
ARTICLE IX
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 9.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity, shall not be personally liable to any Person other than the Trust or a
Shareholder for any act, omission or obligation of the Trust or any Trustee. A
Trustee shall not be liable for any act or omission or any conduct whatsoever in
his capacity as Trustee, provided that nothing contained herein or in the
Delaware Act shall protect any Trustee against any liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
SECTION 9.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
9.02(b): (i) every Person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a
<PAGE>
"Covered Person") shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against all expenses reasonably incurred
or paid by him in connection with any claim, action, suit, proceeding or
investigation in which he becomes involved as a party or otherwise by virtue of
his being or having been a Trustee or officer and against amounts paid or
incurred by him in the settlement thereof; (ii) the words "claim," "action,"
"suit," "proceeding" or "investigation" shall apply to all claims, actions,
suits, proceedings or investigations (civil, criminal or other, including
appeals), formal or informal, actual or threatened while in office or
thereafter, and the words "liability" and "expenses" shall include, without
limitation, attorneys' fees, costs, judgments, amounts paid in settlement,
fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or (ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, (x) by the court or other body approving
the settlement; (y) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(z) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a Person who has ceased to be a
Covered Person and shall inure to the benefit of the heirs, executors and
administrators of such a Person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Covered Persons,
and other Persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit, proceeding or investigation of the character
described in Subsection 9.02(a) may be paid by the Trust or Series from time to
time prior to final disposition thereof upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to the
Trust or Series if it is ultimately determined that he is not entitled to
indemnification under this Section 9.02; provided, however, that either (i) such
Covered Person shall have provided appropriate security for such undertaking,
(ii) the Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither Interested
Persons of the Trust nor parties to the matter, or independent legal counsel in
a written opinion, shall have determined, based upon a review of readily
available facts (as opposed to a trial-type inquiry or full investigation), that
there is reason to believe that such Covered Person will be found entitled to
indemnification under this Section 9.02.
<PAGE>
SECTION 9.03 SHAREHOLDERS. In case any Shareholder (including former
Shareholders) of any Series shall be held to be personally liable solely by
reason of the Shareholder being or having been a Shareholder of such Series and
not because of the Shareholder's acts or omissions or for some other reason, the
Shareholder (or the Shareholder's heirs, executors, administrators or other
legal representatives, or, in the case of a Shareholder other than an
individual, its corporate or other general successor) shall be entitled out of
the assets belonging to the applicable Series to be held harmless from and
indemnified against all loss and expense arising from such liability. The Trust,
on behalf of the affected Series, shall, upon request by the Shareholder, assume
the defense of any claim made against the Shareholder for any act or obligation
of the Series and satisfy any judgment thereon from the assets of the Series.
SECTION 9.04 INSURANCE. The Trust may purchase and maintain insurance
on behalf of any Covered Person or employee of the Trust or any Shareholder,
including any Covered Person or employee of the Trust who is or was serving at
the request of the Trust as a Trustee, officer or employee of another Person,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Trustees would
have the power to indemnify him against such liability.
ARTICLE X
OFFICERS
SECTION 10.01 OFFICERS AND APPOINTMENT.
(A) The officers of the Trust shall be a Chairman of the Board of
Trustees, a President, a Treasurer and a Secretary, each to be elected by the
Trustees, and such other officers as the Trustees may from time to time elect.
The Trustees may delegate to one or more officers or committees the power to
elect any subordinate officers or agents and to prescribe their respective terms
of office, authorities and duties. It shall not be necessary for any Trustee or
officer to be a holder of Shares. Two or more offices may be held by a single
person except the offices of President and Secretary. Subject to the provisions
of Section 10.04 hereof, the Chairman, the President, the Treasurer and the
Secretary shall each hold office until their successors are chosen and qualified
and all other officers shall hold office at the pleasure of the Trustees. Each
officer may receive such compensation for his services and reimbursement for his
expenses as may be fixed from time to time by the Trustees.
(b) The Trustees shall appoint from among their number a Chairman of
the Board of Trustees. When present, the Chairman shall preside at all meetings
of the Shareholders and the Trustees, and he may appoint a Trustee to preside at
such meetings in his absence. The Chairman shall perform such duties as the
Trustees may from time to time designate.
