1933 ACT REGISTRATION NO. _________
1940 ACT REGISTRATION NO. _________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 .................................. X
PRE-EFFECTIVE AMENDMENT NO. ................................
POST-EFFECTIVE AMENDMENT NO. ...............................
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY OF 1940............................... X
AMENDMENT NO. ..............................................
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THE LEGACY FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
61 BROADWAY
NEW YORK, NEW YORK 10006-2802
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 269-7862
JAMES H. BLUCK
HUGHES HUBBARD & REED LLP
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004
(NAME AND ADDRESS OF AGENT FOR SERVICE)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable
after the effective date of the Registration Statement.
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION
8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTUING PURSUANT TO SECTION 8(A), MAY DETERMINE.
TITLE OF SECURITIES BEING REGISTERED: CLASS A STOCK, PAR VALUE $.001 PER
SHARE
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<PAGE>
THE LEGACY FUNDS, INC.
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CROSS REFERENCE SHEET
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N-1A ITEM NO. LOCATION
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PART A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Front and Back Cover Pages................... Front and Back Cover
Pages of the
Prospectus
Item 2. Risk/Return Summary: Investments,
Risks, and Performance....................... Investment Objective
and Philosophy;
Investment Process;
Principal risk
Item 3. Risk/Return Summary: Fee Table.............. Fees and Expenses
Item 4. Investment Objectives, Principal
Strategies, and Related Risks................ Additional Information
about the Fund's
Investments;
Additional Risk
Information
Item 5. Management's Discussion of Fund
Performance.................................. Not Applicable
Item 6. Management, Organization, and Capital
Structure.................................... Investment Adviser;
Portfolio Manager;
Invetment
Performance of the
Portfolio Manager
Item 7. Shareholder Information...................... Purchasing Shares;
Selling Shares;
Retirement Investing;
Account Instructions;
Distributions and
Taxation
Item 8. Distribution Arrangements.................... Marketing, Distribution
and Administration
Item 9. Financial Highlights Information............. Not Applicable
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page and Table of Contents............. Cover Page and Table
of Contents of the
Statement of
Additional
Information
Item 11. Fund History................................. General Information
Item 12. Description of the Fund and Its
Investments and Risks........................ Additional Information
About the Fund's
Investments;
Investment
Restrictions;
Portfolio Transactions
and Turnover
Item 13. Management of the Fund....................... Management of the Trust
Item 14. Control Persons and Principal Holders of
Securities................................... Management of the Trust
Item 15. Investment Advisory and Other Services....... Management of the Trust;
Service Agreements
Item 16. Brokerage Allocation and Other Practices..... Service Agreements;
Portfolio Transactions
and Turnover
<PAGE>
Item 17. Capital Stock and Other Securities........... Shares of Beneficial
Interest
Item 18. Purchase, Redemption and Pricing of
Shares....................................... Additional Information
About Purchases and
Sales
Item 19. Taxation of the Fund......................... Dividends
Item 20. Underwriters................................. Service Agreements
Item 21. Calculation of Performance Data.............. Investment Performance
Item 22. Financial Statements......................... Financial Statements
PART C OTHER INFORMATION
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INFORMATION REQUIRED TO BE INCLUDED IN PART C IS SET FORTH UNDER THE
APPROPRIATE ITEM, SO NUMBERED, IN PART C TO THIS REGISTRATION STATEMENT.
<PAGE>
LEGACY GROWTH FUND
A diversified fund of quality growth oriented equities
having the objective of long term growth in value
PROSPECTUS
Dated
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THE LEGACY FUNDS, INC.
61 Broadway
New York, NY 10006
(212) 269-7862
Shares of the Legacy Growth Fund are sold on a no-load basis through the Fund's
Distributor, Ingalls & Snyder LLC. Shares are available for IRAs and retirement
plans. The Fund is not available in all states; please call the Fund or your
investment professional for details.
As with all mutual funds, the U.S. Securities and Exchange Commission has not
approved or disapproved these securities and does not guarantee the accuracy or
completeness of the Prospectus. It is a criminal offense to suggest otherwise.
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TABLE OF CONTENTS
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Investment Objective and Philosophy 2
Investment Process 2
Principal risk 3
Fees and Expenses 3
Investment Adviser 4
Portfolio Manager 4
Investment Committee 5
Advisory Board 7
Investment Performance of the Portfolio Manager 8
Additional Information About the Fund's Investments 9
Additional Risk Information 10
Purchasing Shares 10
Selling Shares 11
Retirement Investing 12
Account Instructions 15
Marketing, Distribution and Administration 16
Distributions and Taxation 16
Inquiries 17
Additional Information 18
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND PHILOSOPHY
The objective of the Fund is to achieve long-term growth of capital for
shareholders, emphasizing quality companies having strong underlying financial
attributes and potential for sustained above-average growth of earnings. The
Fund looks to achieve its growth objective usually by purchasing and holding
equities over an extended period, keeping turnover of its holdings limited.
The Fund seeks to invest principally in a well diversified portfolio of
companies having strong balance sheets, highly capable managements, unique
aspects to their businesses, significant international exposures, positive and
growing cash flows, high returns on equity and superior rates of growth of
earnings over an extended period.
INVESTMENT PROCESS
The Fund's investment adviser, Ingalls & Snyder LLC, which was founded in
1924. The adviser performs comprehensive research designed to identify companies
with strong financial underpinnings and attractive growth prospects. The adviser
seeks companies with superior management teams, and periodically meets with the
management of companies followed to review meaningful developments. The adviser
normally seeks companies that are leaders in markets and benefit from
technological advantages and economies of scale.
The investment adviser normally selects companies for investment by the
Fund which it believes will generate sustained earnings growth. The adviser also
evaluates the financial characteristics of companies to identify those with
strong cash flow and manageable levels of debt. The adviser believes that such
characteristics assist companies in their efforts to sustain attractive growth
rates. Once companies are identified for the Fund, the adviser uses fundamental
and technical analysis to assist in its efforts to determine attractive,
reasonable purchase prices.
The adviser regularly monitors the financial and investment outlook in the
U.S. and abroad in an effort to anticipate and understand changing business,
economic and political trends that may affect the Fund's investments. The Fund
has a long-term investment outlook. If a stock held in the Fund moves up very
sharply in a short period, the adviser normally trims the holding. Likewise, if
a stock held in the portfolio drops in price, the adviser will likely look to
add more shares to the holding. See More Information About the Fund's
Investments on page 8.
<PAGE>
PRINCIPAL RISK
The principal risk of investing in the Fund is that common stock prices
are subject to market, economic and business risks that will cause their prices
to fluctuate over time. While common stocks have historically been a leading
choice of long-term investors, stock prices may decline over short or even
extended periods. Therefore, the value of your investment in the Fund may go up
and down and you could lose money.
In addition, the Fund's investment success depends on the skill of the
investment adviser in evaluating, selecting and monitoring the Fund's assets. If
the Adviser's conclusions about growth rates or stock values are incorrect, the
Fund may not perform as anticipated.
The Fund could be adversely affected if the computer systems used by the
Fund or its service providers do not function properly when processing
date-related information on or after January 1st, 2000. This is commonly known
as the "Year 2000 Issue." The Fund is taking steps it believes are reasonably
designed to address the Year 2000 Issue with respect to the computer systems it
uses. The Fund is also obtaining reasonable assurances that comparable steps are
being taken by the Fund's other major service providers. At this time, it is
impossible to ensure that these steps will be sufficient to avoid any adverse
impact to the Fund. See Additional Risk Information on page 9.
FEES AND EXPENSES
The following tables describe the fees and estimated expenses involved
with an investment in the Fund.
Shareholder Transaction Fees.............................. None*
(Paid directly from your investment)
*Currently there is a $25.00 wire redemption fee assessed by the Fund, which is
subject to change. There is no fee for redemptions where proceeds are sent by
check.
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Annual Fund Operating Expenses* (deducted from Fund assets)
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Management Fee............................................ 1.0%
Distribution and Service (12b-1) Fees..................... 0.16%
OTHER EXPENSES............................................ 0.96%
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Total Fund Operating Expenses............................. 2.12%*
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*Ingalls and Snyder has voluntary agreed to waive its advisory fee or make
payments to limit Fund expenses to the extent necessary to ensure that Total
Fund Operating Expenses do not exceed 1.70% of average daily net assets for the
first year of operations; this voluntary fee waiver may be discontinued at any
time by Ingalls & Snyder. In addition, the Fund is new, so the amount of "Other
Expenses" and "Total Operating Expenses" are based on estimated amounts for the
first year of operations and do not reflect any fee waiver or expense
limitation.
<PAGE>
The following Expense Example shows the expenses you would pay over time and
will help you to compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The Example assumes you invest $10,000 in the
Fund and that you earn a 5% annual return, with no change in fund expense
levels. The $10,000 and 5% figures are required by SEC rules to aid in
comparison between funds. Because actual return and expenses will be different,
the Example is for comparison only.
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Expense Example 1 Year 3 Years
<S> <C> <C>
Without Fee Waiver or Expense Limitation* $217 $664
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*These dollar amounts do not reflect Ingalls & Snyder's agreement to limit the
Fund's Total Operating Expenses to 1.70% for the first year of operations. With
such expense limit, the amount paid over 1 and 3 years would equal $173 and
$536.
INVESTMENT ADVISER
Ingalls & Snyder LLC serves as the investment adviser for the Fund and is
responsible for managing the Fund's portfolio of securities. As investment
adviser, the firm identifies companies for investment, determines when
securities should be purchased or sold by the Fund and selects brokers or
dealers, including itself, to execute transactions for the Fund's portfolio.
Ingalls & Snyder was founded in 1924. Registered as an investment adviser
with the U.S. Securities and Exchange Commission under the Investment Advisers
Act of 1940, the firm provides investment services to clients of substance,
including individual retirement plans, corporations, trusts, estates, and
charitable organizations located in the United States and abroad. The firm is a
member of the New York and American Stock Exchanges and the National Association
of Securities Dealers.
The firm's investment objective is to maximize its clients' long term
return, consistent with each client's objectives. Almost 6,000 client accounts,
valued at $3 billion are entrusted to Ingalls & Snyder for investment
management, research, or the execution of transactions. Of that amount,
approximately $2 billion is managed on a discretionary or investment advisory
basis. Ingalls & Snyder is wholly owned by its officers and directors, who are
actively involved in all phases of the firm's operations.
PORTFOLIO MANAGER
The portfolio manager of the Fund is Robert E. Belknap, a Senior Director
of Ingalls & Snyder LLC. He graduated from the University of Virginia in 1961,
served as a line officer in the U.S. Navy and specialized in finance and
investments at the New York University Graduate School of Business.
<PAGE>
Mr. Belknap has over thirty-four years experience as an investment adviser
to individuals, charitable organizations, corporations, trusts and retirement
accounts in the United States and abroad. He is a Senior Security Analyst of the
New York Society of Security Analysts, a North American Member of the
International Society of Financial Analysts, and a Fellow Member of the
Financial Analysts Federation and of the Association of Investment Management
and Research. Prior to joining Ingalls & Snyder as a Principal in 1993, Mr.
Belknap was a Senior Vice President of Seligman Securities, Inc., and
concurrently Principal of Robert E. Belknap & Co.
INVESTMENT COMMITTEE
In the ongoing management of the Fund's investments Mr. Belknap
consults with Ingalls & Snyder's Investment Committee, which consists of
Lawton S. Lamb, D. Roger B. Liddell, Steven M. Foote, Joseph J. Cacciotti,
Richard B. Thatcher and Mr. Belknap. The backgrounds of the members of the
Committee, who have an average of over thirty years experience in the
investment business, are as follows:
LAWTON S. LAMB
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Managing Director
Mr. Lamb graduated from Princeton University and served as a Line
Officer in the U.S. Navy. He joined Ingalls & Snyder in 1967, having
formerly been with Scudder, Stevens & Clark, and has over forty years of
investment experience. Mr. Lamb manages the portfolios of a number of
individuals and is involved in the management of various charitable
institutions.
D. ROGER B. LIDDELL
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Managing Director
Mr. Liddell graduated from Princeton University, served as a Line Officer
in the U.S. Navy, and graduated from the Columbia University Graduate Business
School. He joined Ingalls & Snyder in 1988, having previously been with Alex
Brown & Co., Inc., and has over twenty-seven years experience in research and
portfolio management. Mr. Liddell manages individual, trust, and charitable
portfolios, and actively researches utility, energy and selected special
situations.
STEVEN M. FOOTE
- ---------------
Managing Director
Mr. Foote is a graduate of Dartmouth College. Formerly with Mabon
Nugent & Co., where he specialized in high yield fixed income securities, he
joined Ingalls & Snyder in 1991. Mr. Foote has over sixteen years of
investment experience, and manages both individual and charitable investment
portfolios.
<PAGE>
JOSEPH J. CACCIOTTI
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Director
Mr. Cacciotti graduated from Harvard University, served as an officer
in the U.S. Coast Guard, and graduated from the Harvard Graduate School of
Business. He has over forty-one years experience in the investment
business. Prior to joining Ingalls & Snyder in 1993, he was head of Dominick
& Dominick, Inc.'s International Department. Mr. Cacciotti manages
institutional and individual accounts located mainly in Europe, using
fundamental and proprietary technical analysis.
RICHARD B. THATCHER
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Senior Vice President
Mr. Thatcher graduated from Princeton University and served as an
Officer in the U.S. Navy. He has over twenty-nine years investment
experience. Prior to joining Ingalls & Snyder in 1998 Mr. Thatcher was
President and Chief Investment Officer of Capital Management Associates, Inc.
(New York City), and at the same time acted as Principal and Chief Financial
Officer of a sister company, Shields & Co. Mr. Thatcher manages retirement
and other institutional portfolios as well as a number of individual
accounts, trusts, and charitable organizations.
<PAGE>
ADVISORY BOARD
The Advisory Board exists to assist the portfolio manager in the
assessment of economic, political and social developments as they may effect the
investment strategy of the Fund. The members of the Advisory Board do not give
investment advice to the Fund, and are as follows:
Thomas H. Belknap, Esq. Mr. C. P. T. Vaughan-Johnson
Member Deputy Chairman
Hill & Barlow, A Professional Duncan Lawrie Limited
Corporation London
Boston
Mr. David G. Booth Mr. Wynant D. Vanderpoel
Managing Director, Ret. President
Morgan Stanley Dean Witter, Inc. The Vanderpoel Group
New York New York
Mr. Marc Declerck Mr. Lewis M. Weston
Havaux & Cie Limited Partner
Brussels Goldman Sachs & Company
New York
Mr. Christopher Finn Mr. Christopher Wetherhill
Managing Director-International Managing Director
The Carlyle Group Hemisphere Management Ltd.
London Hamilton, Bermuda
Mr. Jolmer D. Gerritse Mr. Edward Wheeler
Managing Director Senior Vice President
SNS Securities N.V. The Buckingham Research Group,
Amsterdam Inc.
New York
Mr. John G. Hunter Mr. Robert D. White
Managing Director Chief Operating Officer
The Management Exchange, Inc. Investor Select Advisers, Inc.
New York New York, Dublin
Mr. William J. Loschert Roger T. Wickers, Esq.
Chairman Senior Vice President and
ACE UK Limited General Counsel, Ret.
London The Keystone Group
Boston
Mr. E. Lawrence Minard, III Mr. Henry K. Wingate
Managing Editor Educational Consultant
Forbes Global Sandisfield, Mass.
New York
<PAGE>
INVESTMENT PERFORMANCE OF THE PORTFOLIO MANAGER
The tables below show the annual returns and long-term performance record
established by the Portfolio Manager while managing client accounts according to
the same investment goals and strategies as those used for the Fund. Please note
that the performance results shown are those of clients of the Portfolio Manager
and not the investment results of the Fund. How the Portfolio Manager performed
in the past is not necessarily an indication of how the Investment Manager will
perform in the future. The results are not intended to predict or suggest the
returns to be experienced by the Fund or the return an individual investor might
achieve by investing in the Fund. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. The tables below provide an
indication of the risk of investment in the Fund by showing changes in the
average annual returns and year-to-year performance of accounts managed pursuant
to the same investment goals and strategies as those used for the Fund.
The Fund's results may be different from the composite performance figures
shown because of, among other things, differences in fees and expenses. The
Fund's overall expenses may be higher than the expenses of similarly managed
private accounts of the adviser. If so, the performance of the Fund would be
lower. The Fund's results may also be different because private accounts are not
subject to certain investment limitations, diversification requirements and
other restrictions imposed on mutual funds by the Investment Company Act of 1940
or the Internal Revenue Code which, if applicable, could have adversely affected
the performance of the client accounts.
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RECORD OF GROWTH-ORIENTED EQUITY ACCOUNT COMPOSITE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991 1992 1993 1994 1995 1996 1997 1998 6Mths99
% Return 37.9 13.7 21.5 (6.3) 31.6 20.1 32.4 30.5 18.9
</TABLE>
<PAGE>
AVERAGE ANNUAL TOTAL RETURNS AS OF 12/31/99
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| 6 mo. 1 Year 3 Years 5 Years 8 Years|
|------------------------------------------------------------------------------|
|Growth-Oriented Equity +18.9% +30.5% +27.7% +21.7% +22.7% |
|Account Composite(1) |
|Standard & Poors 500 Index(2) +12.4% +26.7% $27.7% +24.4% +21.3% |
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|(1) The investment results shown are an unaudited composite of accounts with|
|growth-oriented objectives under the Portfolio Manager's management that are|
|over $100,000 in size and that are at least 80% invested in growth-oriented|
|equity securities. Dividends are included in the rates of return shown, which|
|have been calculated utilizing the "Modified Dietz Method". Performance|
|figures are net of fees charged to customers, assuming that each customer has|
|been charged fees at the highest rate charged to any customer included in the|
|composite. Actual fees varied depending on, among other things, the applicable|
|fee schedule and portfolio size. |
| |
|Included in the foregoing calculations are less than twelve portfolios which|
|have utilized leverage since 1993. The returns of these accounts have been|
|computed on an `all-cash return' basis. These accounts were leveraged an|
|average of 6.8%, 9.1%, 21.5%, 21.4% and 14.2% of total equity as of year-end|
|1998, 1997, 1996, 1995, 1994 and 1993, respectively. Accounts are excluded|
|from the composite during any period in which the average of percentages that|
|any margin borrowings comprise of the account's equity value as of the last|
|day of each month during such period exceeds 30%. |
| |
|(2) The S&P 500 Index is a capitalization weighted index of five hundred large|
|capitalization stocks which is designed to measure broad domestic securities|
|markets. The performance of the S&P 500 Index reflects the reinvestment of|
|dividend and capital gains but does not reflect the deduction of any|
|investment managementfees. |
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ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
This section contains more detailed information about the Fund's
Investments and its investment process. The Fund's investment objective is
long-term capital appreciation. This objective may be changed or modified in the
future by action of the Fund's Board. Shareholder approval is not required to
modify the investment objective; however, shareholders would receive advanced
written notice of any such change.
TYPES OF INVESTMENTS. The Fund invests primarily in companies having sound
underlying financial characteristics and growing at above-average rates.
Specifically, the Fund normally requires that such companies have a strong
balance sheet, a highly capable management, a unique aspect to its business, a
significant international exposure, a positive and growing cash flow, a high
return on equity and a superior rate of growth of earnings over an extended
period.
The Fund normally remains substantially fully invested in common stocks
and other equity securities. However, the Fund may invest in money market
instruments during times when excess cash is generated or when cash is held
pending investment in suitable securities. Such money market investments include
short-term obligations of the U.S. government or money market mutual funds. The
Fund has authority to invest up to 100% of its assets in such short-term money
market instruments for temporary or defensive purposes in response to extreme or
adverse market, economic or other conditions.
<PAGE>
STOCK SELECTION PROCESS. The investment adviser identifies stocks for
investment using its own research and analysis techniques and the research and
analysis of major U.S. investment and brokerage firms. When analyzing a
company's outlook, the adviser considers the company's financial underpinnings,
including its debt burden and ability to generate excess cash, as well as the
company's prospects for generating sustained above-average growth of its
business and earnings.
Once the Fund identifies a company meeting its criteria, it seeks to
purchase the company's stock at reasonable prices. Using fundamental financial
statement analysis, the adviser normally compares a company's price-to-earnings
ratio with its growth rate and its sales-to-market capitalization ratio, as well
as using other measurement methods, in order to evaluate the price of the stock
relative to its future prospects. The Fund may from time to time purchase stocks
having minimal or no current earnings or with high price-to-earnings ratios
relative to their growth rates. The Fund normally seeks to reduce its exposure
to risk by concentrating in larger companies, while also using selected medium
and smaller sized companies which in the opinion of the adviser offer good
prospects for future growth.
The Fund has a long-term investment policy under which stocks are normally
held for extended periods of time. If the price of a stock owned in the Fund
moves up sharply in a short period of time, the adviser normally trims the
holding. Likewise if the price of a stock owned in the Fund moves down, the
adviser would normally look to add to shares.
ADDITIONAL RISK INFORMATION
If the adviser determines that the condition of the financial markets
calls for a temporary or defensive position to reduce risk through a substantial
investment in cash and cash equivalents, such a position would make it difficult
to achieve the objective of capital appreciation.
To the extent that the Fund invests in foreign companies, its investment
may involve political, economic or currency risks not ordinarily associated with
U.S. securities. The Fund may use certain techniques involving a form of
leverage, which could have the effect of magnifying the Fund's gains or losses
or could result in increased volatility of the Fund's share price. In order to
limit such risks, the Fund normally limits the percentage of its assets that can
be exposed to such leveraging techniques to ten percent of the asset value of
the Fund.
PURCHASING SHARES
One may purchase shares of the Fund without any sales charge through
Ingalls & Snyder LLC, the Fund's underwriter and distributor, by submitting a
completed application to the Fund along with payment of the purchase price by
check or wire. Please note that purchase instructions, mailing addresses and
telephone numbers are set forth in the Account Instructions chart included on
page 14 of this Prospectus as well as in the Fund's Shareholder Application.
Please call with any questions.
<PAGE>
MINIMUM INVESTMENTS. The minimum initial investment is $5,000 and
additional investments must total at least $1,000. The minimum initial
investment for qualified retirement accounts in $1,000 ($500 for Educational
IRAs) and their is no minimum for subsequent investments. The Fund may also
change or waive its policies concerning minimum investment amounts at any time.
PURCHASE PRICE. One may purchase shares of the Fund at the Fund's net
asset value per share (NAV), which is calculated as of the close of the New York
Stock Exchange (usually 4:00PM eastern time) every day the exchange is open.
Your order will be priced at the next NAV calculated after your order is
accepted by the Fund.
The NAV is determined by dividing the value of the Fund's securities, cash
and other assets, minus all expenses and liabilities, by the number of shares
outstanding. The fund's securities are valued each day at their market value,
which usually means the last quoted sale price on the security's principal
exchange on that day. If market quotations are not readily available, securities
will be priced at their fair value as determined in good faith by, or under
procedures adopted by, the Board of Trustees. The Fund may use independent
pricing services to assist in calculating the NAV.
IN KIND PURCHASES. At the time of the formation of the Fund the Fund may
permit investors to purchase shares by transferring securities to the Fund.
Under current IRS rules the tax cost of the shares being so purchased in kind
will be the tax cost of the securities being transferred; the tax cost to the
Fund of said securities being transferred to the Fund will be the same as that
of the shareholder. Securities transferred to the Fund will be valued in the
same way that securities in the Fund's portfolio are valued for purposes of
calculating its NAV.
PLEASE BE SURE TO CONSULT YOUR TAX PROFESSIONAL REGARDING THE FEDERAL,
STATE AND LOCAL TAX TREATMENT OF TRANSFERRING SECURITIES IN KIND TO THE FUND.
GENERAL POLICIES. Shares of the Fund may not be available in all states.
Please ask your investment professional or a Fund representative if shares are
available in your state. The fund reserves the right to reject any purchase
order or to suspend the offering of its shares.
SELLING SHARES
Shares of the Fund may be sold at any time. The sale price will be the
next NAV calculated after your order is accepted by the Fund's transfer agent.
No fees are imposed by the Fund when shares are sold. Please note: selling
instructions, mailing addresses and telephone numbers are set forth in the
Account Instructions on page 14 of this Prospectus as well as in the Fund's
Shareholder Application. Please call with any questions.
HOW TO SELL. Shares of the Fund may be sold by giving instructions to the
Fund's transfer agent by mail. The Fund will use reasonable procedures to
confirm that instructions communicated by telephone are genuine and, if the
procedures are followed, will not be liable for any losses due to unauthorized
or fraudulent telephone transactions. During times of drastic economic or market
<PAGE>
changes, the telephone redemption privilege may be difficult to implement and
the Fund reserves the right to suspend this privilege.
Certain written requests to sell shares require a signature guarantee. For
example, a signature guarantee may be required for the sale of a large amount of
shares if the address of record on the account application has been changed
within the last 30 days, or if the shareholder asks that the proceeds be sent to
a different person or address. A signature guarantee is used to help protect the
shareholder and the Fund from fraud. A signature guarantee may be obtained from
most banks and securities dealers, but not from a notary public. Please call the
Fund to learn if a signature guarantee is needed or to make sure that it is
completed appropriately in order to avoid any processing delays.
SALE PROCEEDS. The fund is responsible for processing requests to sell
shares on a timely basis. Checks are normally mailed or proceeds wired on the
next day after receipt and acceptance of selling instructions (if received by
Firstar before the close of regular trading on the NYSE). In no event will
proceeds be mailed or wired later than 7 days following such receipt and
acceptance (or earlier if required by applicable law). If the shares being sold
have recently been purchased by check, the fund reserves the right not to make
the sale proceeds available until it reasonably believes that the check has been
collected. This could take up to 10 business days or more.
Sale proceeds may be wired to your predesignated bank account at any
commercial bank in the United States or abroad if the amount is $1,000 or more.
The receiving bank may charge a fee for this service. Alternatively, proceeds
may be mailed to your bank or to your account address if the address has been
established for a minimum of 60 days.
GENERAL POLICIES. If the amount you are redeeming is large enough to
affect the Fund operations or if the redemption would otherwise disrupt the
Fund, the Fund reserves the right to make a "redemption in kind" or to delay
forwarding payment. For example, the Fund may redeem shares in kind if the
amount represents more than 2% of the Fund's assets or may delay forwarding
funds for ten business days or longer. When the Fund makes a "redemption in
kind" it pays the seller in portfolio securities rather than in cash. In
addition, if your account balance falls below $1,000, the Fund may request that
you increase your balance. If it is still below $1,000 after 60 days, the Fund
may automatically close your account and send you the proceeds.
RETIREMENT INVESTING
Shares of the Fund may be purchased in all types of tax-deferred qualified
plans such as Individual Retirement Accounts (IRAs), employer-sponsored
retirement plans (including 401(K) Plans), and tax sheltered custodial accounts
described in Section 403(b) of the Internal Revenue Code. Distribution of net
investment income and capital gains will be automatically invested in such plans
or accounts. Special applications are required for certain of these plans or
accounts, which can be obtained by calling the Fund. The following is a brief
description of the retirement investing options.
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): If you are not an active
participant (and, if a joint return is filed, your spouse is not an active
participant) in an employer-sponsored retirement plan, or if you have an
adjusted gross income within certain specific limits, you are eligible to make a
deductible contribution to an IRA account. If you are not eligible for
deductible contributions, you may still make non-deductible IRA contributions.
Distributions from qualified retirement plans may be rolled into an IRA account
holding Fund shares. You can continue to defer Federal income taxes on your IRA
account, on your rollover contribution, and on any income that is earned on that
contribution.
Firstar Trust makes its services as an IRA Custodian available for each
shareholder account that is established as an IRA. For these services, Firstar
receives an annual fee of $12.50 per account (maximum $25.00 per social security
number), which is paid directly to Firstar by the IRA shareholder. If the annual
fee is not paid by the date due, shares of the Fund owned by the shareholder in
the IRA account will be automatically sold to pay the annual fee. Firstar may,
in its discretion, hold any initial contribution uninvested until the expiration
of the seven-day revocation period. Firstar does not anticipate that it will
exercise its discretion but reserves the right to do so.
TRADITIONAL IRA: In a Traditional IRA, amounts contributed to the IRA may
be tax deductible at the time of contribution depending on your income and
whether you are an "active participant" in an employer-sponsored retirement
plan. Amounts invested are permitted to grow tax-free until they are
distributed, and then distributions will be taxed except to the extent that the
distribution represents a return of your own contributions for which you did not
claim a deduction. If you take distributions before age 59 1/2 or fail to begin
taking distributions after age 70 1/2, you may experience adverse tax
consequences.
ROTH IRA: In a Roth IRA, amounts contributed to the IRA are not tax
deductible at the time of contribution. Amounts invested are permitted to grow
tax-free and distributions from the IRA are not subject to tax if you have held
the IRA for certain minimum periods of time (generally, until age 59 1/2).
EDUCATIONAL IRA: In an Educational IRA, nondeductible contributions of up
to $500 per year per child are permitted to grow tax-free. Distributions used to
pay for secondary education expenses are not subject to tax.
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP): A special IRA program is available
for employers under which the employers may establish IRA accounts for their
employees in lieu of establishing tax qualified retirement plans. Known as
SEP-IRA's, they free the employer of many of the record keeping requirements of
establishing and maintaining a tax qualified retirement plan trust.
SIMPLE IRA: An IRA may also be used in connection with a SIMPLE Plan
established by employers or by a self-employed individual. Under a SIMPLE Plan,
you may elect to have your employer make salary reduction contributions or as a
non-elective contribution to all eligible participants whether or not making
salary reduction contributions. A number of special rules apply to SIMPLE Plans,
<PAGE>
including (1) a SIMPLE Plan generally is available only to employees with fewer
than 100 employees; (2) contributions must be made on behalf of all employees of
the employer, other than bargaining unit employees, who satisfy certain minimum
participation requirements; (3) contributions are made to a special SIMPLE IRA
that is separate and apart from the other IRAs of employees; (4) the
distribution excise tax (if otherwise applicable) is increased to 25% on
withdrawals during the first two years of participation in a SIMPLE IRA; and (5)
amounts withdrawn during the first two years of participation may be rolled over
tax-free only into another SIMPLE IRA and not to a Traditional IRA or to a Roth
IRA.
403(B) PLANS: The Fund's shares are also available for use by schools,
hospitals, and certain other tax-exempt organizations or association which wish
to use shares of the Fund as a funding medium for a retirement plan for their
employees. Contributions are made to the 403(b) Plan as a reduction to the
employee's regular compensation. Such contributions, to the extent they do not
exceed applicable limitations (including a generally applicable limitation of
$9,500 per year), are excludable from the gross income of the employee for
Federal Income tax purposes.
401 (K) PLANS AND OTHER QUALIFIED PENSION OR PROFIT-SHARING PLANS: The
Fund's shares may be used for investment in various employer-sponsored
retirement plans by both self-employed individuals (sole proprietorships and
partnerships) and corporations who wish to use shares of the Fund as a funding
medium for a retirement plan qualified under the Internal Revenue Code. Such
plans typically allow investors to make annual deductible contributions, which
may be matched by their employers up to certain percentages based on the
investor's pre-contribution earned income. Fund shares may be purchased by
investors who wish to contribute to a 401(k) or similar Plan already established
through their employer or otherwise. Please contact the Fund for information
about establishing a 401(k) Plan for your company using the Legacy funds.
<PAGE>
ACCOUNT INSTRUCTIONS
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TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT TO SELL SHARES
<S> <C> <C>
Regular Account Minimum: $5,000 Regular Account Minimum: $1,000 All requests to sell shares from
Retirement Account Minimum: Retirement Account Minimum: None IRA accounts must be in writing
$1,000
</TABLE>
<TABLE>
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IN WRITING IN WRITING IN WRITING
---------- ---------- ----------
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Complete the application. Write a letter of instruction that Write a letter of instruction that
includes: includes:
Make your check* payable to: - your name(s) and signature(s) - your name(s) and signature(s)
"Legacy Growth Fund" - your account number - your account number
- the Fund name - the Fund name
- the dollar amount you want to buy - the dollar amount you want to
sell Proceeds will be sent to
Mail your letter, along the address of record unless
with your check made specified in the letter and
Mail your application and payable to "Legacy Growth accompanied by a signature
check to: Fund" to: guarantee
Mail your letter to:
Ingalls & Snyder LLC. Ingalls & Snyder LLC Ingalls & Snyder LLC
61 Broadway 61 Broadway 61 Broadway
New York, NY 10006 New York, NY 10006 New York, NY 10006
Attn: Legacy Growth Fund Attn: Legacy Growth Fund Attn: Legacy Growth Fund
</TABLE>
<TABLE>
<CAPTION>
BY WIRE BY WIRE BY WIRE
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To obtain instructions for To obtain instructions for Be sure the Fund has your bank
Federal Funds wire Federal Funds wire account information on file.
purchase for the Fund, purchase for the Fund, Proceeds will be wired to your
please call Ingalls & please call Ingalls & bank. There is a $25.00 wire
Snyder LLC at 212-269-7862. Snyder LLC at 212-269-7862. fee charged for this service.
</TABLE>
* All checks should be in U.S. Dollars and drawn in U.S. banks. If your
check is returned for any reason, you may be charged for any resulting fees
or losses. Third party checks will not be accepted.
<PAGE>
MARKETING, DISTRIBUTION AND ADMINISTRATION
Shares of the Fund are offered through Ingalls & Snyder LLC, the Fund's
principal underwriter and distributor. The shares are offered and sold without
any sales charges imposed by the Fund or its distributor. Investment
professionals who offer the Fund's shares are generally paid separately by their
individual clients. If you invest through a third party, the fees may be
different than those described in this Prospectus. For example, third parties
may charge transaction fees or set different minimum investment amounts.
The Fund has adopted a Distribution and Shareholder Servicing Plan
pursuant to Rule 12b-1 under the investment Company act of 1940. Under this
plan, the Fund may reimburse the distributor or others for amounts spent in
connection with the sale and distribution of its shares or for shareholder
servicing activities. Distribution activities include the preparation, printing
and mailing of prospectuses, shareholder reports and sales material for
marketing purposes, marketing activities, advertising and payments to brokers or
others who sell shares of the Fund. Shareholder service activities include
ongoing maintenance and service of shareholder accounts for the Fund, responding
to inquiries regarding shareholder accounts and acting as agent or intermediary
between shareholders and the Fund or its service providers. The maximum amount
that the Fund may pay for these services is 0.25% per year of the average daily
net assets of the Fund. Because these fees are paid out of the Fund's assets on
an ongoing basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges. The Fund
currently expects that the fees of the Plan will primarily be used to compensate
mutual fund marketers or retirement plan record keepers for their activities on
behalf of the Fund and its shareholders.
Firstar Mutual Fund Services, LLC serves as the administrator, transfer
agent, and dividend disbursing agent for the Fund. The Fund may also compensate
other parties who provide transfer agency services in addition to those provided
by Firstar Mutual Fund Service, LLC. Firstar Bank Milwaukee, N.A. serves as the
custodian for the Fund.
DISTRIBUTIONS AND TAXATION
The Fund will distribute substantially all of the net investment income
and net capital gains that it has realized on the sale of securities. These
income and gains distributions will generally be paid once each year, on or
before December 31. Distributions will automatically be reinvested in additional
shares of the Fund unless you elect to have the distributions paid to you in
cash. There are no sales charges or transaction fees for reinvested dividends
and all shares will be purchased at the NAV.
Distributions made by the Fund are taxable to most U.S. Shareholders
whether received in cash or additional shares. Dividends and short-term capital
gains are taxed to most U.S. shareholders as ordinary income while long-term
capital gains are taxed as such, regardless of how long you own your shares of
the Fund. The tax status of distributions made to you, whether ordinary income
or long-term capital gain, will be detailed in your annual tax statement from
<PAGE>
the Fund. If the Fund distributes unrealized gains soon after you purchase
shares, a portion of your investment may be returned as a taxable distribution.
A sale or exchange of fund shares is a taxable event for most U.S.
shareholders and may result in a capital gain or loss to you if you are subject
to tax. Non-U.S. investors may be subject to U.S. withholding and state tax. In
addition, distributions from the Fund or gains from the sale or exchange of Fund
shares may be subject to state or local taxes. By law, the Fund must withhold
31% of your taxable distributions and proceeds if you do not provide a correct
taxpayer identification number ("TIN") or certify that your TIN is correct, or
if the IRS instructs the Fund to do so.
BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, PLEASE BE SURE TO CONSULT YOUR
TAX PROFESSIONAL REGARDING FEDERAL, STATE AND LOCAL TAX CONSEQUENCES.
INQUIRIES
Please contact the Fund's Investment Adviser, Ingalls & Snyder LLC,
regarding monthly portfolio updates and new prospectus/shareholder report
information as soon as it is available. You may wish to check with Ingalls &
Snyder for the latest information regarding the Legacy funds.