(c) The Treasurer shall be the principal financial and accounting
officer of the Trust. The Treasurer shall make annual and semi-annual reports
regarding the business and condition of the Trust and each series, which reports
shall be preserved in Trust records and, if required by applicable law, filed
with any and all regulatory agencies, shall furnish such other reports
<PAGE>
regarding the business and condition of the Trust as the Trustees may from time
to time require and shall execute all tax returns and other tax documents of the
Trust. The Treasurer shall perform such additional duties as the Trustees may
from time to time designate.
(d) The Treasurer shall be the principal financial and accounting
officer of the Trust. The Treasurer shall deliver all funds and securities of
the Trust that may come into his hands to such Person as the Trustees shall
employ as custodians. The Treasurer shall make annual reports regarding the
business and condition of the Trust, which reports shall be preserved in Trust
records, and he shall furnish such other reports regarding the business and
condition of the Trust as the Trustees may from time to time require. The
Treasurer shall perform such additional duties as the Trustees may from time to
time designate.
(e) The Secretary shall record in books kept for the purpose all votes
and proceedings of the Trustees and the Shareholders at their respective
meetings. The Secretary shall have the custody of the seal of the Trust. The
Secretary shall perform such additional duties as the Trustees may from time to
time designate.
(f) Any Vice President of the Trust shall perform such duties as the
Trustees or the President may from time to time designate. At the request or in
the absence or disability of the President, the Vice President (or, if there are
two or more Vice Presidents, then the senior of the Vice Presidents present and
able to act) may perform all the duties of the President and, when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President.
(g) Any Assistant Treasurer of the Trust shall perform such duties as
the Trustees or the Treasurer may from time to time designate, and, in the
absence of the Treasurer, the senior Assistant Treasurer, present and able to
act, may perform all the duties of the Treasurer.
(h) Any Assistant Secretary of the Trust shall perform such duties as
the Trustees or the Secretary may from time to time designate, and, in the
absence of the Secretary, the senior Assistant Secretary, present and able to
act, may perform all the duties of the Secretary.
(i) The Trustees from time to time may appoint such other officers or
agents as they may deem advisable, each of whom shall have such title, hold
office for such period, have such authority and perform such duties as the
Trustees may determine.
SECTION 10.02 RESIGNATIONS. Any officer of the Trust may resign,
notwithstanding Section 10.01 hereof, by filing a written resignation with the
President, the Trustees or the Secretary, which resignation shall take effect on
being so filed or at such time as may be therein specified.
SECTION 10.03 SURETY BONDS. The Trustees may require any officer or
agent of the Trust to execute a bond (including without limitation, any bond
required by applicable law) to the Trust in such sum and with such surety or
sureties as the Trustees may determine, conditioned upon the faithful
performance of the officer's or agent's duties to the Trust including
<PAGE>
responsibility for negligence and for the accounting of any of the Trust's
property, funds or securities that may come into the officer's or agent's hands.
SECTION 10.04 REMOVAL. Any officer may be removed from office by the
Trustees whenever in the judgment of the Trustees the best interest of the Trust
will be served thereby. In addition, any officer or agent appointed in
accordance with the provisions of Subsection 10.01(g) may be removed, either
with or without cause, by any officer upon whom such power of removal shall have
been conferred by the Trustees.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01 TRUST NOT A PARTNERSHIP. It is hereby expressly
declared that a business trust and not a partnership is created hereby.
SECTION 11.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretions hereunder
in good faith and with reasonable care under the circumstances then prevailing
shall be binding. Subject to the provisions of Article IX hereof, the Trustees
shall not be liable for errors of judgment or mistakes of fact or law. The
Trustees may obtain the advice of counsel or other experts with respect to the
meaning and operation of this Trust Instrument or any other matter and subject
to the provisions of Article IX hereof shall be under no liability for any act
or omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as Trustees nor any surety.