<PAGE>
LEGACY GROWTH FUND
61 Broadway
New York, NY 10006
212-269-7862
INVESTMENT ADVISER
INGALLS & SNYDER LLC
61 Broadway
New York, NY 10006
DISTRIBUTOR
INGALLS & SNYDER LLC
61 Broadway
New York, NY 10006
ADMINISTRATOR, FUND ACCOUNTANT
& TRANSFER AGENT
FIRSTAR MUTUAL FUND SERVICE, LLC
615 East Michigan Street
Milwaukee, WI 53202
CUSTODIAN
FIRSTAR TRUST COMPANY
615 East Michigan Street
Milwaukee, WI 53202
LEGAL COUNSEL
HUGHES HUBBARD & REED LLP
One Battery Park Plaza
New York, NY 10004
AUDITORS
ADDITIONAL INFORMATION
A Statement of Additional Information (SAI) contains additional
information about the Fund and is incorporated by reference into this
Prospectus. The Fund's annual and semi-annual reports to shareholders will
contain 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 impacted on the Fund's performance during each fiscal year.
<PAGE>
You may obtain a free copy of these documents by calling or writing the
Fund as shown above. You may also call the telephone number shown above to
request other information about the Fund and to make shareholder inquiries.
You may review and copy the SAI and other information about the Fund by
visiting the Securities and Exchange Commission's Public Reference Room in
Washington, DC or by visiting the Commission's Internet site at
http://www.sec.gov. Copies of this information may also be obtained, upon
payment of a duplicating fee, by writing to the Public Reference Section of the
Commission, Washington, DC 20549-6009. You may call the Commission at
1-800-SEC-0330 for information about the operation of the public reference room.
<PAGE>
THE LEGACY FUNDS
61 Broadway
New York, NY 10006
(212) 269-7862
STATEMENT OF ADDITIONAL INFORMATION
DATED
This Statement of Additional Information (SAI) relates to The Legacy Growth Fund
which is a series of The Legacy Funds, a registered open-end management
investment company commonly known as a mutual fund. This SAI is not a Prospectus
and should be read in conjunction with the Prospectus for the Fund dated . The
Prospectus may be obtained by writing or calling the Fund at the address and
number shown above.
<TABLE>
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TABLE OF CONTENTS
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ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS 2
CONVERTIBLE SECURITIES 3
WARRANTS AND RIGHTS 3
ILLIQUID SECURITIES 3
RULE 144A SECURITIES 4
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD
COMMITMENTS 4
AMERICAN DEPOSITORY RECEIPTS 4
U.S. GOVERNMENT SECURITIES 5
BANK OBLIGATIONS 5
LOANS OF PORTFOLIO SECURITIES 5
REPURCHASE AGREEMENTS 6
REVERSE REPURCHASE AGREEMENTS 7
BORROWING 7
FUTURES 8
OPTIONS 9
INDEX OPTIONS 12
RISKS OF OPTIONS 12
OTHER INVESTMENTS 13
INVESTMENT RESTRICTIONS 14
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES 14
MANAGEMENT OF THE TRUST 17
INVESTMENT ADVISER AND ADVISORY AGREEMENT 21
CODE OF ETHICS 22
SERVICE AGREEMENTS 22
PORTFOLIO TRANSACTIONS AND TURNOVER 26
DIVIDENDS 27
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES 28
INVESTMENT PERFORMANCE 29
FINANCIAL STATEMENTS 33
</TABLE>
(REV 6/23/99)
<PAGE>
GENERAL INFORMATION
The Legacy Growth Fund (the "Fund") is a series of the Legacy Funds, a
business trust organized in the state of Delaware on (the "Trust").
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), which is authorized
to issue multiple series and classes of shares. Each series represents interests
in a separate portfolio of investments. The Trust is authorized to issue an
unlimited number of shares of beneficial interest, par value $0.001. The Legacy
Growth Fund is the first series of the Trust and is classified as a
"diversified" series as that term is defined in the 1940 Act.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
The Fund's investment objective is long-term growth of capital. The Fund
seeks to achieve its objective by investing primarily in a diversified portfolio
of common stocks of companies having sound underlying financial characteristics
and growing at above-average rates. The Fund's investment objective is not
fundamental, and therefore may be changed in the future by action of the Board
of Trustees of the Trust. Shareholders would not be asked to vote on any change
in the investment objective, but would receive written notice well in advance of
any such change.
The following discussion of investment techniques and instruments
supplements and should be read in conjunction with the investment information
set forth in the Fund's Prospectus. The investment practices described below,
except for the discussion of certain investment restrictions, are not
fundamental and may be changed by the Board of Trustees without the approval of
the shareholders. In seeking to meet its investment objective the Fund may
invest in any type of security whose characteristics are consistent with the
Fund's investment program. The securities in which the Fund may invest include
those described below.
The Fund normally remains substantially fully invested in common stocks
and other equity securities. However, the Fund may invest in money market
instruments during times when excess cash is generated or when cash is held
pending investment in suitable securities. Such money market investments include
short-term obligations of the U.S. government or money market mutual funds. The
Fund has authority to invest up to 100% of its assets in such short-term money
market instruments for temporary or defensive purposes in response to extreme or
adverse market, economic or other conditions.
<PAGE>
CONVERTIBLE SECURITIES
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock, and
other securities that also provide an opportunity for equity participation.
These securities are generally convertible either at a stated price or a stated
rate (that is, for a specific number of shares of common stock or other
security). As with other fixed income securities, the price of a convertible
security to some extent varies inversely with interest rates. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a nonconvertible debt security), a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
the value of the underlying common stock. To obtain such a higher yield, the
Fund may be required to pay for a convertible security an amount in excess of
the value of the underlying common stock. Common stock acquired by the Fund upon
conversion of a convertible security will generally be held for so long as the
Adviser anticipates such stock will provide the Fund with opportunities which
are consistent with the Fund's investment objective and policies.
WARRANTS AND RIGHTS
The Fund may invest in warrants: however, not more than 5% of the Fund's
total assets (at the time of purchase) will be invested in warrants other than
warrants acquired in units or attached to other securities. Warrants are pure
speculation in that they have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. Warrants
basically are options to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. Warrants differ from call options in
that warrants are issued by the issuer of the security which may be purchased on
their exercise, whereas call options may be written or issued by anyone. The
prices of warrants do not necessarily move in parallel with the prices of the
underlying securities. Rights represent a preemptive right to purchase
additional shares of stock at the time of new issuance, before stock is offered
to the general public, so that the stockholder can retain the same ownership
percentage after the offering.
ILLIQUID SECURITIES
The Fund may invest up to 5% of its net assets in Illiquid securities. The
term "Illiquid securities" for this purpose 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 are considered to include generally, among other things, certain
written over-the-counter options, securities or other liquid assets being used
as cover for such options, repurchase agreements with maturities in excess of
seven days, certain loan participation interests and other securities whose
disposition is restricted under the federal securities laws. The Fund's Illiquid
<PAGE>
investments may include privately placed securities which are not registered for
sale under the Securities Act of 1933, as amended (the "1933 Act").
RULE 144A SECURITIES
The Fund may invest in securities that are restricted as to resale, but
which are regularly traded among qualified institutional buyers because they are
exempt under Rule 144A from the registration requirements of the 1933 Act. The
Board of Trustees of the Trust has instructed the Adviser to consider the
following factors in determining the liquidity of a security purchased under
Rule 144A: (i) the frequency of trades and trading volume for the security; (ii)
whether at least three dealers are willing to purchase or sell the security and
the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security, the method of soliciting offers and the
mechanics of transfer. Although having delegated the day-to-day functions, the
Board of Trustees will continue to monitor and periodically review the Adviser's
selection of Rule 144A securities, as well as the Adviser's determinations as to
their liquidity. Investing in securities under Rule 144A could affect the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities. After the purchase of a
security under Rule l44A, the Board of Trustees and the Adviser will continue to
monitor the liquidity of that security to ensure that the Fund has no more than
5% of its net assets in Illiquid securities.
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the Fund will only enter
into a forward commitment with the intention of actually acquiring the security,
the Fund may sell the security before the settlement date if it is deemed
advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate with its Custodian cash or liquid
high-grade debt securities in an aggregate amount at least equal to the amount
of its outstanding forward commitments.
AMERICAN DEPOSITORY RECEIPTS
The Fund may make foreign investments through the purchase and sale of
sponsored or unsponsored American Depository Receipts ("ADRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. The Fund may
purchase ADRs whether they are "sponsored" or "unsponsored." "Sponsored" ADRs
<PAGE>
are issued jointly by the issuer of the underlying security and a depository,
whereas "unsponsored" ADRs are issued without participation of the issuer of the
deposited security. Holders of unsponsored ADRs generally bear all the costs of
such facilities and the depository of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through voting rights to the holders
of such receipts in respect of the deposited securities. Therefore, there may
not be a correlation between information concerning the issuer of the security
and the market value of an unsponsored ADR. Ownership of ADRs may result in a
withholding tax by the foreign country of source which will have the effect of
reducing the income distributable to shareholders.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed by, the U.S.
Government, its agencies or instrumentalities. The U.S. Government does not
guarantee the net asset value of the Funds' shares. Some U.S. Government
securities, such as Treasury bills, notes and bonds, and securities guaranteed
by the Government National Mortgage Association ("GMNA"), are supported by the
full faith and credit of the United States; others, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from the
U.S. Treasury; others, such as those of the Federal National Mortgage
Association ("FNMA"), are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others, such as those
of the Student Loan marketing Association, are supported only by the credit of
the instrument. U.S. Government securities include securities that have no
coupons, or have been stripped of their unmatured interest coupons, individual
interest coupons from such securities that trade separately, and evidences of
receipt of such securities. Such securities may pay no cash income, and are
purchased at a deep discount from their value at maturity. Because interest on
zero coupon securities is not distributed on a current basis but is, in effect,
compounded, zero coupon securities tend to be subject to greater market risk
than interest-payment securities, such as CATS and TIGRs, which are not issued
by the U.S. Treasury, and are therefore not U.S. Government securities although
the underlying bond represented by such receipt is a debt obligation of the U.S.
Treasury. Other zero coupon Treasury securities (STRIPs and CUBEs) are direct
obligations of the U.S. Government.
BANK OBLIGATIONS
Certificates of deposit are short-term obligations of commercial banks. A
banker's acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with international commercial transactions. Certificates
of deposit may have fixed or variable rates.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend its investment securities to approved borrowers who need
to borrow securities in order to complete certain transactions, such as covering
short sales, avoiding failures to deliver securities or completing arbitrage
operations. By lending its investment securities, the Fund attempts to increase
its income through the receipt of interest on the loan. Any gain or loss in the
market price of the securities loaned that might occur during the term of the
<PAGE>
loan would be for the account of the Fund. The Fund may lend its investment
securities to qualified brokers, dealers, domestic and foreign banks or other
financial institutions, so long as the terms, the structure and the aggregate
amount of such loans are not inconsistent with the 1940 Act or the rules and
regulations or interpretations of the Securities and Exchange Commission (the
"SEC") thereunder, which currently require that: (a) the borrower pledge and
maintain with a Fund collateral consisting of cash, an irrevocable letter of
credit issued by a bank or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value of the
securities loaned; (b) the borrower add to such collateral whenever the price of
the securities loaned rises (i.e., the borrower "marks to the market" on a daily
basis); the loan be made subject to termination by a Fund at any time; and (d)
the Fund receives reasonable interest on the loan (which may include the Fund
investing any cash collateral in interest bearing short-term investments). All
relevant facts and circumstances, including the creditworthiness of the broker,
dealer or institution, will be considered in making decisions with respect to
the lending of securities, subject to review by the Board of Trustees.
At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities so
long as such fees are set forth in a written contract and approved by the
investment company's Board of Trustees. In addition, voting rights may pass with
the loaned securities, but if a material event occurs affecting an investment on
a loan, the loan must be called and the securities voted.
REPURCHASE AGREEMENTS
When the Fund enters into a repurchase agreement, it purchases securities
from a bank or broker-dealer which simultaneously agrees to repurchase the
securities at a mutually agreed upon time and price, thereby determining the
yield during the term of the agreement. As a result, a repurchase agreement
provides a fixed rate of return insulated from market fluctuations during the
term of the agreement. The term of a repurchase agreement generally is short,
possibly overnight or for a few days, although it may extend over a number of
months (up to one year) from the date of delivery. Repurchase agreements will be
fully collateralized and the collateral will be marked-to-market daily. The Fund
may not enter into a repurchase agreement having more than seven days remaining
to maturity, if as a result, such agreement, together with any other Illiquid
securities held by the Fund, would exceed 5% of the value of the net assets of
the Fund.
In the event of bankruptcy or other default by the seller of the security
under a repurchase agreement, the Fund may suffer time delays and incur costs or
possible losses in connections with the disposition of the collateral. In such
event, instead of the contractual fixed rate of return, the rate of return to
the Fund would be dependent upon intervening fluctuations of the market value of
the underlying security and the accrued interest on the security. Although the
Fund would have rights against the seller for breach of contract with respect to
any losses arising from market fluctuations following the failure of the seller
to perform, the ability of the Fund to recover damages from a seller in
bankruptcy or otherwise in default would be reduced.
Repurchase agreements are securities for purposes of the tax
diversification requirements that must be met for pass-through treatment under
<PAGE>
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the Fund will limit the value of its repurchase agreements, if any,
on each of the quarterly testing dates to ensure compliance with Subchapter M of
the Code.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve sales of portfolio securities of the
Fund to member banks of the Federal Reserve System or securities dealers
believed creditworthy, concurrently with an agreement by the Series to
repurchase the same securities at a later date at a fixed price which is
generally equal to the original sales price plus interest. The Fund retains
record ownership and the right to receive interest and principal payments on the
portfolio securities involved. In connection with each reverse repurchase
transaction, the Fund will direct its custodian bank to place cash, U.S.
government securities, equity securities and/or investment and non-investment
grade debt securities in a segregated account of the Series in an amount equal
to the repurchase price. Any assets held in any segregated securities, options,
futures, forward contracts or other derivative transactions shall be liquid,
unencumbered and marked-to-market daily (any such assets held in a segregated
account are referred to in this Statement of Additional Information as
"Segregated Assets").
A reverse repurchase agreement involves the risk that the market value of
the securities retained by the Fund may decline below the price of the
securities the Series has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities under a reverse repurchase
agreement files for the bankruptcy or becomes insolvent, the Fund's use of the
proceeds of the agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's obligation to
repurchase the securities. Reverse repurchase agreements are considered
borrowings and as such are subject to the same investment limitations.
BORROWING
The Fund may borrow money up to 33 1/3% of the value of its total assets
(calculated at the time of the borrowing) from banks for temporary,
extraordinary or emergency purposes, for the clearance of transactions or for
investment purposes. The Fund may pledge up to 33 1/3% of its total assets to
secure these borrowings. If the Fund's asset coverage for borrowings falls below
300%, the Fund will take prompt action to reduce its borrowings. If the 300%
asset coverage should decline as a result of market fluctuations or other
reasons, the Fund may be required to sell portfolio securities to reduce the
debt and restore the 300% asset coverage, even though it may be disadvantageous
from an investment standpoint to sell securities at that time. The Fund will
normally not purchase portfolio securities when borrowings exceed 15% of the
value of its total assets.
Borrowing for investment purposes is generally known as "leveraging."
Leveraging exaggerates the effect on net asset value of any increase or decrease
in the market value of the Fund's portfolio. Money borrowed for leveraging will
be subject to interest costs which may or may not be recovered by appreciation
of the securities purchased and may exceed the income from the securities
<PAGE>
purchased. In addition, the Fund may be required to maintain minimum average
balances in connection with such borrowing or pay a commitment fee to maintain a
line of credit which would increase the cost of borrowing over the stated
interest rate. On an ongoing basis the Fund's borrowing for investment purposes
will not typically exceed 10% of the value of the Fund's assets.
FUTURES
The Fund may enter into contracts for the purchase or sale for future
delivery of securities. A purchase of a futures contract means the acquisition
of a contractual right to obtain delivery to the Fund of the securities or
foreign currency called for by the contract at a specified price and future
date. When the Fund enters into a futures transaction, it must deliver to the
futures commission merchant selected by the Fund an amount referred to as
"initial margin." This amount is maintained by the futures commission merchant
in a segregated account at the custodian bank. Thereafter, a "variation margin"
may be paid by the Fund to, or drawn by the Fund from, such account in
accordance with controls set for such accounts, depending upon changes in the
price of the underlying securities subject to the futures contract.
The Fund may enter into futures contracts and engage in options on futures
to the extent that no more than 5% of the Fund's assets are required as futures
contract margin deposits and premiums on options, and may engage in such
transactions to the extent that obligations relating to such futures and related
options on futures transactions represent not more than 10% of the Fund's
assets.
The Fund may enter into futures transactions on domestic exchanges and, to
the extent such transactions have been approved by the Commodity Futures Trading
Commission for sale to customers in the United States, on foreign exchanges. In
addition, the Fund may sell stock index futures in anticipation of or during a
market decline to attempt to offset the decrease in market value of its common
stocks that might otherwise result; and it may purchase such contracts in order
to offset increases in the cost of common stocks that it intends to purchase.
Unlike other futures contracts, a stock index futures contract specifies that no
delivery of the actual stocks making up the index will take place. Instead,
settlement in cash must occur upon the termination of the contract. While
futures contracts provide for the delivery of securities, deliveries usually do
not occur. Contracts are generally terminated by entering into offsetting
transactions.
The Fund may enter into futures contracts to protect against the adverse
effects of fluctuations in security prices, interest or foreign exchange rates
without actually buying or selling the securities or foreign currency. For
example, if interest rates are expected to increase, the Fund might enter into
futures contracts for the sale of debt securities. Such a sale would have much
the same effect as selling an equivalent value of the debt securities owned by
the Fund. If interest rates did increase, the value of the debt securities in
the portfolio would decline, but the value of the futures contracts to the Fund
would increase at approximately the same rate thereby keeping the net asset
value of the Fund from declining as much as it otherwise would have. Similarly,
when it is expected that interest rates will decline, futures contracts may be
purchased to hedge in anticipation of subsequent purchases of securities at
higher prices. Since the fluctuations in the value of futures contracts should
<PAGE>
be similar to those of debt securities, the Fund could take advantage of the
anticipated rise in value of debt securities without actually buying them until
the market had stabilized. At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the cash market.
To the extent that market prices move in an unexpected direction, the Fund
may not achieve the anticipated benefits of futures contracts or may realize a
loss. For example, if the Fund is hedged against the possibility of an increase
in interest rates which would adversely affect the price of securities held in
its portfolio and interest rates decrease instead, the Fund would lose part or
all of the benefit of the increased value which it has because it would have
offsetting losses in its futures position. In addition, in such situations, if
the Fund had insufficient cash, it may be required to sell securities from its
portfolio to meet daily variation margin requirements. Such sales of securities
may, but will not necessarily, be at increased prices which reflect the rising
market. The Fund may be required to sell securities at a time when it may be
disadvantageous to do so.
OPTIONS
The Fund may invest in options that are listed on U.S. exchanges or traded
over-the-counter. Certain over-the-counter options may be illiquid. Thus, it may
not be possible to close options positions and this may have an adverse impact
on the Fund's ability to effectively hedge its securities. The Fund considers
over-the-counter options to be illiquid. Accordingly, the Fund will only invest
in such options to the extent consistent with its 5% limit on investments in
illiquid securities. The Fund may purchase and write call or put options on
securities but will only engage in option strategies for non-speculative
purposes. In addition, the Fund will only engage in option transactions (other
than index options) to the extent that no more than 10% of its total assets are
subject to obligations relating to such options.
PURCHASING CALL OPTIONS - The Fund may purchase call options on
securities. When the Fund purchases a call option, in return for a premium paid
by the Fund to the writer of the option, the Fund obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option has the obligation to
deliver the underlying security against payment of the exercise price. The
advantage of purchasing call options is that the Fund may alter portfolio
characteristics and modify portfolio maturities without incurring the cost
associated with transactions.
The Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. The
Fund will realize a profit from a closing sale transaction if the price received
on the transaction is more than the premium paid to purchase the original call
option; the Fund will realize a loss from a closing sale transaction if the
price received on the transaction is less than the premium paid to purchase the
original call option.
Although the Fund would generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange would exist for any particular option,
<PAGE>
or at any particular time, and for some options no secondary market on an
exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund, in which event it would realize a capital loss which will be
short-term unless the option were held for more than one year.
COVERED CALL WRITING - The Fund may write covered call options from time
to time on such portions of its portfolio, without limit, as the Adviser
determines is appropriate in seeking to achieve the Fund's investment objective.
The advantage to the Fund of writing covered calls is that it receives a premium
which is additional income. However, if the security rises in value, the Fund
may not fully participate in the market appreciation thereof.
During the option period for a covered call option, the writer may be
assigned an exercise notice by the broker-dealer through whom such call option
was sold, requiring the writer to deliver the underlying security against
payment of the exercise price. This obligation is terminated upon the expiration
of the option or upon entering a closing purchase transaction. A closing
purchase transaction, in which the Fund, as writer of an option, terminates its
obligation by purchasing an option of the same kind as the option previously
written, cannot be effected with respect to an option once the option writer has
received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expiration date or both. The Fund may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund will realize a short-term
capital gain in the amount of the premium on the option less the commission
paid. Such a gain, however, may be offset by depreciation in the market value of
the underlying security during the option period. If a call option is exercised,
the Fund will realize a gain or loss from the sale of the underlying security
equal to the difference between the cost of the underlying security and the
proceeds of the sale of the security plus the amount of the premium on the
option less the commission paid.
The Fund may write call options only on a covered basis, which means that
the Fund would own the underlying security subject to a call option at all times
<PAGE>
during the option period. Unless a closing purchase transaction is effected, the
Fund would be required to continue to hold a security which it might otherwise
wish to sell or deliver a security it would want to hold. The exercise price of
a call option may be below, equal to or above the current market value of the
underlying security at the time the option is written.
PURCHASING PUT OPTIONS - The Fund may purchase put options, in which event
the Fund would, at all times during which it holds a put option, own the
security covered by such option. The purchase of the put on substantially
identical securities held would constitute a short sale for tax purposes, the
effect of which would be to create short-term capital gain on the sale of the
security and to suspend the running of its holding period (and treat it as
commencing on the date of the closing of the short sale) or that of a security
acquired to cover the same if at the time the put were acquired, the security
had not been held for more than one year.
A put option purchased by the Fund would give it the right to sell one of
its securities for an agreed price up to an agreed date. The Fund may purchase
put options in order to protect against a decline in the market value of the
underlying security below the exercise price less the premium paid for the
option ("protective puts"). The ability to purchase put options would allow the
Fund to protect unrealized gains in an appreciated security in its portfolio
without actually selling the security. If the security does not drop in value,
the Fund would lose the value of the premium paid. The Fund may sell a put
option which it has previously purchased prior to the sale of the securities
underlying such option. Such sale would result in a net gain or loss depending
on whether the amount received on the sale is more or less than the premium and
other transaction costs paid on the put option which is sold.
The Fund may sell a put option purchased on individual portfolio
securities. Additionally, the Fund may enter into closing sale transactions. A
closing sale transaction is one in which the Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
WRITING PUT OPTIONS - The Fund may also write put options on a secured
basis which means that the Fund will maintain in a segregated account with its
Custodian segregated assets in an amount not less than the exercise price of the
option at all times during the option period. The amount of segregated assets
held in the segregated account will be adjusted on a daily basis to reflect
changes in the market value of the securities covered by the put option written
by the Fund. Secured put options would generally be written in circumstances
where the Fund wishes to purchase the underlying security for the Fund's
portfolio at a price lower than the current market price of the security. In
such event, the Fund would write a secured put option at an exercise price
which, reduced by the premium received on the option, reflects the lower price
it is willing to pay.
Following the writing of a put option, the Fund may wish to terminate the
obligation to buy the security underlying the option by effecting a closing
purchase transaction. This would be accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
<PAGE>
STRADDLES - The Fund may write covered straddles consisting of a
combination of a call and a put written on the same underlying security. A
straddle would be covered when sufficient assets are deposited to meet the
Fund's immediate obligations. The Fund may use the same liquid assets to cover
both the call and put options where the exercise price of the call and put are
the same, or the exercise price of the call is higher than that of the put. In
such cases, the Fund would also segregate liquid assets equivalent to the
amount, if any, by which the put is "in the money."
INDEX OPTIONS
The Fund may purchase exchange-listed put and call options on stock
indices and sell such options in closing sale transactions for hedging purposes.
The Fund may purchase call options on broad market indices to temporarily
achieve market exposure when the Fund is not fully invested. The Fund may also
purchase exchange-listed call options on particular market segment indices to
achieve temporary exposure to a specific industry. The Fund may purchase put
options on broad market indices in order to protect its fully invested portfolio
from a general market decline. Put options on market segments may be bought to
protect the Fund from a decline in value of heavily weighted industries in the
Fund's portfolio. Put options on stock indices may be used to protect the Fund's
investments in the case of a major redemption. While the option is open, the
Fund would maintain a segregated account with its Custodian in an amount equal
to the market value of the option.
Options on indices are similar to regular options except that an option on
an index gives the holder the right, upon exercise, to receive an amount of cash
if the closing level of the index upon which the option is based is greater than
(in the case of a call) or lesser than (in the case of a put) the exercise price
of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier").
RISKS OF OPTIONS
The purchase and writing of options involves certain risks. During the
option period, the covered call writer has, in return for the premium on the
option, given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as its obligation
as a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying securities at the exercise price. If a
put or call option purchased by the Fund is not sold when it has remaining
value, and if the market price of the underlying security, in the case of a put,
remains equal to or greater than the exercise price or, in the case of a call,
remains less than or equal to the exercise price, the Fund will lose its entire
investment in the option. Also where a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security. There can be no assurance that a liquid market will exist when
<PAGE>
a Fund seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options markets, the Fund may be
unable to close out a position.
The Fund's purchases of options on indices may subject it to the risks
described below:
First, because the value of an index option depends upon movements in the
level of the index rather than the price of a particular security, whether the
Fund will realize a gain or loss on the purchase of an option on an index
depends upon movements in the level of prices in the market generally or in an
industry or market segment rather than movements in the price of a particular
security. Accordingly, successful use by the Fund of options on indices is
subject to the Fund's ability to predict correctly the direction of movements in
the market generally or in a particular industry. This requires different skills
and techniques than predicting changes in the prices of individual securities.
Second, index prices may be distorted if trading of a substantial number
of securities included in the index is interrupted causing the trading of
options on that index to be halted. If a trading halt were to occur, the Fund
would not be able to close put options which it had purchased and the Fund may
incur losses if the underlying index moved adversely before trading resumed. If
a trading halt were to occur and restrictions prohibiting the exercise of
options were imposed through the close of trading on the last day before
expiration, exercises on that day would be settled on the basis of a closing
index value that may not reflect current price information for securities
representing a substantial portion of the value of the index.
Third, if the Fund were to hold an index option and were to exercise it
before final determination of the closing index value for that day, it would run
the risk that the level of the underlying index may change before closing. If
such a change were to cause the exercised option to fall "out-of-the-money," the
Fund would be required to pay the difference between the closing index value and
the exercise price of the option (times the applicable multiplier) to the
assigned writer. Though the Fund may be able to minimize this risk by
withholding exercise instructions until just before the daily cutoff time or by
selling rather than exercising the option when the index level is close to the
exercise price, it may not be possible to eliminate this risk entirely because
the cutoff times for index options may be earlier than those fixed for other
types of options and may occur before definitive closing index values are
announced.
OTHER INVESTMENTS
The Board of Trustees may, in the future, authorize the Fund to invest in
securities other than those listed in this SAI and in the prospectus, provided
such investment would be consistent with the Fund's investment objective and
that it would not violate any fundamental investment policies or restrictions.
<PAGE>
INVESTMENT RESTRICTIONS
LENDING: The Fund may not make loans, provided that this restriction does
not prevent the Fund from purchasing debt obligations, entering into repurchase
agreements, loaning its assets to broker-dealers or institutional investors and
investing in loans, including assignments and participation interests.
NON-FUNDAMENTAL POLICIES AND RESTRICTIONS: In addition to the fundamental
policies and investment restrictions described above, and the various general
investment policies described in the Prospectus the Fund will be subject to the
following investment restrictions, which are considered non-fundamental and may
be changed by the Board of Trustees without shareholder approval.
OTHER INVESTMENT COMPANIES: The Fund is permitted to invest in other
investment companies, including open-end, closed-end or unregistered investment
companies, either within the percentage limits set forth in the 1940 Act, any
rule or order thereunder, or SEC staff interpretation thereof, or without regard
to percentage limits in connection with a merger, reorganization, consolidation
or other similar transaction. However, the Fund may not operate as a "fund of
funds" which invests primarily in the shares of other investment companies as
permitted by Section 12(d)(1)(F) or (G) of the 1940 Act, if its own shares are
utilized as investments by such a "fund of funds."
ILLIQUID SECURITIES: The Fund may not invest more than 10% of its net
assets in securities which it can not sell or dispose of in the ordinary course
of business within seven days at approximately the value at which the Fund has
valued the investment.
In applying the Fund's fundamental policy concerning concentration that is
described above, it is a matter of non-fundamental policy that investments in
certain categories of companies will not be considered to be investments in a
particular industry. For example: (i) financial service companies will be
classified according to the end users of their services, for example, automobile
finance, bank finance and diversified finance will each be considered a separate
industry; (ii) technology companies will be divided according to their products
and services, for example, hardware, software, information services and
outsourcing, or telecommunications will each be a separate industry; (iii)
asset-backed securities will be classified according to the underlying assets
securing such securities; and (iv) utility companies will be divided according
to their services, for example, gas, gas transmission, electric and telephone
will each be considered a separate industry.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
PURCHASING SHARES
Shares of the Fund may be purchased without any sales charge through an
investment adviser, financial planner, broker, dealer or other investment
professional or through a fund supermarket or retirement plan. Shares of the
Fund are offered on a continuous basis by the distributor. Other persons may
<PAGE>
receive compensation for the marketing and shareholder servicing activities in
the form of 12b-1 fees payable by the Fund under its 12b-1 Plan.
The Fund reserves the right to reject any purchase order and to suspend
the offering of shares of the Fund. The minimum initial investment is $5,000 and
additional investments must total at least $1,000. The minimum initial
investment for qualified retirement accounts is $1,000 ($500 for Education IRAs)
and there is no minimum for subsequent investments in these accounts. The Fund
may change or waive its policies concerning minimum investment amounts at any
time. The Fund's Transfer Agent maintains all shareholder and shareholder
transaction(s) records for the Fund.
The Fund does not intend to issue certificates representing shares
purchased. Shareholders will have the same rights of ownership with respect to
such shares as if certificates had been issued.
Shares of the Fund may be purchased at the Fund's net asset value per
share (NAV), which is calculated as of the close of the New York Stock Exchange
("NYSE") (usually 4:00 P.M. eastern time) every day the exchange is open. As of
the date of this SAI, the Fund is informed that the NYSE observes the following
holidays: New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
The NAV is determined by dividing the value of the Fund's securities, cash
and other assets, minus all expenses and liabilities, by the number of shares
outstanding. The Fund's securities are valued each day at their market value,
which usually means the last quoted sale price on the security's principal
exchange on that day. Expenses and fees of the Fund, including management,
distribution and shareholder servicing fees, are accrued daily and taken into
account for the purpose of determining the net asset value.
Cash and any receivables are valued at their realizable amounts. Interest
is recorded as accrued and dividends are recorded on the ex-dividend date.
Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and ask prices. The current
market value of any option held by the Fund is its last sale price on the
relevant exchange before the time when assets are valued. Lacking any sales that
day or if the last sale price is outside the bid and ask prices, options are
valued within the range of the current closing bid and ask prices if the
valuation is believed to reflect the contract's market value. The value of a
foreign security is determined as of the close of trading on the foreign
exchange on which it is traded or as of the scheduled close of trading on the
NYSE, if that is earlier. Generally, trading in corporate bonds, U.S. government
securities and money market instruments is substantially completed each day at
various times before the scheduled close of the NYSE. The value of these
securities used in computing the NAV of each class is determined as of such
time.
Upon purchasing shares of the Fund, if a check or draft is returned unpaid
to the Fund the Fund may impose a $10 charge for each returned item. All checks,
<PAGE>
drafts, wires and other payment mediums used to buy or sell shares of the Fund
must be denominated in U.S. dollars. The Fund may, in its sole discretion,
either (a) reject any order to buy or sell shares denominated in any other
currency or (b) honor the transaction or make adjustments to a shareholder's
account for the transaction as of a date and with a foreign currency exchange
factor determined by the drawee bank.
SELLING SHARES
Shares of the Fund may be redeemed on any business day that the Fund
calculates its NAV. The sale price will be the next NAV calculated after the
redemption order is accepted by the Fund's transfer agent. No fees are imposed
by the Fund when shares are sold.
Shares of the Fund may be sold by giving instructions to the Fund's
transfer agent by mail or by telephone. The Fund will use reasonable procedures
to confirm that instructions communicated by telephone are genuine and, if such
procedures are followed, will not be liable for any losses due to unauthorized
or fraudulent telephone transactions. During times of drastic economic or market
changes, the telephone redemption privilege may be difficult to implement and
the Fund reserves the right to suspend this privilege.
Certain written requests to sell shares require a signature guarantee. For
example, a signature guarantee may be required if shares are sold worth $10,000
or more if your address of record on the account application has been changed
within the last 30 days, or if you ask that the proceeds be sent to a different
person or address. A signature guarantee is used to help protect you and the
Fund from fraud. You can obtain a signature guarantee from most banks and
securities dealers, but not from a notary public. Signature guarantees must
appear together with the signature(s) of the registered owner(s), on: (1) a
written request for redemption; or (2) a separate instrument of assignment,
which should specify the total number of shares to be redeemed (this "stock
power" may be obtained from the Fund or from most banks or stock brokers).
If shares are sold through a securities dealer or investment professional,
it is such person's responsibility to transmit the order to the Fund in a timely
fashion. Any loss to you resulting from failure to do so must be settled between
you and such person.
Delivery of the proceeds of a redemption of shares purchased and paid for
by check shortly before the receipt of the request may be delayed until the Fund
determines that the Custodian has completed collection of the purchase check
which may take up to 10 days. Also, redemption requests for accounts for which
purchases were made by wire may be delayed until the Fund receives a completed
application for the account. The Board of Trustees may suspend the right of
redemption or postpone the date of payment during any period when (a) trading on
the New York Stock Exchange is restricted as determined by the SEC or such
exchange is closed for other than weekends and holidays, (b) the SEC has by
order permitted such suspension, or (c) an emergency, as defined by rules of the
SEC, exists during which time the sale of Fund shares or valuation of securities
held by the Fund are not reasonably practicable.
<PAGE>
If dividend checks are returned to the Fund marked "unable to forward" by
the postal service, the Fund will consider this a request by the shareholder to
change the dividend option to reinvest all contributions. The proceeds will be
reinvested in additional shares at NAV until the Fund receives new instructions.
If mail is returned as undeliverable or the Fund is unable to locate you
or verify your current mailing address, it may deduct the costs of any efforts
to find you from your account. These costs may include a percentage of the
account when a search company charges a percentage fee in exchange for its
location services.
Distribution or redemption checks sent to a shareholder do not earn
interest or any other income during the time the checks remain uncashed. Neither
the Fund nor its affiliates will be liable for any loss caused by a
shareholder's failure to cash such checks.
The Fund also reserves the right to make a "redemption in kind" if the
amount you are redeeming is large enough to affect Fund operations or if the
redemption would otherwise disrupt the Fund. For example, the Fund may redeem
shares in kind if the amount represents more than 1% of the Fund's assets. When
the Fund makes a "redemption in kind" it pays the Seller in portfolio securities
rather than cash. If shares are redeemed in kind, the redeeming shareholder may
incur brokerage costs in converting the assets to cash. The method of valuing
securities used to make redemptions in kind will be the same as the method of
valuing portfolio securities is described above. Such valuation will be made as
of the same time the redemption price is determined.
In addition, if a shareholder's account balance falls below $1,000, the
Fund may request the balance be increased. If it is still below $1,000 after 60
days, the Fund may automatically close the account and forward the proceeds to
the shareholder.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trust is governed by a Board of Trustees which is responsible for
protecting the interests of the Fund's shareholders. The Trustees are
experienced business persons who meet throughout the year to oversee the Trust's
activities, review contractual arrangements with companies that provide services
to the Fund, and review performance. The names and business addresses of the
Trustees and officers of the Trust, together with information as to their
principal occupations during the past five years, are listed below. The Trustees
who are considered "interested persons" of the investment adviser or of the
Trust, as defined in Section 2(a)(19) of the 1940 Act, are noted with an
asterisk (*).