SECTION 11.03 REORGANIZATION. Notwithstanding anything else in this
Trust Instrument, the Trustees may (i) cause the Trust or any Series to merge or
consolidate with or into one or more entities, if the surviving or resulting
entity is the Trust or another company registered as an open-end, management
investment company under the 1940 Act, or a series thereof, (ii) cause any or
all Shares to be exchanged under or pursuant to any state or federal statute to
the extent permitted by law or (iii) cause the Trust to incorporate or organize
under the laws of any state, commonwealth, territory, dependency, colony or
possession of the United States of America or in any foreign jurisdiction.
Pursuant to and in accordance with the provisions of Section 3815(f) of
the Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 11.03 may (i) effect any amendment to
the Trust Instrument or (ii) effect the adoption of a new trust instrument of
the Trust if the Trust is the surviving or resulting trust in the merger or
consolidation.
<PAGE>
SECTION 11.04 TERMINATION OF TRUST, SERIES OR CLASS.
(a) This Trust, each Series and each Class thereof shall continue
without limitation of time but subject to the provisions of this Section 11.04.
The Trustees may provide that any Series or Class thereof shall have a limited
life and shall automatically terminate as determined by the Trustees.
(b) The Trustees may determine to terminate the operations of the
Trust, a Series or a Class thereof. After such determination, the Trustees may
require the redemption of all Shares of the Trust, Series or Class or take such
other action as they deem necessary in order to eliminate all Outstanding Shares
of the Trust, Series or Class, as the case may be.
(c) The Trustees may at any time, in contemplation of the termination
of the Trust or of a Series: (i) sell and convey all or any portion of the
assets of the Trust or the affected Series to another Person organized under the
laws of any jurisdiction, or to a separate series of shares thereof, for
adequate consideration, which may include the assumption of all outstanding and
contingent liabilities of the Trust or any affected Series, and which may
include shares of beneficial interest, stock or other ownership interest of such
Person or series thereof; or (ii) sell and convert into money all or any portion
of the assets of the Trust or the affected Series. Upon paying or making
reasonable provision for the payment of all known liabilities of the Trust or
any affected Series, the Trustees shall distribute the remaining proceeds or
assets (as the case may be) ratably among the Shareholders of all Series or the
affected Series subject to Section 2.08 and the preferences, rights and
privileges of each Class of the Series.
(d) At any time that there are no Outstanding Shares of the Trust, a
Series or a Class, the Trustees may abolish the Trust, Series or Class, as
applicable, and, if applicable, the establishment and designation thereof.
(e) Upon completion of the distribution of the remaining proceeds or
the remaining assets of a Trust or a Series as provided in Subsection 11.04(c),
the Trust or any affected Series shall terminate. Upon the abolishment of the
Trust, a Series or a Class as provided in Subsection 11.04(d), the Trust, Series
or Class, as applicable, shall terminate. Upon such termination, the Trustees
and the Trust shall be discharged of any and all further liabilities and duties
hereunder and the right, title and interest of all parties with respect to the
Trust, Series or Class shall be canceled and discharged.
(f) Upon termination of the Trust, following completion of winding up
of its business, the Trustees shall cause a certificate of cancellation of the
Trust's certificate of trust to be filed in accordance with the Delaware Act,
which certificate of cancellation may be signed by any Trustee.
<PAGE>
SECTION 11.05 DERIVATIVE ACTIONS. Except as required under applicable
law, no derivative action may be brought by Shareholders unless Shareholders
owning not less than one-half of the outstanding Shares of all Series of the
Trust, or of the affected Series or Classes of the Trust, as the case may be,
join in the bringing of the derivative action.
SECTION 11.06 PARTIES TO CONTRACT. Any contract may be entered into by
the Trust with any Person, even though one or more of the Trustees or officers
of the Trust may be (i) that Person, (ii) an officer, director, trustee,
shareholder, or member of that Person or (iii) financially interested or
otherwise affiliated with that Person, and no such contract shall be invalidated
or rendered void or voidable by reason of the existence of any relationship, nor
shall any Person holding such relationship be disqualified from voting on or
executing the same in his capacity as Shareholder and/or Trustee, nor shall any
Person holding such relationship be liable merely by reason of such relationship
for any loss or expense to the Trust under or by reason of said contract or
accountable for any profit realized directly or indirectly therefrom, provided
that the contract when entered into was not inconsistent with the provisions of
this Trust Instrument.