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
- --------------------- --------------- -----------------------
<S> <C> <C>
Theodore F. Ells, Esq. Chairman of the Trustees Partner of the Law Firm
28 West 44th Street of Craig & Ells
New York, NY 10036
Age 59
D. Roger B. Liddell* Trustee Managing Director of
61 Broadway Ingalls & Snyder LLC
New York, NY 10006
Age 54
Barnabas B. B. Breed, Esq. Trustee, Treasurer, Principal of the Law
Tower Suite 3500 Secretary Firm of Breed &
The French Building Associates
551 Fifth Avenue
New York, NY 10017
Age 55
Robert E. Belknap* Trustee Principal and Senior
61 Broadway Director of Ingalls &
New York, NY 10006 Snyder LLC
Age 61
The following individuals have agreed to serve as Trustee of the Fund upon the
effectiveness of the Registration Statement:
Steven L. Wood Trustee Managing Director of the
2250 Century Square Real Estate Development
1501 Fourth Avenue Firm of Century Pacific,
Seattle, WA 98101 L.P.
Age 52
( ) Trustee, Assistant (Officer) of Firstar
Treasurer, Assistant Bank, Administrator of
Secretary the Fund
</TABLE>
ADVISORY BOARD
The Fund has an Advisory Board whose members are experienced in many
different types of business and who assist the Fund's portfolio manager in the
ongoing assessment of economic, political and social developments as they may
<PAGE>
affect the investment strategy of the Fund. The members of the Advisory Board
are not compensated, do not give investment advice to the Fund, and are as
follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, BUSINESS ADDRESS DURING THE PAST 5 YEARS
- ---------------------- -----------------------
<S> <C>
Thomas H. Belknap, Esq. Partner of the Law Firm of Hill &
One International Place Barlow
Boston, MA 02110-2607
Mr. David G. Booth Managing Director, Ret., of the
15 Garden Place investment firm Morgan Stanley Dean
Brooklyn, NY 11201 Witter, Inc.
Mr. Marc Declerck Partner of the investment firm of
Place du Champs de Mars Havaux & Cie
2 Marsveldplain
Brussels 1050, Belgium
Mr. Christopher Finn Managing Director - International of
20 Berkeley Square the merchant banking firm The Carlyle
London W1X 6NB Group
United Kingdom
Mr. Jolmer D. Gerritse Managing Director of the investment
Nieuwezijds Voorburgwal 162 firm SNS Securities N.V.
1012 SJ Amsterdam
The Netherlands
Mr. John G. Hunter Managing Director of the conference
123 East 54th Street management company The Management
New York, NY 10022 Exchange, Inc.
Mr. William J. Loschert Chairman of the insurance company ACE
Crosby Court UK Limited
38 Bishopsgate
London EC2N 4DL
United Kingdom
Mr. E. Lawrence Minard, III Managing Editor of Forbes Global
60 Fifth Avenue Business & Finance Magazine
New York, NY 10011
<PAGE>
PRINCIPAL OCCUPATION(S)
NAME, BUSINESS ADDRESS DURING THE PAST 5 YEARS
- ---------------------- -----------------------
Mr. C. P. T. Vaughan-Johnson Deputy Chairman of the private bank
1 Hobart Place Duncan Lawrie Limited
London SW1W 0HU
England
Mr. Wynant D. Vanderpoel President of private investment
79 East 79th Street company The Vanderpoel Group
New York, NY 10021
Mr. Lewis M. Weston Limited Partner of the investment firm
85 Broad Street Goldman, Sachs & Company
New York, NY 10004
Mr. Christopher Wetherhill Managing Director of the mutual fund
P. O. Box HM 951 services firm Hemisphere Management
Hamilton HM DX Ltd.
Bermuda
Mr. Edward W. Wheeler Senior Vice President of the
630 3rd Avenue investment research firm The
New York, NY 10017 Buckingham Research Group, Inc.
Mr. Robert D. White Chief Operating Officer of the
414 East 75th Street investment firm Investor Select
New York, NY 10021 Advisers, Inc.
Roger T. Wickers, Esq. Senior Vice President and General
99 Springfield Point Counsel, Ret., of the mutual fund
Wolfeboro, NH 03894 management company The Keystone Group
Mr. Henry K. Wingate Independent Educational Consultant
P.O. Box 197
Sandisfield, MA 01255
</TABLE>
COMPENSATION OF TRUSTEES: The Trust does not compensate the Trustees who
are officers or employees of the Adviser or its affiliates. The "independent"
Trustees receive a fee of $250 for each meeting of the Trustees which they
attend in person or by telephone. Trustees are reimbursed for travel and other
out-of-pocket expenses. The Board of Trustees is expected to hold regular
quarterly meetings each year, and would receive the annual compensation shown
below from the Trust for serving on the Board and attending such meetings. The
Trust does not offer any retirement benefits for Trustees. As of July 15th,
<PAGE>
1999, the officers and Trustees, individually and as a group, owned beneficially
less than 1% of the outstanding shares of the Fund.
<TABLE>
<CAPTION>
AGGREGATE COMPENSATION
NAME OF TRUSTEE TITLE FROM TRUST
- --------------- ----- ----------------------
<S> <C> <C>
Theodore F. Ells, Esq. Chairman of the Trustees $1,000
Steven L. Wood Trustee $1,000
D. Roger B. Liddell Trustee None
Barnabas B. B. Breed Trustee $1,000
Robert E. Belknap Trustee None
</TABLE>
INVESTMENT ADVISER AND ADVISORY AGREEMENT: Ingalls & Snyder LLC ("Ingalls
& Snyder" or the "Adviser"), having its principal offices located at 61
Broadway, New York, NY 10006, is the Fund's investment adviser. Ingalls & Snyder
is registered as an investment adviser under the Investment Advisers Act of
1940, as amended (the "Advisers Act").
Ingalls & Snyder serves as investment adviser to the Fund pursuant to an
Investment Advisory Agreement with the Trust dated as of ________________ (the
"Advisory Agreement'). Under the Advisory Agreement, the Adviser, subject to the
supervision of the Trustees, provides a continuous investment program for the
Fund, including investment research and management with respect to securities,
investments and cash equivalents, in accordance with the Fund's investment
objective, policies and restrictions as set forth in its prospectus, this SAI
and the resolutions of the Trustees. The Adviser is responsible for effecting
all security transactions on behalf of the Fund, including the allocation of
principal business and portfolio brokerage and the negotiation of commissions.
The Adviser also maintains books and records with respect to the securities
transactions of the Fund and furnishes to the Trustees such periodic or other
reports as the Trustees may request.
The Fund is obligated to pay the Adviser a monthly fee equal to an annual
rate of 1.00% of the Fund's average daily net assets. The Adviser has
voluntarily agreed to waive its advisory fee or make payments to limit Fund
expenses to the extent necessary to ensure that total operating expenses of the
Fund do not exceed 1.70% of average daily net assets during the Fund's first
year of operations. This voluntary arrangement may be terminated by the Adviser
at any time.
During the term of the Advisory Agreement, the Adviser will pay all
expenses incurred by it in connection with its activities thereunder except the
cost of securities (including brokerage commissions, if any) purchased for the
Fund. The services furnished by the Adviser under the Advisory Agreement are not
exclusive, and the Adviser is free to perform similar services for others.
(Rev.d 7/9/99)
Ingalls & Snyder is an independent, privately owned firm. Its shareholders
consist of twenty-five directors, none of whom owns 25% of its outstanding
stock.
<PAGE>
Unless sooner terminated in accordance with its terms, the Advisory
Agreement is initially effective for a period of two years and may be continued
from year to year, provided that such continuance is approved at least annually
by a vote of the holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Fund, or by the Trustees, and in either
event by vote of a majority of the Trustees who are not parties to the Advisory
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The required shareholder approval of any continuance will be effective
with respect to the Fund if a majority of the outstanding voting securities of
the Fund votes to approve such continuance.
The Advisory Agreement will automatically terminate in the event of its
"assignment" as that term is defined in the 1940 Act, and may be terminated
without penalty at any time upon 60 days' written notice to the other party: (i)
by the majority vote of all the Trustees or by majority vote of the outstanding
voting securities of the Fund; or (ii) by the Adviser.
The Advisory Agreement may be amended by the parties, provided, in most
cases, that any such amendment is specifically approved by the vote of a
majority of the outstanding voting securities of the Fund and by the vote of a
majority of the Trustees who are not interested persons of the Fund or of the
Adviser, cast in person at a meeting called for the purpose of voting upon such
approval.
Under the terms of the Advisory Agreement, the Adviser will be liable to
the Fund only for losses resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services, willful misfeasance, bad faith,
gross negligence or reckless disregard of duty.
The Adviser and the Trustees have agreed that the Fund will use the name
"Legacy," and that other funds with differing investment objectives may also be
formed under the Legacy name.
CODE OF ETHICS
Both the Fund and the Adviser have adopted a Code of Ethics that governs
the conduct of employees of the Fund and the Adviser who may have access to
information about the Fund's securities transactions. The Code recognizes that
such persons owe a fiduciary duty to the Fund's shareholders and must place the
interests of shareholders ahead of their own interests. Among other things, the
Code requires pre-clearance of personal securities transactions; certain
blackout periods for personal trading of securities which may be considered for
purchase or sale by the Fund or other clients of the adviser; and prohibitions
against personal trading of initial public offerings. Violations of the code are
subject to review by the Trustees and could result in severe penalties.
SERVICE AGREEMENTS
As more fully described below, the Trust has entered into a number of
agreements with Firstar Mutual Funds Services, LLC ("Firstar"), a Wisconsin
<PAGE>
limited liability company, pursuant to which management-related and other
services are performed for the Fund. Firstar serves as the Administrator,
Transfer and Dividend Disbursing Agent, and Fund Accountant. Firstar Trust
Company serves as the Fund's Custodian. The principal offices of Firstar and
Firstar Trust Company are located at 615 Michigan Avenue, Milwaukee, WI 53202.
ADMINISTRATOR
Pursuant to an Administration Agreement with the Trust dated as of
________________ (the "Administration Agreement"), Firstar serves as
Administrator of the Fund and subject to the direction and control of the
Trustees, supervises all aspects of the operation of the Fund except those
performed by the Fund's Adviser. As administrator, Firstar receives asset-based
fees at the annual rates of 0.06% on the first $200 million of average daily net
assets, 0.05% on the next $500 million of average daily net assets and 0.03% on
average daily net assets above $700 million, subject to a minimum amount of $
_____ per year.
Under the Administration Agreement, Firstar provides certain
administrative services and facilities for the Fund. These services include
preparing and maintaining books, records, tax and financial reports, and
monitoring compliance with state and federal regulatory requirements.
FUND ACCOUNTING
Pursuant to an Accounting Agreement with the Trust dated as of November
11, 1998 (the "Accounting Agreement"), Firstar is responsible for accounting
relating to the Fund and its investment transactions; maintaining certain books
and records of the Fund; determining daily the net asset value per share of the
Fund and calculating yield, dividends and capital gain distributions; and
preparing security position, transaction and cash position reports.
Under the Accounting Agreement, Firstar maintains portfolio trading
records and records of brokerage activity in order to provide monthly brokerage
reports which identify brokers and set forth commission amounts. Firstar also
monitors periodic distributions of gains or losses on portfolio sales and
maintains a daily listing of portfolio holdings. Firstar is responsible for
expenses accrued and payment reporting services. Firstar provides tax accounting
services and tax-related financial information to the Trustees. Firstar also
monitors compliance with the regulatory requirements relating to maintaining
accounting records.
TRANSFER AGENT
Pursuant to a Transfer Agency Agreement with the Trust dated as of
________________ (the "Transfer Agency Agreement"), Firstar acts as the Trust's
transfer, dividend disbursing and redemption agent. Firstar provides certain
shareholder and other services to the Trust, including: furnishing account and
transaction information; providing mailing labels for the distribution to the
Fund's shareholders of financial reports, prospectuses, proxy statements and
other such materials; providing compliance reporting; calculating distribution
plan and marketing expenses; and maintaining shareholder account records.
<PAGE>
Firstar is responsible for processing orders for Fund shares and ensuring
appropriate participation with the National Securities Clearing Corporation for
transactions with Fund shares. If so requested by the Trustees, Firstar will
produce shareholder lists and reports for proxy solicitations. Firstar receives
and processes redemption requests and administers distribution of redemption
proceeds. Firstar also handles shareholder inquiries and provides routine
account information. In addition, Firstar prepares and files appropriate tax
related information concerning dividends and distributions to shareholders.
CUSTODIAN
Pursuant to a Custodian Servicing Agreement with the Trust dated as of
November 11, 1998 (the "Custodian Agreement"), Firstar Trust Company acts as the
Custodian of the Fund's securities and cash. Portfolio securities purchased in
the U.S. are maintained in the custody of the Custodian and may be entered into
the Federal Reserve Book Entry System of the security depository system of the
Depository Trust Corporation. Firstar Trust Company maintains one account in the
name of the Fund. Firstar Trust Company is responsible for holding and making
payments of all cash received for the account of the Fund.
From the Fund's account Firstar Trust Company may make payments for the
purchase of securities, payment of interest, taxes, fees and other operating
expenses. As the Custodian, Firstar Trust Company is authorized to endorse and
collect checks, drafts or other orders for payment. Firstar Trust Company is
responsible for the release or delivery of portfolio securities. Firstar Trust
Company also monitors compliance with the regulatory requirements of the
Treasury Department, Internal Revenue Service and the laws of the various
states. Firstar Trust Company is compensated on the basis of an annual fee based
on the market value of the assets of the Fund and on fees for certain
transactions.
DISTRIBUTOR
Ingalls & Snyder LLC (the "Distributor"), located at 61 Broadway, New
York, NY 10006, serves as the underwriter and distributor for the shares of the
Fund pursuant to a Distribution Agreement with the Trust dated as of
_______________ (the "Distribution Agreement"). The distributor is registered as
a broker-dealer under the 1934 Act and each state's securities laws and is a
member of the National Association of Securities Dealers ("NASD"). The offering
of the Fund's shares is continuous. The Distribution Agreement provides that the
Distributor, as agent in connection with the distribution of Fund shares, will
use appropriate efforts to solicit orders for the sale of Fund shares and
undertake such advertising and promotion as it deems reasonable, including, but
not limited to, advertising, compensation to underwriters, dealers and sales
personnel, printing and mailing prospectuses to persons other than current Fund
shareholders, and printing and mailing sales literature.
DISTRIBUTION PLAN
The Board of Trustees has adopted a Distribution and Shareholder Servicing
Plan ("the Plan") on behalf of the Fund, in accordance with Rule 12b-1 (the
"Rule") under the 1940 Act. The Fund is authorized under the Plan to use the
<PAGE>
assets of the Fund to reimburse the Distributor or others for certain activities
relating to the distribution of shares of the Fund to investors and the
provision of shareholder services. The maximum amount payable under the Plan is
0.25% of the Fund's average net assets on an annual basis. Because these fees
are paid out of the Fund's assets on an ongoing basis, over time these fees will
increase the cost of an investor's investment.
The NASD's maximum sales charge rule relating to mutual fund shares
establishes limits on all types of sales charges, whether front-end, deferred or
asset-based. This rule may operate to limit the aggregate distribution fees to
which shareholders may be subject under the terms of the Plan.
The Plan authorizes the use of distribution fees to pay, or reimburse
expenses incurred by, banks, broker-dealers and other institutions which provide
distribution assistance and/or shareholder services including, but not limited
to, printing and distributing prospectuses to persons other than Fund
shareholders, printing and distributing advertising and sales literature and
reports to shareholders used in connection with selling shares of the Fund,
furnishing personnel and communications equipment to service shareholder
accounts and prospective shareholder inquiries. Such services may be performed
by the Distributor, the Adviser or others.
The Plan requires that any person authorized to direct the disposition of
monies paid or payable by the Fund pursuant to the Plan or any related agreement
prepare and furnish to the Trustees for their review, at least quarterly,
written reports complying with the requirements of the Rule and setting out the
amounts expended under the Plan and the purposes for which those expenditures
were made. The Plan provides that so long as it is in effect the selection and
nomination of Trustees who are not interested persons of the Trust will be
committed to the discretion of the Trustees then in office who are not
interested persons of the Trust.
Neither the Plan nor any related agreements can take effect until approved
by a majority vote of both all the Trustees and those Trustees who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan
cast in person at a meeting called for the purpose of voting on the Plan and the
related agreements. The Trustees approved the Plan on
- ----------------.
The Plan will continue in effect only so long as its continuance is
specifically approved at least annually by the Trustees in the manner described
above for Trustee approval of the Plan. The Plan for the Fund may be terminated
at any time by a majority vote of the Trustees who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operations
of the Plan or in any agreement related to the Plan or by vote of a majority of
the outstanding voting securities of the Fund.
The Plan may not be amended so as to materially increase the amount of the
distribution fees for the Fund unless the amendment is approved by a vote of at
least a majority of the outstanding voting securities of the Fund. In addition,
no material amendment may be made unless approved by the Trustees in the manner
described above for Trustee approval of the Plan.
<PAGE>
INDEPENDENT ACCOUNTANTS
The Fund's independent accountants, ________________, will audit the
Fund's annual financial statements and review the Fund's tax returns.
____________ is located at ________________.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Fund's portfolio securities transactions are placed by the Investment
Adviser. One of the main objectives of the Fund is to obtain the best available
prices in its portfolio transactions, taking into account the costs, promptness
of executions and other qualitative considerations. There is no pre-existing
commitment to place orders with any broker, dealer or member of an exchange. The
Investment Adviser evaluates a wide range of criteria in seeking the most
favorable price and market for the execution of transactions, including the
broker's commission rate, execution capability, positioning and distribution
capabilities, information in regard to the availability of securities, trading
patterns, statistical or factual information, opinions pertaining to trading
strategy, back office efficiency, ability to handle difficult trades, financial
stability, and prior performance in servicing the Investment Adviser and its
clients. In transactions on equity securities and U.S. Government securities
executed in the over-the-counter market, purchases and sales are transacted
directly with principal market-makers except in those circumstances where, in
the opinion of the Investment Adviser, better prices and executions are
available elsewhere.
The Investment Adviser, when effecting purchases and sales of portfolio
securities for the account of the Fund, will seek execution of trades either (i)
at the most favorable and competitive rate of commission charged by any broker,
dealer or member of an exchange, or (ii) at a higher rate of commission charges,
if reasonable, in relation to brokerage and research services provided to the
Fund or the Investment Adviser by such member, broker, or dealer. Such services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale,
statistical or factual information, or opinions pertaining to investments. The
Investment Adviser may use research and services provided by brokers and dealers
in servicing all its clients, including the Fund, and not all such services will
be used by the Investment Adviser in connection with the Fund. In accordance
with the provisions of Section 28(e) of the 1934 Act, the Adviser may from time
to time receive services and products which serve both research and non-research
functions. In such event, the Adviser makes a good faith determination of the
anticipated research and non-research use of the product or service and
allocates brokerage only with respect to the research component. Brokerage may
be allocated to Ingalls & Snyder, in its capacity as broker-dealer. Brokerage
may also be allocated to dealers in consideration of the Fund's share
distribution but only when execution and price are comparable to that offered by
other brokers.