SECTION 11.07 FILING OF COPIES, REFERENCES, HEADINGS. The original or a
copy of this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been made and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof' and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his," "he" and "him," shall be deemed to include the feminine
and neuter, as well as masculine, genders. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts, each of which shall be deemed an
original.
SECTION 11.08 GOVERNING LAW. The trust set forth in this instrument is
made in the State of Delaware, and the Trust and this Trust Instrument, and the
rights and obligations of the Trustees and Shareholders hereunder, are to be
governed by and construed and administered according to the Delaware Act and the
laws of said State; provided, however, that there shall not be applicable to the
Trust, the Trustees or this Trust Instrument (a) the provisions of Section 3540
of Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust,
<PAGE>
(v) the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards of responsibilities or limitations on the acts or powers of
trustees, which are inconsistent with the limitations or liabilities or
authorities and powers of the Trustees set forth or referenced in this Trust
Instrument. The Trust shall be of the type commonly called a "business trust,"
and without limiting the provisions hereof, the Trust may exercise all powers
that are ordinarily exercised by such a trust under Delaware law. The Trust
specifically reserves the right to exercise any of the powers or privileges
afforded to trusts or actions that may be engaged in by trusts under the
Delaware Act, and the absence of a specific reference herein to any such power,
privilege or action shall not imply that the Trust may not exercise such power
or privilege or take such actions.
SECTION 11.09 AMENDMENTS. Except as specifically provided herein, the
Trustees may amend or otherwise supplement this Trust Instrument. The amendment
or supplement may be made by the Trustees executing an amendment, a Trust
Instrument supplemental hereto or an amended and restated Trust Instrument.
Shareholders shall have the right to vote only (a) on any amendment which would
adversely affect their right to vote granted in Section 7.01, (b) on any
amendment to this Section 11.09 that adversely affects the right of the
Shareholders to vote, (c) on any amendment as may be required by law and (d) on
any amendment submitted to Shareholders by the Trustees. Any amendment required
or permitted to be submitted to Shareholders which, as the Trustees determine,
shall affect the Shareholders of one or more Series or Classes thereof shall be
authorized by vote of the Shareholders of each Series or Class affected and no
vote of shareholders of a Series or Class not affected shall be required.
Notwithstanding anything else herein, any amendment to Article IX hereof shall
not limit the rights to indemnification or insurance provided therein with
respect to action or omission of Covered Persons prior to such amendment.
SECTION 11.10 FISCAL YEAR. The fiscal year of the Trust (or of each
Series) shall end on a specified date as determined from time to time by the
Trustees.
SECTION 11.11 PROVISIONS IN CONFLICT WITH LAW. The provisions of this
Trust Instrument are severable, and if the Trustees shall determine that any of
such provisions is in conflict with any applicable law or regulation, the
conflicting provision shall be deemed never to have constituted a part of this
Trust Instrument; provided, however, that such determination shall not affect
any of the remaining provisions of this Trust Instrument or render invalid or
improper any action taken or omitted prior to such determination. If any
provision of this Trust Instrument shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision in such jurisdiction and shall not in any matter affect such
provisions in any other jurisdiction or any other provision of this Trust
Instrument in any jurisdiction.
SECTION 11.12 EXECUTION VIA FACSIMILE. Execution and delivery of any
consent, waiver, certificate, proxy or other document by Trustees, officers or
Shareholders of the Trust or parties
<PAGE>
contracting with the Trust may be accomplished by facsimile or other similar
electronic mechanism.
SECTION 11.13 PRINCIPAL OFFICE. The principal office of the Trust shall
be located in Portland, Maine, or such other location as the Trustees may from
time to time determine.
SECTION 11.14 INSPECTION OF BOOKS. The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of Shareholders; and no Shareholder shall
have any right to inspect any account or book or document of the Trust except as
conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.
SECTION 11.15 SEAL. The seal of the Trust shall be circular in form
bearing the inscription: "The NP Comanche Funds" -- 1999 The State Of Delaware.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument as of date first written above.
_______________________________
D. Blaine Riggle, as Trustee
and not individually
_______________________________
Stephen J. Barrett, as Trustee
and not individually
_______________________________
David I. Goldstein, as Trustee
and not individually
<PAGE>
THE NP COMANCHE FUNDS
ANNEX A
As of July 29, 1999
Series Class Thereof Date Created
NP Comanche Growth Fund Sole class July 29, 1999
FORM OF
THE NP COMANCHE FUNDS
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made as of the ___ day of _________, 1999, by and between The
NP Comanche Funds, a Delaware business trust, with its principal office and
place of business at Two Portland Square, Portland, Maine 04101 (the "Trust"),
and NewBridge Partners, LLC, a Delaware limited liability company with its
principal office and place of business at 535 Madison Avenue, 14th Floor, New
York, New York 10022 (the "Adviser").
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment company
and may issue its shares of beneficial interest, no par value (the "Shares"), in
separate series; and
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for each series of the Trust listed in Appendix A hereto (each, a
"Fund" and collectively, the "Funds"), and the Adviser is willing to provide
those services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and the Adviser hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) The Trust hereby employs Adviser, subject to the direction and
control of the Board, to manage the investment and reinvestment of the assets in
each Fund and, without limiting the generality of the foregoing, to provide
other services as specified herein. The Adviser accepts this employment and
agrees to render its services for the compensation set forth herein.
(b) In connection therewith, the Trust has delivered to the Adviser
copies of (i) the Trust's Trust Instrument and Bylaws (collectively, as amended
from time to time, "Organic Documents"), (ii) the Trust's Registration Statement
and all amendments thereto filed with the U.S. Securities and Exchange
Commission ("SEC") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), or the 1940 Act (the "Registration Statement"), (iii) the
Trust's current Prospectuses and Statements of Additional Information of each
Fund (collectively, as currently in effect and as amended or supplemented, the
"Prospectus"), and (iv) all procedures adopted by the Trust with respect to the
Funds (e.g., repurchase agreement procedures), and shall promptly furnish the
Adviser with all amendments of or supplements to the foregoing. The Trust shall
deliver to the Adviser (x) a certified copy of the resolution of the Board of
Trustees of the Trust (the "Board") appointing the Adviser and authorizing the
execution and delivery of this Agreement, (y) a copy of all proxy statements and
related materials relating to the Funds, and (z) any other documents, materials
or information that the Adviser shall reasonably request to enable it to perform
its duties pursuant to this Agreement.
<PAGE>
(c) The Adviser has delivered to the Trust (i) a copy of its Form ADV
as most recently filed with the SEC and (ii) a copy of its code of ethics
complying with the requirements of Rule 17j-1 under the 1940 Act (the "Code").
The Adviser shall promptly furnish the Trust with all amendments of or
supplements to the foregoing at least annually.
SECTION 2. DUTIES OF THE TRUST
In order for the Adviser to perform the services required by this
Agreement, the Trust (i) shall cause all service providers to the Trust to
furnish information to the Adviser, and assist the Adviser as may be required
and (ii) shall ensure that the Adviser has reasonable access to all records and
documents maintained by the Trust or any service provider to the Trust.
SECTION 3. DUTIES OF THE ADVISER
(a) The Adviser will make decisions with respect to all purchases and
sales of securities and other investment assets in each Fund. To carry out such
decisions, the Adviser is hereby authorized, as agent and attorney-in-fact for
the Trust, for the account of, at the risk of and in the name of the Trust, to
place orders and issue instructions with respect to those transactions of the
Funds. In all purchases, sales and other transactions in securities and other
investments for the Funds, the Adviser is authorized to exercise full discretion
and act for the Trust in the same manner and with the same force and effect as
the Trust might or could do with respect to such purchases, sales or other
transactions, as well as with respect to all other things necessary or
incidental to the furtherance or conduct of such purchases, sales or other
transactions.
Consistent with Section 28(e) of the Securities and Exchange Act of
1934, as amended, the Adviser may allocate brokerage on behalf of the Funds to
broker-dealers who provide research services. The Adviser may aggregate sales
and purchase orders of the assets of the Funds with similar orders being made
simultaneously for other accounts advised by the Adviser or its affiliates.