The Investment Adviser provides investment advisory services to
individuals and other institutional clients, including corporate pension plans,
profit-sharing and other employee benefit trusts, and other investment pools.
There may be occasions when other investment advisory clients advised by the
<PAGE>
Investment Adviser may also invest in the same securities as the Fund. When
these clients buy or sell the same securities at substantially the same time,
the Investment Adviser may average the transactions as to price and allocate the
amount of available investments in a manner which it believes to be equitable to
each client, including the Fund. As well, to the extent permitted by law, the
Investment Adviser may aggregate the securities to be sold or purchased for the
Fund with those to be sold or purchased for other clients managed by it in order
to obtain lower brokerage commissions.
The Fund does not normally engage in frequent trading activities for
short-term gains; however, the Adviser will effect portfolio transactions
without regard to holding period if, in its judgment, such transactions are
advisable in light of a change in circumstances of a particular company or
within a particular industry or in general market, economic or financial
conditions. While the Fund anticipates that its annual portfolio turnover rate
should not exceed 50% under normal conditions, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by dividing
the lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities in the portfolio during the year.
SHARES OF BENEFICIAL INTEREST
The Trust is a series business trust that currently offers one series of
shares. The beneficial interest of the Trust is divided into an unlimited number
of shares, with a par value of $0.00l each. Each share has equal dividend,
voting, liquidation and redemption rights. There are no conversion or preemptive
rights. Shares, when issued, will be fully paid and nonassessable. Fractional
shares have proportional voting rights. Shares of the Fund do not have
cumulative voting rights, which means that the holders of more than 50% of the
shares voting for the election of trustees can elect all of the trustees if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any person to the Board of Trustees. Shares will be maintained
in open accounts on the books of the Transfer Agent, and certificates for shares
will generally not be issued.
If they deem it advisable and in the best interests of shareholders, the
Trustees may create additional funds, each of which represents interests in a
separate portfolio of investments and is subject to separate liabilities, and
may create multiple classes of shares of such funds, which may differ from each
other as to expenses and dividends. If additional funds are created, shares of
each fund are entitled to vote only to the extent required by the 1940 Act or as
permitted by the Trustees. Upon the Trust's liquidation, all shareholders of a
fund would share pro-rata in the net ASSETS of such fund available for
distribution to shareholders of the fund, but, as shareholders of such a fund,
would not be entitled to share in the distribution of assets belonging to any
other fund.
DIVIDENDS
A shareholder will automatically receive all dividend and capital gain
distributions in additional full and fractional shares of the Fund at their net
<PAGE>
asset value as of the date of payment unless the shareholder elects to receive
such dividends or distributions in cash. The reinvestment date normally precedes
the payment date by about seven days although the exact timing is subject to
change. Shareholders will receive a confirmation of each new transaction in
their account. The Fund will confirm all account activity, including the payment
of dividend and capital gain distributions and all Fund share transactions.
Shareholders may rely on these statements in lieu of stock certificates. Stock
certificates representing shares of the Fund will not be issued.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
DISTRIBUTIONS OF NET INVESTMENT INCOME. The Fund receives income generally
in the form of dividends and interest on its investments. This income, less
expenses incurred in the operation of the Fund, constitute its net investment
income from which dividends may be paid to shareholders. Any distributions by
the Fund from such income will be taxable to most U.S. shareholders as ordinary
income, whether such income is taken in cash or in additional shares.
DISTRIBUTIONS OF CAPITAL GAINS. The Fund may derive capital gains and
losses in connection with sales or other dispositions of its portfolio
securities. Distributions derived from the excess of net short-term capital gain
over net long-term capital loss will be taxable to most U.S. shareholders as
ordinary income. Distributions paid from long-term capital gains realized by the
Fund will be taxable to most U.S. shareholders as long-term capital gain,
regardless of how long the shares have been held. Any net short-term or
long-term capital gains realized by the Fund (net of any capital loss
carryovers) generally will be distributed once each year, and may be distributed
more frequently, if necessary, in order to reduce or eliminate federal excise or
income taxes on the Fund.
INFORMATION ON THE TAX CHARACTER OF DISTRIBUTIONS. The Fund will inform
all shareholders of the amount and character of all distributions at the time
they are paid, and will advise shareholders of the tax status for federal income
tax purposes of such distributions shortly after the close of each calendar
year. If shareholders have not held Fund shares for a year, said shareholders
may have designated and distributed to them as ordinary income or capital gain a
percentage of income that is not equal to the actual amount of such income
earned during the period of their investment in the Fund.
TAXES
ELECTION TO BE TAXED AS A REGULATED INVESTMENT COMPANY. The Fund intends
to be treated as a regulated investment company under Subchapter M of the
Internal Revenue Code (the "Code"), and intends to so qualify during the current
fiscal year. As a regulated investment company, the Fund generally pays no
federal income tax on the income and gains it distributes to shareholders. The
Board of Trustees reserves the right not to maintain the qualification of the
Fund as a regulated investment company if it determines such course of action to
be beneficial to the shareholders. In such case, the Fund would be subject to
federal, and possibly state, corporate taxes on its taxable income and gains,
<PAGE>
and distributions to shareholders would be taxed as ordinary dividend income to
the extent of the Fund's available earnings and profits.
EXCISE TAX DISTRIBUTION REQUIREMENTS. The Code requires the Fund to
distribute at least 98% of its taxable ordinary income earned during the
calendar year and 98% of its net capital gain income earned during the twelve
month period ending October 31 (in addition to undisputable amounts from the
prior year) to shareholders by December 31 of each year in order to avoid
federal excise taxes. The Fund intends to declare and pay sufficient dividends
in December (or in January that are treated by shareholders as received in
December) but does not guarantee and can give no assurances that such
distributions will be sufficient to eliminate all such taxes.
REDEMPTION OF FUND SHARES. Redemptions and exchanges of Fund shares of
U.S. shareholders are taxable transactions for federal and state income tax
purposes which cause such shareholders to recognize a gain or loss. If shares
are held as a capital asset, the gain or loss realized will be a capital gain or
loss. Any loss incurred on the redemption or exchange of shares held for six
months or less will be treated as a long-term capital loss to U.S. shareholders
to the extent of any long-term capital gains distributed to such shareholders by
the Fund on those shares.
All or a portion of any loss realized upon the redemption of Fund shares
by U.S. shareholders will be disallowed to the extent that such shareholders
purchase other shares in the Fund (through reinvestment of dividends or
otherwise) within 30 days before or after said share redemption. Any loss
disallowed under these rules will be added to the tax basis of the new shares
purchased.
DIVIDENDS-RECEIVED DEDUCTION FOR CORPORATIONS. Dividends paid by the Fund
will generally qualify in part for the 70% dividends-received deduction for U.S.
corporations, but the portion of the dividends so qualifying depends on the
aggregate taxable qualifying dividend income received by such corporation from
domestic (13.5.) sources. The Fund will send to shareholders a statement each
year advising the amount designated by the Fund as eligible for such treatment.
All dividends (including the deducted portion) must be included in any
alternative minimum taxable income calculation.
INVESTMENT IN COMPLEX SECURITIES. The Fund may invest in complex
securities. Such investments may be subject to numerous special and complicated
tax rules. These rules could affect whether gains and losses recognized by the
Fund are treated as ordinary income or capital gain and/or accelerate the
recognition of income to the Fund or defer the Fund's ability to recognize
losses. In turn, these rules may affect the amount, timing or character of the
income distributed to shareholders by the Fund.
INVESTMENT PERFORMANCE
For purposes of quoting and comparing the performance of the Fund to other
mutual funds and to relevant indices in advertisements or in reports to
<PAGE>
shareholders, performance will be stated in terms of total return or yield. Both
"total return" and "yield" figures are based on the historical performance of a
fund, show the performance of a hypothetical investment and are not intended to
indicate future performance.
YIELD INFORMATION
From time to time, the Fund may advertise a yield figure. A portfolio's
yield is a way of showing the rate of income the portfolio earns on its
investments as a percentage of the portfolio's share price. Under the rules of
the SEC, yield must be calculated according to the following formula:
YIELD = 2[(A-B + 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.
Yields for the Fund used in advertising are computed by dividing the
Fund's interest and dividend income for a given 30-day period, net of expenses,
by the average number of shares entitled to receive distributions during the
period, dividing this figure by a Fund's offering price at the end of the period
and annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock and
bond mutual funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a premium
over their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount by
adding a portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation. Income calculated for the purpose
of calculating a 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 a
Fund may differ from the rate of distributions the Fund paid over the same
period or the rate of income reported in the Fund's financial statements.
TOTAL RETURN PERFORMANCE
Under the rules of the SEC, funds advertising performance must include
total return quotes, "T" below, calculated according to the following formula:
<PAGE>
P(1+T)N=ERV
Where:
P = a hypothetical initial payment of $l,000
T = average annual total return
N = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods
(or fractional portion thereof).
The average annual total return will be calculated under the foregoing
formula and the time periods used in advertising will be based on rolling
calendar quarters, updated to the last day of the most recent quarter prior to
submission of the advertising for publication, and will cover prescribed
periods. When the period since inception is less than one year, the total return
quoted will be the aggregate return for the period. In calculating the ending
redeemable value, the maximum sales load is deducted from the initial $1,000
payment and all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the prospectuses on the
reinvestment dates during the period. Total return, or "T" in the formula above,
is computed by finding the average annual compounded rates of return over the
prescribed periods (or fractional portions thereof) that would equate the
initial amount invested to the ending redeemable value. Any sales loads that
might in the future be made applicable at the time to reinvestment would be
included as would any recurring account charges that might be imposed by the
Fund.
The Fund may also from time to time include in such advertising an
aggregate total return figure or an aggregate annual total return figure that is
not calculated according to the formula set forth above in order to compare more
accurately the Fund's performance with other measures of investment return. The
Fund may quote an aggregate total return figure in comparing the Fund's total
return with data published by Lipper Analytical Services, Inc. or with the
performance of various indices including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, Russell Indices, and
the Value Line Composite Index. For such purposes, each Fund calculates its
aggregate total return for the specified periods of time by assuming the
investment of $1,000 in Fund shares and assuming the reinvestment of each
dividend or other distribution at net asset value on the reinvestment date.
Percentage increases are determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the beginning
value.
The Fund does not, for these purposes, deduct from the initial value
invested any amount representing sales charges. The Fund would, however,
disclose the maximum sales charge and would also disclose that the performance
data does not reflect sales charges and that the inclusion of sales charges
would reduce the performance quoted, if a sales charge is in effect. To
calculate its average annual total return, the aggregate return is then
annualized according to the SEC's formula for total return quotes, outlined
above. When the period since inception is less than one year, the total return
quoted will be the aggregate return for the period.
<PAGE>
The Fund may also advertise the performance rankings assigned by various
publications and statistical services, including but not limited to SEI, Lipper
Mutual Fund Performance Analysis, Intersect Research Survey of Non-U.S. Equity
Fund Returns, Frank Russell International Universe, and any other data which may
be presented from time to time by such analysts as Dow Jones, Morningstar, Inc.,
Chase Investment Performance, Wilson Associates, Stanger, CDA Investment
Technologies, Inc., the Consumer Price Index ("CPI"), The Bank Rate Monitor
National Index, IBC/Donaghue's Average/U.S. Government and Agency, or as they
appear in various publications, including but not limited to, The Wall Street
Journal, Forbes, Barron's, Fortune, Money Magazine, The New York Times,
Financial World, Financial Services Week, USA Today and other regional
publications.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
LEGACY GROWTH FUND
Statement of Assets and Liabilities
<S> <C> <C>
ASSETS
Cash $( - )
Receivable from sponsor
Prepaid initial registration fees
Prepaid insurance --------------
Total Assets $( - )
LIABILITIES
Payable to sponsor $
-------------
Total Liabilities $( - )
NET ASSETS $( - )
Capital Shares, $0.001 par value, ( - )
unlimited shares authorized --------------
Net asset value offering and redemption price per share $( - )
(net assets/shares outstanding)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEGACY GROWTH FUND
Statement of Operations
For the Period ____________ (inception) through _____________
<S> <C>
EXPENSES
Organization $
Less: Accrued expenses to be paid ($ )
by sponsor
Net Income (loss) -------------
$0
</TABLE>
<PAGE>
LEGACY GROWTH FUND
Notes to the Financial Statements
For the Period ________ (inception) through ____________
1. Organization
The Legacy Growth Fund (the "Fund") is a series of The Legacy Funds (the
"Trust"), a business trust organized on ____________ in the state of Delaware
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end diversified management investment company. The
Legacy Growth Fund is currently the only series of the Trust. The Fund has had
no operations other than those relating to organizational matters, including the
sale of 10,000 shares for cash in the amount of $100,000, which were sold to
Ingalls & Snyder LLC (the "Adviser"), on ____________.
2. Significant Accounting Policies
(a) Organization and Prepaid Initial Registration Expenses
Expenses incurred by the Trust in connection with the
organization and the initial public offering of shares are
expended as incurred. These expenses were advanced by the
Adviser, which voluntarily agreed to reimburse the Fund for such
expenses, subject to potential recovery (see Note 3). Prepaid
initial registration expenses are deferred and amortized over the
period of benefit.
(b) Federal Income Taxes
The Fund intends to comply with those requirements of the Internal Revenue
Code necessary to qualify as a regulated investment company and to make
the requisite distributions of income and capital gains to its
shareholders sufficient to relieve it from all or substantially all
Federal income taxes.
(c) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the making of estimates and use of
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
3. Investment Adviser
The Trust has an Investment Advisory Agreement (the "Agreement") with the
Adviser, with whom certain officers and Trustees of the Trust are
affiliated, to furnish advisory services to the Fund. Under the terms of
the Agreement, the Trust, on behalf of the Fund, compensates the Adviser
for its management services at the annual rate of 1% of the Fund's average
daily assets.
<PAGE>
The Adviser has agreed to voluntarily waive its management fee and/or
reimburse the Fund's other expenses, including organization expenses, to
the extent necessary to ensure that the Fund's operating expenses do not
exceed 1.70% of its average daily net assets. Any such waiver or
reimbursement is subject to later adjustment to allow the Adviser to
recoup amounts waived or reimbursed to the extent actual fees and expenses
for a period are less than the expense limitation caps, provided, however,
that the Adviser shall only be entitled to recoup such amounts for a
period of three years from the date such amount was waived or reimbursed.
4. Distribution Plan
The Trust, on behalf of the Fund, has adopted a distribution plan pursuant
to Rule 12b-1 under the 1940 Act (the "12b-1 Plan"), which provides that
the Fund may reimburse the Fund's distributor or others at an annual rate
of up to 0.25% of the average daily net assets attributable to its shares.
Payments under the 12b-1 Plan shall be used to compensate or reimburse the
Fund's distributor for services provided and expenses incurred in
connection with the sale of shares and are tied to the amounts of actual
expenses incurred.
INDEPENDENT ACCOUNTANTS' REPORT
To the Shareholder and Board of Trustees of the Legacy Growth Fund
We have audited the accompanying statement of assets and liabilities of
the Legacy Growth Fund (the "Fund"), as of ______________ and the related
statement of operations for the period ____________ (inception) through
______________. These financial statements are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based upon our audit.
We have conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Fund as of _____________
and the results of its operations for the period ______________ (inception)
through ______________, in conformity with generally accepted accounting
principles.
<PAGE>
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits
(a) Certificate of Trust of the Registrant
(1) Agreement and Declaration of Trust of Registrant dated
July 14, 1999 to be filed by Pre-Effective Amendment.
(2) Certificate of Trust of Registrant dated July 14, 1999
is filed herewith as Exhibit No. 23(a)(2).
(b) By-Laws of the Registrant is filed herewith as Exhibit No. 23(b).
(c) Instruments Defining Rights of Security Holders
(1) Agreement and Declaration of Trust to be filed by
Pre-Effective Amendment.
(2) Certificate of Trust. (See Exhibit 23(a)(2).)
(3) By-Laws of Registrant. (See Exhibit 23(b).)
(d) Investment Advisory Agreement dated as of __________, 1999 between
the Registrant and Ingalls & Snyder, LLC is filed herewith as
Exhibit No. 23(d).
(e) Distribution Agreement dated as of __________, 1999 between the
Registrant and Ingalls & Snyder, LLC is filed herewith as Exhibit
No. 23(e).
(f) Not Applicable
(g) Custodian Services Agreement dated as of ________, 1999 between the
Registrant and Firstar Trust Company is filed herewith as Exhibit
No. 23(g)(1).
(h) Other Material Contracts
(1) Fund Administration Servicing Agreement dated as of
________, 1999 between the Registrant and Firstar Mutual
Fund Service, LLC is filed herewith as Exhibit No.
23(h)(1).
(2) Fund Accounting Servicing Agreement dated as of
________, 1999 between the Registrant and Firstar Mutual
Fund Service, LLC is filed herewith as Exhibit No.
23(h)(2:).
<PAGE>
(3) Transfer Agency Services Agreement dated as of ________,
1999 between the Registrant and Firstar Mutual Fund
Service, LLC is filed herewith as Exhibit No. 23(h)(3).
(i) Legal Opinion and Consent of Hughes Hubbard & Reed LLP to be filed
by Pre-Effective Amendment.
(j) Consent of independent auditors to be filed by Pre-Effective
Amendment.
(k) Omitted Financial Statements to be filed by Pre-Effective Amendment.
(l) Initial Capital Agreements to be filed by Pre-Effective Amendment
(m) Rule 12b-1 Plan is filed herewith as Exhibit No. 23(m).
(n) Not Applicable
(o) Not Applicable
Item 24. Persons Controlled by or under Common Control with Fund
[Not Applicable]
Item 25. Indemnification
Reference is made to Section 7.02 of the Registrant's Agreement and
Declaration of Trust.
Pursuant to Rule 484 under the Securities Act of 1933, as amended, the
Registrant furnishes the following undertaking: "Insofar as indemnification for
liability arising under the Securities Act of 1933 (the "Act") may be permitted
to trustees, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a trustee,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such trustee, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue."
Item 26. Business and Other Connections of Investment Adviser
[To be completed by amendment.]
<PAGE>
Item 27. Principal Underwriters
(a) Not Applicable
(b) [To be completed by amendment.]