Whenever the Adviser simultaneously places orders to purchase or sell the same
asset on behalf of a Fund and one or more other accounts advised by the Adviser,
the orders will be allocated as to price and amount among all such accounts in a
manner believed to be equitable over time to each account.
(b) The Adviser will report to the Board at each meeting thereof as
requested by the Board all material changes in each Fund since the prior report,
and will also keep the Board informed of important developments affecting the
Trust, the Funds and the Adviser, and on its own initiative, will furnish the
Board from time to time with such information as the Adviser may believe
appropriate for this purpose, whether concerning the individual companies whose
securities are included in the Funds' holdings, the industries in which they
engage, the economic, social or political conditions prevailing in each country
in which the Funds maintain investments, or otherwise. The Adviser will also
furnish the Board with such statistical and analytical information with respect
to investments of the Funds as the Adviser may believe appropriate or as the
Board reasonably may request. In making purchases and sales of securities and
<PAGE>
other investment assets for the Funds, the Adviser will bear in mind the
policies set from time to time by the Board as well as the limitations imposed
by the Organic Documents and Registration Statement, the limitations in the 1940
Act, the Securities Act, the Internal Revenue Code of 1986, as amended, and
other applicable laws and the investment objectives, policies and restrictions
of the Funds.
(c) The Adviser will from time to time employ or associate with such
persons as the Adviser believes to be particularly fitted to assist in the
execution of the Adviser's duties hereunder, the cost of performance of such
duties to be borne and paid by the Adviser. No obligation may be incurred on the
Trust's behalf in any such respect.
(d) The Adviser will report to the Board all material matters related
to the Adviser. On an annual basis, the Adviser shall report on its compliance
with its Code to the Board and upon the written request of the Trust, the
Adviser shall permit the Trust, or its representatives to examine the reports
required to be made to the Adviser under the Code. The Adviser will notify the
Trust of any change of control of the Adviser and any changes in the key
personnel who are either the portfolio manager(s) of the Fund or senior
management of the Adviser, in each case prior to or promptly after such change.
(e) The Adviser will maintain records relating to its portfolio
transactions and placing and allocation of brokerage orders as are required to
be maintained by the Trust under the 1940 Act. The Adviser shall prepare and
maintain, or cause to be prepared and maintained, in such form, for such periods
and in such locations as may be required by applicable law, all documents and
records relating to the services provided by the Adviser pursuant to this
Agreement required to be prepared and maintained by the Adviser or the Trust
pursuant to applicable law. To the extent required by law, the books and records
pertaining to the Trust which are in possession of the Adviser shall be the
property of the Trust, but the Adviser shall be entitled, in any event, to keep
copies of all such books and records as are property of the Trust. The Trust, or
its representatives, shall have access to such books and records at all times
during the Adviser's normal business hours. Upon the reasonable request of the
Trust, copies of any such books and records shall be provided promptly by the
Adviser to the Trust or its representatives.
(f) The Adviser will cooperate with each Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to the accountants for the performance of the accountants' duties.
(g) The Adviser will provide the Funds' custodian and fund accountant
on each business day with such information relating to all transactions
concerning the Funds' assets as the custodian and fund accountant may reasonably
require. In accordance with procedures adopted by the Board, the Adviser is
responsible for assisting in the fair valuation of all Fund assets and will use
its reasonable efforts to arrange for the provision of prices from parties who
are not affiliated persons of the Adviser for each asset for which the Funds'
fund accountant does not obtain prices in the ordinary course of business.
<PAGE>
(h) The Adviser shall authorize and permit any of its directors,
officers and employees who may be elected as Trustees or officers of the Trust
to serve in the capacities in which they are elected.
(i) The Adviser shall have no duties or obligations pursuant to this
Agreement (other than the continuation of its preexisting duties and
obligations) during any period in which the Fund invests all (or substantially
all) of its investment assets in a registered, open-end management investment
company, or separate series thereof, in accordance with Section 12(d)(1)(E)
under the 1940 Act.
SECTION 4. COMPENSATION; EXPENSES
(a) In consideration of the foregoing, the Trust shall pay the Adviser,
with respect to each of Fund, a fee at an annual rate as listed in Appendix A
hereto. Such fees shall be accrued by the Trust daily and shall be payable
monthly in arrears on the first day of each calendar month for services
performed hereunder during the prior calendar month. If fees begin to accrue in
the middle of a month or if this Agreement terminates before the end of any
month, all fees for the period from that date to the end of that month or from
the beginning of that month to the date of termination, as the case may be,
shall be prorated according to the proportion that the period bears to the full
month in which the effectiveness or termination occurs. Upon the termination of
this Agreement with respect to a Fund, the Trust shall pay to the Adviser such
compensation as shall be payable prior to the effective date of termination.
(b) The Adviser may reimburse expenses of each Fund or waive its fees.
(c) No fee shall be payable hereunder with respect to a Fund during any
period in which the Fund invests all (or substantially all) of its investment
assets in a registered, open-end, management investment company, or separate
series thereof, in accordance with Section 12(d)(1)(E) under the 1940 Act.
(d) The Trust shall be responsible for and assumes the obligation for
payment of all of its expenses, including: (a) the fee payable under this
Agreement; (b) the fees payable to each administrator under an agreement between
the administrator and the Trust; (c) expenses of issue, repurchase and
redemption of Shares; (d) interest charges, taxes and brokerage fees and
commissions; (e) premiums of insurance for the Trust, its trustees and officers
and fidelity bond premiums; (f) fees and expenses of third parties, including
the Trust's independent accountant, custodian, transfer agent, dividend
disbursing agent and fund accountant; (g) fees of pricing, interest, dividend,
credit and other reporting services; (h) costs of membership in trade
associations; (i) telecommunications expenses; (j) funds transmission expenses;
(k) auditing, legal and compliance expenses; (l) costs of forming the Trust and
maintaining its existence; (m) costs of preparing, filing and printing the
Trust's Prospectuses, subscription application forms and shareholder reports and
other communications and delivering them to existing shareholders, whether of
record or beneficial; (n) expenses of meetings of shareholders and proxy
solicitations therefor; (o) costs of maintaining books of original entry for
portfolio and fund accounting and other required books and accounts, of
calculating the net asset value of Shares and of preparing
<PAGE>
tax returns; (p) costs of reproduction, stationery, supplies and postage; (q)
fees and expenses of the Trust's trustees and officers; (r) the costs of
personnel (who may be employees of the Adviser, an administrator or their
respective affiliated persons) performing services for the Trust; (s) costs of
Board, Board committee, shareholder and other corporate meetings; (t) SEC
registration fees and related expenses; (u) state, territory or foreign
securities laws registration fees and related expenses; and (v) all fees and
expenses paid by the Trust in accordance with any distribution or service plan
or agreement related to similar manners.
SECTION 5. STANDARD OF CARE
(a) The Trust shall expect of the Adviser, and the Adviser will give
the Trust the benefit of, the Adviser's best judgment and efforts in rendering
its services to the Trust. The Adviser shall not be liable hereunder for any
mistake of judgment or in any event whatsoever, except for lack of good faith,
provided that nothing herein shall be deemed to protect, or purport to protect,
the Adviser against any liability to the Trust or to the Trust's security
holders to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of the Adviser's
duties hereunder, or by reason of the Adviser's reckless disregard of its
obligations and duties hereunder.
(b) The Adviser shall not be responsible or liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties (other than those related to the Adviser's
employees), fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund
immediately upon approval by a majority of the outstanding voting securities
of that Fund.
(b) This Agreement shall remain in effect with respect to a Fund for a
period of two years from the date of its effectiveness and shall continue in
effect for successive annual periods with respect to the Fund; provided that
such continuance is specifically approved at least annually (i) by the Board or
by the vote of a majority of the outstanding voting securities of the Fund, and,
in either case, (ii) by a majority of the Trust's trustees who are not parties
to this Agreement or interested persons of any such party (other than as
trustees of the Trust); provided further, however, that if the continuation of
this Agreement is not approved as to a Fund, the Adviser may continue to render
to that Fund the services described herein in the manner and to the extent
permitted by the 1940 Act and the rules and regulations thereunder.
(c) This Agreement may be terminated with respect to a Fund at any
time, without the payment of any penalty, (i) by the Board or by a vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to the Adviser or (ii) by the Adviser on 60 days' written notice to the
Trust. This Agreement shall terminate immediately upon its assignment.