NAME OF DIRECTOR OR PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES
- ------------------- -------------------------- ---------------------
OFFICER OF THE DISTRIBUTOR WITH DISTRIBUTOR
- -------------------------- ----------------
Item 28. Location of Accounts and Records
The books and other documents required to be maintained pursuant to Rule
31a-1(b) (4) and (b) (10) are in the physical possession of the Fund's
Investment Adviser, Ingalls & Snyder LLC, 61 Broadway, New York, New York,
10006; accounts, books and other documents required by Rule 31a-1(b) (5) through
(7) and (b) (11) and Rule 31a-1(f) are in the physical possession of Ingalls &
Snyder LLC, 61 Broadway, New York, New York, 10006; all other books, accounts
and other documents required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated thereunder are in the
physical possession of Firstar Mutual Fund Services, LLC, 615 East Michigan
Street, P.O. Box 701, Milwaukee, Wisconsin, 53201-0701.
Item 29. Management Services
[Not Applicable]
Item 30. Undertakings
[Not Applicable]
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, and State of New York, on July 24, 1999.
THE LEGACY FUNDS, INC.
By: /S/ THEODORE F. ELLS
----------------------------------
Theodore F. Ells, Esq.
Chairman of the Board of
Trustees
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
/S/ THEODORE F. ELLS Chairman of the Board July 26, 1999
- -------------------------------- of Trustees and Trustee
(Theodore F. Ells, Esq.) (Principal Executive
Officer)
/S/ BARNABAS B. B. BREED Treasurer (Principal July 26, 1999
- -------------------------------- Financial Officer) and
(Barnabas B. B. Breed, Esq.) Trustee
/S/ ROBERT E. BELKNAP Trustee July 26, 1999
- --------------------------------
(Robert E. Belknap)
/S/ D. ROGER B. LIDDELL Trustee July 26, 1999
- ------------------------------
(D. Roger B. Liddell)
EXHIBIT 23(A)(2)
CERTIFICATE OF TRUST
<PAGE>
CERTIFICATE OF TRUST
OF
THE LEGACY FUNDS, INC.
a Delaware Business Trust
THIS Certificate of Trust of The Legacy Funds, Inc. (the "Trust"),
dated as of this 14th day of July, 1999, is being duly executed and filed, in
order to form a business trust pursuant to the Delaware Business Trust Act
(the "Act"), Del. Code Ann. tit. 12, ss. 3801 eT Seq.
1. NAME. The name of the business trust formed hereby is "The Legacy
Funds, Inc."
2. REGISTERED OFFICE AND REGISTERED AGENT. The Trust will become, prior
to the issuance of shares of beneficial interest, a registered investment
company under the Investment Company Act of 1940, as amended. Therefore, in
accordance with section 3807(b) of the Act, the Trust has and shall maintain in
the State of Delaware a registered office and a registered agent for service of
process.
(a) REGISTERED OFFICE. The registered office of the Trust in
Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19801.
(b) REGISTERED AGENT. The registered agent for service of process
on the Trust in Delaware is The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801.
3. LIMITATION OF LIABILITY. Pursuant to section 3804(a) of the Act, the
debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular series of the Trust, established
pursuant to the terms of the Agreement and Declaration of Trust of the Trust,
shall be enforceable against the assets of such series only, and not against the
assets of the Trust generally.
4. EFFECTIVE DATE. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the Trustee named below does hereby execute this
Certificate of Trust as of the date first-above written.
/S/ ROBERT E. BELKNAP
-----------------------
Robert E. Belknap
EXHIBIT 23(B)
BY-LAWS
<PAGE>
BY-LAWS
OF
THE LEGACY FUNDS, INC.
ARTICLE I
Fiscal Year and Offices
Section 1.01. FISCAL YEAR. Unless otherwise provided by resolution of the
Board of Trustees, the fiscal year of the Trust shall begin on the first day of
November and end on the last day of October.
Section 1.02. DELAWARE OFFICE. The Board of Trustees shall establish a
registered office in the State of Delaware and shall appoint as the Trust's
registered agent for service of process in the State of Delaware an individual
resident of the State of Delaware or a Delaware corporation or a foreign
corporation authorized to transact business in the State of Delaware; in each
case the business office of such registered agent for service of process shall
be identical with the registered Delaware office of the Trust.
Section 1.03. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where the Trust
intends to do business.
ARTICLE II
Meetings of Shareholders
Section 2.01. PLACE OF MEETING. Meetings of the shareholders for the
election of trustees shall be held in such place as shall be fixed by resolution
of the Board of Trustees and stated in the notice of the meeting.
Section 2.02. ANNUAL MEETINGS. An Annual Meeting of shareholders will not
be held unless the Investment Company Act of 1940 requires the election of
trustees to be acted upon.
Section 2.03. SPECIAL MEETINGS. Special Meetings of the shareholders may
be called at any time by the Chairman of the Board of Trustees, or by a majority
of the Board of Trustees, and shall be called by the Secretary upon written
request of the holders of shares entitled to cast not less than ten percent of
all the votes entitled to be cast at such meeting provided that (a) such request
shall state the purposes of such meeting and the matters proposed to be acted on
and (b) the shareholders requesting such meeting shall have paid to the Trust
the reasonable estimated cost of preparing and mailing the notice thereof, which
the Secretary shall determine and specify to such shareholders. No special
meeting need be called upon the request of shareholders entitled to cast less
than a majority of all votes entitled to be cast at such meeting to consider any
matter which is substantially the same as a matter voted on at any meeting of
the shareholders held during the preceding twelve months. The foregoing
provisions of this section 3 notwithstanding a special meeting of shareholders
shall be called upon the request of the holders of at least ten percent of the
<PAGE>
shares entitled to vote for the purpose of consideration removal of a director
from office as provided in section 16(c) of the Investment Company Act of 1940.
Section 2.04. NOTICE. Not less than ten, nor more than ninety days before
the date of every Annual or Special Shareholders Meeting, the Secretary shall
cause to be mailed to each shareholder entitled to vote at such meeting at his
(her) address (as it appears on the records of the Trust at the time of mailing)
written notice stating the time and place of the meeting and, in the case of a
Special Meeting of Shareholders, shall be limited to the purposes stated in the
notice. Notice of adjournment of a shareholders meeting to another time or place
need not be given, if such time and place are announced at the meeting.
Section 2.05. RECORD DATE FOR MEETINGS. Subject to the provisions of the
Declaration of Trust, the Board of Trustees may fix in advance a date not more
than ninety, nor less than ten days, prior to the date of any annual or special
meeting of the shareholders as a record date for the determination of the
shareholders entitled to receive notice of, and to vote at any meeting and any
adjournment thereof; and in such case such shareholders and only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to receive notice of and to vote at such meeting and any adjournment
thereof as the case may be, notwithstanding any transfer of any stock on the
books of the Trust after any such record date fixed as aforesaid.
Section 2.06. QUORUM. At any meeting of shareholders, the presence in
person or by proxy of the holders of record of a majority of the shares issued
and outstanding and entitled to vote there shall constitute a quorum for the
transaction of any business at the meeting, except as otherwise provided by the
Investment Company Act of 1940 or in the Trust's Declaration of Trust. If,
however, such quorum shall not be present or represented at any meeting of the
shareholders, the holders of a majority of the shares present or in person or by
proxy shall have the power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented to a date not more than 120 days after the original record date.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 2.07. VOTING. Each shareholder shall have one vote for each full
share and a fractional vote for each fractional share of stock having voting
power held by such shareholder on the record date set pursuant to Section 5 on
each matter submitted to a vote at a meeting of shareholders. Such vote may be
made in person or by proxy. At all meetings of the shareholders, a quorum being
present, all matters shall be decided by majority vote of the shares of
beneficial interest entitled to vote held by shareholders present in person or
by proxy, unless the question is one for which by express provision of the laws
of the State of Delaware, the Investment Company Act of 1940, as from time to
time amended, or the Declaration of Trust, a different vote is required, in
which case such express provision shall control the decision of such question.
At all meetings of shareholders, unless the voting is conducted by inspectors,
all questions relating to the qualification of voters and the validity of
proxies and the acceptance or rejection of votes shall be decided by the
Chairman of the meeting.
<PAGE>
Section 2.08. INSPECTORS. At any election of trustees, the Board of
Trustees prior thereto may, or, if they have not so acted, the Chairman of the
meeting may appoint one or more inspectors of election who shall first subscribe
an oath of affirmation to execute faithfully the duties of inspectors at such
election with strict impartiality and according to the best of their ability,
and shall after the election make a certificate of the result of the vote taken.
Section 2.09. STOCK LEDGER AND LIST OF SHAREHOLDERS. It shall be the duty
of the Secretary or Assistant Secretary of the Trust to cause an original or
duplicate share ledger to be maintained at the office of the Trust's transfer
agent. Such share ledger may be in written form or any other form capable of
being converted into written form within a reasonable time for visual
inspection.
Section 2.10. ACTION WITHOUT MEETING. Any action to be taken by
shareholders may be taken without a meeting if (a) all shareholders entitled to
vote on the matter consent to the action in writing, and (b) all shareholders
entitled to notice of the meeting but not entitled to vote at it sign a written
waiver of any right to dissent, and (c) the written consents are filed with the
records of the meetings of shareholders. Such consent shall be treated for all
purposes as a vote at a meeting.
ARTICLE III
Trustees
Section 3.01. GENERAL POWERS. The business of the Trust shall be managed
under the direction of its Board of Trustees, which may exercise all powers of
the Trust, except such as are by statute, or the Declaration of Trust, or by
these By-Laws conferred upon or reserved to the shareholders.
Section 3.02. NUMBER AND TERM OF OFFICE. The number of trustees which
shall constitute the whole Board shall be determined from time to time by the
Board of Trustees, but shall not be fewer than the minimum number permitted by
applicable laws, nor more than fifteen. Each trustee elected shall hold office
until his successor is elected and qualified. Trustees need not be shareholders.
Section 3.03. ELECTIONS. Provided a quorum is present, the directors shall
be elected by the vote of a plurality of the shares present in person or by
proxy, except that any vacancy on the Board of Trustees may be filled by a
majority vote of the Board of Trustees, although less than a quorum, subject to
the requirements of Section 16(a) of the Investment Company Act of 1940.
Section 3.04. PLACE OF MEETING. Meetings of the Board of Trustees, regular
or special, may be held at any place as the Board may from time to time
determine.
Section 3.05. QUORUM. At all meetings of the Board of Trustees, one-third
of the entire Board of Trustees shall constitute a quorum for the transaction of
business provided that in no case may a quorum be less than two persons. The
action of a majority of the trustees present at any meeting at which a quorum is
present shall be the action of the Board of Trustees unless the concurrence of a
<PAGE>
greater proportion is required for such action by the Investment Company Act of
1940, these By-Laws or the Declaration of Trust. If a quorum shall not be
present at any meeting of trustees, the trustees present thereat may by a
majority vote adjourn the meeting from time to time without notice other than
announcement at the meeting, until a quorum shall be present.
Section 3.06. REGULAR MEETINGS. Regular meetings of the Board of Trustees
may be held without additional notice at such time and place as shall from time
to time be determined by the Board of Trustees provided that notice of any
change in the time or place of such meetings shall be sent promptly to each
trustee not present at the meeting at which such change was made in the manner
provided for notice of special meetings.
Section 3.07. SPECIAL MEETINGS. Special meetings of the Board of Trustees
may be called by the Chairman of the Board of Trustees on one day's notice to
each trustee; Special meetings shall be called by the Chairman of the Board of
Trustees or Secretary in like manner and on like notice on the written request
of two trustees.
Section 3.08. TELEPHONE MEETING. Members of the Board of Trustees or a
committee of the Board of Trustees may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Section 3.09. INFORMAL ACTIONS. Any action required or permitted to be
taken at any meeting of the Board of Trustees or of any committee thereof may be
taken without a meeting, if a written consent to such action is signed by all
members of the Board or of such committee, as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
Section 3.10. COMMITTEES. The Board of Directors may by resolution passed
by a majority of the entire Board appoint from among its members an Executive
Committee and other committees composed of two or more directors, and may
delegate to such committees, in the intervals between meetings of the Board of
Trustees, any or all of the powers of the Board of Trustees in the management of
the business and affairs of the Trust.
Section 3.11. ACTION OF COMMITTEES. In the absence of an appropriate
resolution of the Board of Trustees, each committee may adopt such rules and
regulations governing its proceedings, quorum and manner of acting as it shall
deem proper and desirable, provided that the quorum shall not be less than two
trustees. The committees shall keep minutes of their proceedings and shall
report the same to the Board of Trustees at the meeting next succeeding, and any
action by the committee shall be subject to revision and alteration by the Board
of Trustees, provided that no rights of third persons shall be affected by any
such revision or alteration. In the absence of any member of such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint a member of the Board of Trustees to act in the place of such absent
member.
<PAGE>
Section 3.12. COMPENSATION. Any trustee, whether or not he is a salaried
officer or employee of the Trust, may be compensated for his services as trustee
or as a member of a committee of trustees, or as Chairman of the Board of
Trustees or chairman of a committee by fixed periodic payments or by fees for
attendance at meetings or by both, and in addition may be reimbursed for
transportation and other expenses, all in such manner and amounts as the Board
of Trustees may from time to time determine.
ARTICLE IV
Notices
Section 4.01. FORM. Notices to shareholders shall be in writing and
delivered personally or mailed to the shareholders at their addresses appearing
on the books of the Trust. Notices to trustees shall be oral or by telephone or
telegram or in writing delivered personally or mailed to the trustees at their
addresses appearing on the books of the Trust. Notice by mail shall be deemed to
be given at the time when the same shall be mailed. Subject to the provisions of
the Investment Company Act of 1940, notice to trustees need not state the
purpose of a regular or special meeting.
Section 4.02. WAIVER. Whenever any notice of the time, place or purpose of
any meeting of shareholders, trustees or a committee is required to be given
under the provisions of the Declaration of Trust or these By-Laws, a waiver
thereof in writing, signed by the person or persons entitled to such notice and
filed with the records of the meeting, whether before or after the holding
thereof, or actual attendance at the meeting of shareholders in person or by
proxy, or at the meeting of Trustees or a committee in person, shall be deemed
equivalent to the giving of such notice to such persons.
ARTICLE V
Officers
Section 5.01. EXECUTIVE OFFICERS. The officers of the Trust shall be
chosen by the Board of Trustees and shall include a Chairman of the Board of
Trustees [(who shall be the Chief Executive Officer)], a Secretary and a
Treasurer. The Board of Trustees may, from time to time, elect or appoint a
Controller, one or more Assistant Secretaries and Assistant Treasurers. The same
person may hold two or more offices, except that no officer shall execute,
acknowledge or verify any instrument in more than one capacity, if such
instrument is required by law, the Declaration of Trust or these By-Laws to be
executed, acknowledged or verified by two or more officers.
Section 5.02. ELECTION. The Board of Trustees shall choose a Chairman of
the Board of Trustees, a Secretary and a Treasurer.
Section 5.03. OTHER OFFICERS. The Board of Trustees from time to time may
appoint such other officers and agents as it shall deem advisable, who shall
hold their offices for such terms and shall exercise powers and perform such
duties as shall be determined from time to time by the Board. The Board of
<PAGE>
Trustees from time to time may delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties.
Section 5.04. COMPENSATION. The salaries or other compensation of all
officers and agents of the Trust shall be fixed by the Board of Trustees, except
that the Board of Trustees may delegate to any person or group of persons the
power to fix the salary or other compensation of any subordinate officers or
agents appointed pursuant to Section 3 of this Article V.
Section 5.05. TENURE. The officers of the Trust shall serve at the
pleasure of the Board of Trustees. Any officer or agent may be removed by the
affirmative vote of a majority of the Board of Trustees whenever, in its
judgment, the best interests of the Trust will be served thereby. In addition,
any officer or agent appointed pursuant to Section 3 may be removed, either with
or without cause, by any officer upon whom such power of removal shall have been
conferred by the Board of Trustees. Any vacancy occurring in any office of the
Trust by death, resignation, removal or otherwise shall be filled by the Board
of Trustees, unless pursuant to Section 3 the power of appointment has been
conferred by the Board of Trustees on any other officer.
Section 5.06. CHAIRMAN OF THE BOARD OF TRUSTEES. The Chairman of the Board
of Trustees shall be the Chief Executive Officer of the Trust and shall see that
all orders and resolutions of the Board are carried into effect. The Chairman of
the Board of Trustees shall also be the Chief Administrative Officer of the
Trust and shall perform and execute such other duties and have such other powers
as the Board of Trustees may from time to time prescribe.
Section 5.07. SECRETARY. The Secretary shall attend all meetings of the
Board of Trustees and all meetings of the shareholders and record all the
proceedings thereof and shall perform like duties for any committee when
required. He shall give, or cause to be given, notice of meetings of the
shareholders and of the Board of Trustees, shall have charge of the records of
the Trust, including the stock books, and shall perform such other duties as may
be prescribed by the Board of Trustees or Chief Executive Officer, under whose
supervision he shall be. He shall keep in safe custody the seal of the Trust
and, when authorized by the Board of Trustees, shall affix and attest the same
to any instrument requiring it. The Board of Trustees may give general authority
to any other officer to affix the seal of the Trust and to attest the affixing
by his signature.
Section 5.08. ASSISTANT SECRETARIES. The Assistant Secretaries in order of
their seniority, shall, in the absence or disability of the Secretary, perform
the duties and exercise the powers of the Secretary and shall perform such other
duties as the Board of Trustees shall prescribe.
Section 5.09. TREASURER. The Treasurer, unless another officer has been so
designated, shall be the Chief Financial Officer of the Trust. He shall have
general charge of the finances and books of account of the Trust. Except as
otherwise provided by the Board of Trustees, he shall have general supervision
of the funds and property of the Trust and of the performance by the custodian
of its duties with respect thereto. He shall render to the Board of Trustees,
whenever directed by the Board, an account of the financial condition of the
Trust and of all his transactions as Treasurer. He shall cause to be prepared
<PAGE>
annually a full and correct statement of the affairs of the Trust, including a
balance sheet and a statement of operations for the preceding fiscal year. He
shall perform all the acts incidental to the office of Treasurer, subject to the
control of the Board of Trustees.
Section 5.10. ASSISTANT TREASURER. The Assistant Treasurer shall in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as the Board of
Trustees may from time to time prescribe.
ARTICLE VI
Indemnification and Insurance
Section 6.01. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee or officer of this
Trust and any person who, while a trustee or officer of this Trust, is or was
serving at the request of this Trust as a Trustee, director, officer, partner,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust or other enterprise; "Trust" includes any domestic or
foreign predecessor entity of this Trust in a merger, consolidation, or other
transaction in which the predecessor's existence ceased upon consummation of the
transaction; "proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 6.02. ACTIONS OTHER THAN BY THE TRUST. This Trust shall indemnify
any person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed: (a) in the case of conduct in his official
capacity as an agent of the Trust, that his conduct was in the Trust's best
interests and (b) in all other cases, that his conduct was at least not opposed
to the Trust's best interests and (c) in the case of a criminal proceeding, that
he had no reasonable cause to believe the conduct of that person was unlawful.