<PAGE>
SECTION 7. ACTIVITIES OF THE ADVISER
Except to the extent necessary to perform its obligations hereunder,
nothing herein shall be deemed to limit or restrict the Adviser's right, or the
right of any of the Adviser's managers, officers or employees to engage in any
other business or to devote time and attention to the management or other
aspects of any other business, whether of a similar or dissimilar nature, or to
render services of any kind to any other corporation, trust, firm, individual or
association.
SECTION 8. REPRESENTATIONS OF ADVISER.
The Adviser represents and warrants that (i) it is either registered as
an investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") (and will continue to be so registered for so long as this
Agreement remains in effect) or exempt from registration under the Advisers Act,
(ii) is not prohibited by the 1940 Act or the Advisers Act from performing the
services contemplated by this Agreement, (iii) has met, and will seek to
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
self-regulatory agency, necessary to be met in order to perform the services
contemplated by this Agreement, and (iv) will promptly notify the Trust of the
occurrence of any event that would disqualify the Adviser from serving as an
investment adviser of an investment company pursuant to Section 9(a) of the 1940
Act or otherwise.
SECTION 9. SUBADVISERS
At its own expense, the Adviser may carry out any of its obligations
under this Agreement by employing, subject to the direction and control of the
Board, one or more persons who are registered as investment advisers pursuant to
the Advisers Act or who are exempt from registration thereunder ("Subadvisers").
Each Subadviser's employment will be evidenced by a separate written agreement
approved by the Board and, if required, by the shareholders of the applicable
Fund. The Adviser shall not be liable hereunder for any act or omission of any
Subadviser, except to exercise good faith in the employment of the Subadviser
and except with respect to matters as to which the Adviser assumes
responsibility in writing.
SECTION 10. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and the Adviser agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Fund to which the Adviser's rights or claims relate in settlement of such rights
or claims, and not to the Trustees of the Trust or the shareholders of the
Funds.
<PAGE>
SECTION 11. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the 1940 Act, by a vote of a majority of the
outstanding voting securities of any Fund thereby affected.
(b) No amendment to this Agreement or the termination of this Agreement
with respect to a Fund shall affect this Agreement as it pertains to any other
Fund, nor shall any such amendment require the vote of the shareholders of any
other Fund.
(c) Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement.
(d) This Agreement shall be governed by, and the provisions of this
Agreement shall be construed and interpreted under and in accordance with, the
laws of the State of Delaware.
(e) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof, whether oral or written.
(f) This Agreement may be executed by the parties hereto in any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(g) If any part, term or provision of this Agreement is held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(h) Section headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
(i) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(j) Notwithstanding any other provision of this Agreement, the parties
agree that the assets and liabilities of each Fund of the Trust are separate and
distinct from the assets and liabilities of each other Fund and that no Fund
shall be liable or shall be charged for any debt, obligation or liability of any
other Fund, whether arising under this Agreement or otherwise.
(k) No affiliated person, employee, agent, director, officer or manager
of the Adviser shall be liable at law or in equity for the Adviser's obligations
under this Agreement.
<PAGE>
(l) The terms "vote of a majority of the outstanding voting
securities", "interested person", "affiliated person," "control" and
"assignment" shall have the meanings ascribed thereto in the 1940 Act.
(m) Each of the undersigned warrants and represents that they have full
power and authority to sign this Agreement on behalf of the party indicated and
that their signature will bind the party indicated to the terms hereof and each
party hereto warrants and represents that this Agreement, when executed and
delivered, will constitute a legal, valid and binding obligation of the party,
enforceable against the party in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE NP COMANCHE FUNDS
By:_______________________
[Name]
[Title]
NEWBRIDGE PARTNERS, LLC
By:_______________________
[Name]
[Title]
<PAGE>
THE NP COMANCHE FUNDS
INVESTMENT ADVISORY AGREEMENT
APPENDIX A
FEE AS A % OF THE ANNUAL
FUND OF THE TRUST AVERAGE DAILY NET ASSETS OF THE FUND
NP Comanche Growth Fund 0.70