The termination of any proceeding by judgment, order or settlement shall not of
itself create a presumption that the person did not meet the requisite standard
of conduct set forth in this Section. The termination of any proceeding by
conviction, or a plea of nolo contendere or its equivalent, or an entry of an
order of probation prior to judgment, creates a rebuttable presumption that the
person did not meet the requisite standard of conduct set forth in this Section.
Section 6.03. ACTIONS BY THE TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any proceeding by
or in the right of this Trust to procure a judgment in its favor by reason of
the fact that that person is or was an agent of this Trust, against expenses
actually and reasonably incurred by that person in connection with the defense
or settlement of that action if that person acted in good faith, in a manner
that person believed to be in the best interests of this Trust and with such
care, including reasonable inquiry, as an ordinarily prudent person in a like
position would use under similar circumstances.
<PAGE>
Section 6.04. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with this Trust. No indemnification shall be made under
Sections 2 or 3 of this Article:
(a) In respect of any proceeding as to which that person shall have
been adjudged to be liable on the basis that personal benefit was improperly
received by him, whether or not the benefit resulted from an action taken in the
person's official capacity; or
(b) In respect of any proceeding as to which that person shall have
been adjudged to be liable in the performance of that person's duty to this
Trust, unless and only to the extent that the court in which that action was
brought shall determine upon application that in view of all the relevant
circumstances of the case, that person is fairly and reasonably entitled to
indemnity for the expenses which the court shall determine; however, in such
case, indemnification with respect to any proceeding by or in the right of the
Trust or in which liability shall have been adjudged by reason of the disabling
conduct set forth in the preceding paragraph shall be limited to expenses; or
(c) Of amounts paid in settling or otherwise disposing of a
proceeding, with or without court approval, or of expenses incurred in defending
a proceeding which is settled or otherwise disposed of without court approval,
unless the required approval set forth in Section 6 of this Article is obtained.
Section 6.05. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this Trust has been successful, on the merits or otherwise, in the defense of
any proceeding referred to in Sections 2 or 3 of this Article before the court
or other body before whom the proceeding was brought, the agent shall be
indemnified against expenses actually and reasonably incurred by the agent in
connection therewith, provided that the Board of Trustees, including a majority
who are disinterested, non-party Trustees, also determines that based upon a
review of the facts, the agent was not liable by reason of the disabling conduct
referred to in Section 4 of this Article.
Section 6.06. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not
parties to the proceeding and are not interested persons of the Trust (as
defined in the Investment Company Act of 1940);
(b) A written opinion by an independent legal counsel; or
<PAGE>
(c) The shareholders; however, shares held by agents who are parties
to the proceeding may not be voted on the subject matter under this Sub-Section.
Section 6.07. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding if (a) receipt of a written affirmation by the agent of his good
faith belief that he has met the standard of conduct necessary for
indemnification under this Article and a written undertaking by or on behalf of
the agent, such undertaking being an unlimited general obligation to repay the
amount of the advance if it is ultimately determined that he has not met those
requirements, and (b) a determination that the facts then known to those making
the determination would not preclude indemnification under this Article.
Determinations and authorizations of payments under this Section must be made in
the manner specified in Section 6 of this Article for determining that the
indemnification is permissible.
Section 6.08. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 6.09. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any circumstances
where it appears:
(a) That it would be inconsistent with a provision of the Agreement
and Declaration of Trust of the Trust, a resolution of the shareholders, or an
agreement in effect at the time of accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or other amounts
were paid which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 6.10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent or employee of this Trust
against any liability asserted against or incurred by the agent or employee in
such capacity or arising out of the agent's or employee's status as such to the
fullest extent permitted by law.
Section 6.11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
<PAGE>
ARTICLE VII
Shares of Beneficial Interest
Section 7.01. CERTIFICATES. A certificate or certificates representing and
certifying the class and the full, but not fractional, number of shares of
beneficial interest owned by each shareholder in the Trust shall not be issued
except as the Board of Trustees may otherwise determine from time to time. Any
such certificate issued shall be signed by facsimile signature or otherwise by
the Chairman of the Board of Trustees [or other such officer as the Board of
Trustees shall name] and counter-signed by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer.
Section 7.02. SIGNATURE. In case any officer who has signed any
certificate ceases to be an officer of the Trust before the certificate is
issued, the certificate may nevertheless be issued by the Trust with the same
effect as if the officer had not ceased to be such officer as of the date of its
issue.
Section 7.03. RECORDING AND TRANSFER WITHOUT CERTIFICATES. The Trust shall
have the full power to participate in any program approved by the Board of
Trustees providing for the recording and transfer of ownership of the Trust's
shares by electronic or other means without the issuance of certificates.
Section 7.04. LOST CERTIFICATES. The Board of Trustees may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Trust alleged to have been stolen, lost
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to have been stolen, lost or destroyed, or
upon other satisfactory evidence of such theft, loss or destruction and may in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such stolen, lost or destroyed certificate or certificates, or his
legal representative, to give the Trust a bond with sufficient surety, to the
Trust to indemnify it against any loss or claim that may be made by reason of
the issuance of a new certificate.
Section 7.05. TRANSFER OF SHARES. Transfers of shares of beneficial
interest of the Trust shall be made on the books of the Trust by the holder of
record thereof (in person or by his attorney thereunto duly authorized by a
power of attorney duly executed in writing and filed with the Secretary of the
Trust) (i) if a certificate or certificates have been issued, upon the surrender
of the certificate or certificates, properly endorsed or accompanied by proper
instruments of transfer, representing such shares, or (ii) as otherwise
prescribed by the Board of Trustees. Every certificate exchanged, surrendered
for redemption or otherwise returned to the Trust shall be marked "Canceled"
with the date of cancellation.
Section 7.06. REGISTERED SHAREHOLDERS. The Trust shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
<PAGE>
it shall have express or other notice thereof, except as otherwise provided by
applicable law or the Declaration of Trust.
Section 7.07. TRANSFER AGENTS AND REGISTRARS. The Board of Trustees may,
from time to time, appoint or remove transfer agents and or registrars of the
Trust, and they may appoint the same person as both transfer agent and
registrar. Upon any such appointment being made, all certificates representing
shares of beneficial interest thereafter issued shall be countersigned by such
transfer agent and shall not be valid unless so countersigned.
Section 7.08. STOCK LEDGER. The Trust shall maintain an original stock
ledger containing the names and addresses of all shareholders and the number and
class of shares held by each shareholder. Such stock ledger may be in written
form or any other form capable of being converted into written form within
reasonable time for visual inspection.
ARTICLE VIII
General Provisions
Section 8.01. CUSTODIANSHIP. Except as otherwise provided by resolution of
the Board of Trustees, the Trust shall place and at all times maintain in the
custody of a custodian (including any sub-custodian for the custodian) all
funds, securities and similar investments owned by the Trust. Subject to the
approval of the Board of Trustees, the custodian may enter into arrangements
with securities depositories, provided such arrangements comply with the
provisions of the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder.
Section 8.02. EXECUTION OF INSTRUMENTS. All deeds, documents, transfers,
contracts, agreements and other instruments requiring execution by the Trust
shall be signed by the Chairman of the Board of Trustees [or other such officer
as the Board of Trustees shall name].
Section 8.03. NET ASSET VALUE. The net asset value per share shall be
determined separately as to each class of the Trust's shares, by dividing the
sum of the total market value of the class's investments and other assets, less
any liabilities, by the total outstanding shares of such class, subject to the
Investment Company Act of 1940 and any other applicable Federal securities law
or rule or regulation currently in effect.
ARTICLE IX
Amendments
The Board of Trustees shall have the power to make, alter and repeal the
By-Laws of the Trust.
EXHIBIT 23(D)
INVESTMENT ADVISORY AGREEMENT
<PAGE>
INVESTMENT ADVISORY AGREEMENT
-----------------------------
This Agreement made and entered into as of ___________, 1999, by and
between The LEGACY FUNDS, INC., a Delaware business trust (the "Fund"), and
INGALLS & SNYDER LLC, a New York limited liability company (the "Adviser"):
WHEREAS, the Fund is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth the parties hereto agree as follows:
1. ADVISORY SERVICES. The Fund hereby appoints the Adviser to act as
investment adviser to the Fund with respect to the assets belonging to the
Fund's [Class A] stock, $[___] par value, and to provide administration of the
Fund not otherwise provided by third party service providers, subject to the
discretion of the Board of Trustees, for the period and on the terms set forth
in this Agreement. Shares of the Fund's [Class A] stock, $[___] par value, are
referred to herein as "Fund Shares." The Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided. The Fund, at its option, may also appoint the Adviser to act as
investment adviser to the Fund hereunder with respect to the assets belonging to
any other class of capital stock of the Fund from time to time created, but the
Adviser shall not be required to accept any such appointment. The Adviser shall
furnish investment research and advice to the Fund and shall manage the
investment and reinvestment of its assets and its business affairs and matters
incidental thereto, all subject to the supervision of the Board of Trustees of
the Fund and subject to the provisions of the Agreement and Declaration of Trust
(as defined in paragraph 3(a) of this Agreement), Certificate of Trust (as
defined in paragraph 3(b) of this Agreement) and By-Laws (as defined in
paragraph 3(c) of this Agreement) of the Fund and any resolution, rules or
regulations adopted by the Board of Trustees of the Fund. The Adviser shall for
all purposes herein provided be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Board of
Trustees of the Fund from time to time, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent for the Fund. The
Fund shall also be free to retain, at its own expense, other persons to provide
it with any services whatsoever including, but not limited to, statistical,
factual or technical information or advice. The services of the Adviser herein
provided are not to be deemed exclusive and the Adviser shall be free to render
similar services or other services to others.
[It is understood that Adviser performs investment advisory services for
various clients and that several individuals perform advisory services on behalf
<PAGE>
of Adviser for such clients (the "Advisory Representatives"). It is understood
that Adviser does not require that the same advice be given by all Advisory
Representatives with respect to a particular investment, and the Advisory
Representative acting with respect to the Fund may give advice with respect to a
particular investment different from other Advisory Representatives acting with
respect to other clients of Adviser, depending upon each Advisory
Representative's opinion with respect to the investment. The Fund agrees that
Adviser may give advice and take action with respect to any of its clients which
may differ from advice given or the timing or nature of action taken with
respect to the Fund, so long as it is Adviser's policy, to the extent practical,
to allocate investment opportunities to the Fund over a period of time on a fair
and equitable basis relative to other clients. In addition, Adviser believes it
to be proper that investment advisers invest their own personal funds in the
same securities that are recommended to clients. Adviser, and Directors and
employees of Adviser, do make investments for their own account, which may be in
securities purchased, sold or held for the Fund. The Fund does not object to the
fact that Adviser and Directors and employees of Adviser may purchase, sell or
hold securities that are purchased, sold or held for the Fund in a manner
(including timing, prices and quantities) that differs from action taken or
advice given for the Fund. It is understood that Adviser shall not have any
obligation to purchase or sell, or to recommend for purchase or sale, for the
Fund any security which Adviser, its principals, affiliates or employees may
purchase or sell for its or their own accounts or for the account of any other
client.]
2. DUTIES OF THE ADVISER. Subject to the general supervision of the
Board of Trustees of the Fund, the Adviser shall administer the Fund's corporate
affairs and, in connection therewith, shall furnish the Fund with office
facilities and with clerical, bookkeeping and recordkeeping services at such
office facilities and shall, employing its discretion, manage the investment
operations of the Fund and the composition of the portfolio of securities and
investments (including cash) belonging to the Fund, including the purchase,
retention and disposition thereof and the execution of agreements relating
thereto, in accordance with the investment objective, policies and restrictions
of the Fund as stated in the Prospectus (as defined in paragraph 3(f) of this
Agreement), Registration Statement (as defined in paragraph 3(d) of this
Agreement), Agreement and Declaration of Trust, Certificate of Trust and By-Laws
of the Fund and subject to the following understandings:
(a) The Adviser shall furnish a continuous investment program for the
Fund and determine from time to time what investments or securities will
be purchased, retained or sold by the Fund, and what portion of the assets
will be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations under
this Agreement, shall act in conformity with the Agreement and Declaration
<PAGE>
of Trust, the Certificate of Trust, the By-Laws and Prospectus of the Fund
and with the instructions and directions of the Board of Trustees of the
Fund and will conform to and comply with the requirements of the
Investment Company Act of 1940, as amended from time to time, and the
rules and regulations of the Securities and Exchange Commission thereunder
(collectively, the "1940 Act") and all other applicable Federal and state
laws and regulations, including without limitation the provisions of the
Internal Revenue Code, as amended from time to time, applicable to the
Fund as a regulated investment company.
(d) The Adviser shall determine the securities and other investments to
be purchased or sold by the Fund and, as agent for the Fund, will effect
transactions pursuant to its determinations either directly with the
issuer or with any broker and/or dealer in such securities. In placing
orders with brokers and/or dealers the Adviser will comply with such
policies with respect to brokerage as are set forth in the Fund's
Registration Statement and Prospectus or as the Fund's Board of Trustees
may adopt from time to time. In providing the Fund with investment
supervision, it is recognized that the Adviser will give primary
consideration to securing the most favorable price and efficient
execution. Consistent with this policy, the Adviser may consider the
financial responsibility, research and investment information and other
services provided by brokers, dealers or futures commission merchants who
may effect or be a party to any such transaction or other transactions to
which other clients of the Adviser may be a party. It is understood that
Ingalls & Snyder LLC may be used as principal broker for securities
transactions but that no formula has been adopted for allocation of the
Fund's investment transaction business. The Adviser is authorized to
direct portfolio transactions to a broker-dealer which is an affiliated
person of the Adviser or the Fund in accordance with such standards and
procedures as may be approved by the Board in accordance with the 1940 Act
Rule 17e-1, or other rules promulgated by the Securities and Exchange
Commission. It is also understood that it is desirable for the Fund that
the Adviser have access to supplemental investment and market research and
security and economic analysis provided by brokers or futures commission
merchants and that such brokers may execute brokerage transactions at a
higher cost to the Fund than may result when allocating brokerage to other
brokers or futures commission merchants on the basis of seeking the most
favorable price and efficient execution. Therefore, the Adviser is
authorized to pay higher brokerage commissions for the purchase and sale
of securities and futures contracts for the Fund to brokers or futures
commission merchants who provide such research and analysis, subject to
review by the Fund's Board of Trustees from time to time with respect to
the extent and continuation of this practice. It is understood that the
services provided by such broker or futures commission merchant may be
useful to the Adviser in connection with its services to other clients. On
occasions when the Adviser deems the purchase or sale of a security to be
in the best interest of the Fund as well as other customers, the Adviser
may, to the extent permitted by applicable laws and regulations, but shall
not be obligated to, aggregate the securities to be sold or purchased in
order to obtain the best price and execution. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in
the transaction, will be made by the Adviser in a manner it considers to
<PAGE>
be equitable and consistent with its fiduciary obligations to the Fund
and, if applicable, to such other customers.
(e) The Adviser shall maintain books and records with respect to the
portfolio transactions of the Fund and shall render to the Fund's Board of
Trustees such periodic and special reports as the Board of Trustees may
reasonably request.
(f) The Adviser shall be responsible for the financial and accounting
records to be maintained by the Fund (including those being maintained by
the Fund's custodian).
(g) The Adviser shall provide the Fund's custodian and administrator on
each business day with information relating to all transactions concerning
the assets of the Fund, except redemptions of and any subscriptions for
Fund Shares, and will provide on a timely basis to the Fund's
administrator and other persons providing services to the Fund such
information as the administrator or such other persons may reasonably
request in connection with the performance of their respective duties and
obligations with respect to the Fund.
(h) The Adviser will report to the Board of Trustees of the Fund at each
meeting thereof all changes in the investments and other assets of the
Fund since the prior report, and will keep the Board of Trustees informed
of material developments affecting the Fund and the Adviser, and on its
own initiative, will furnish the Board of Trustees 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 Fund's holdings, the industries in which they engage, or the
economic, social or political conditions prevailing in each country in
which the Fund maintains investments. The Adviser also will furnish the
Board of Trustees with such statistical and analytical information with
respect to securities and other investments of the Fund as the Adviser may
believe appropriate or as the Board of Trustees may reasonably request.
The Adviser shall prepare and furnish to the Board of Trustees all such
other written materials and documents as may be requested or as may
otherwise be necessary or appropriate in connection with meetings of the
Board of Trustees, and, if the Secretary of the Fund is an officer,
director, or employee of the Adviser or any of its affiliated persons, the
Adviser shall cause to be prepared and shall bear the costs of preparing
and keeping the minutes of the meetings of the Board of Trustees and
committees thereof and of meetings of the stockholders of the Fund.
(i) The Adviser shall furnish such office and other facilities as may be
required by the Fund.
<PAGE>
(j) Services of Personnel. The Adviser shall provide all necessary
executive and administrative personnel for managing the affairs of the
Fund, including personnel to perform clerical, bookkeeping, accounting and
other office functions. These services are exclusive of the bookkeeping
and accounting services of any dividend disbursing agent, transfer agent,
registrar or custodian. The Adviser shall compensate all personnel,
officers and Trustees of the Fund if such persons are also employees of
the Adviser or its affiliates.
3. DELIVERY OF DOCUMENTS. The Fund has delivered, or will deliver
promptly, copies of each of the following documents to the Adviser and will
promptly notify and deliver to it all future amendments and supplements if any:
(a) Agreement and Declaration of Trust, as in effect on the date hereof
and as amended or restated from time to time (the "Agreement and
Declaration of Trust").
(b) Certificate of Trust of the Fund, as filed with the Secretary of
State of the State of Delaware and in effect on the date hereof and as
amended or restated from time to time (the "Certificate of Trust").
(c) By-Laws of the Fund, as in effect on the date hereof and as amended
or restated from time to time (the "By-Laws").
(d) Certified resolutions of the Board of Trustees of the Fund and of
the Fund's stockholders, respectively, authorizing the appointment of the
Adviser and approving the form of this Agreement.
(e) Registration Statement under the 1940 Act and the Securities Act of
1933, as amended, on Form N-1A (the "Registration Statement") as filed
with the Securities and Exchange Commission (the "Commission") and in
effect on the date hereof relating to the Fund, and all subsequent
amendments thereto.
(f) Notification of Registration under the 1940 Act on Form N-8A as
filed with the Commission.
(g) Prospectus or Prospectuses and Statement or Statements of Additional
Information of the Fund, if any, as currently in effect and as amended or
supplemented from time to time, being herein called the "Prospectus".
<PAGE>
4. EMPLOYEES OF THE ADVISER. The Adviser shall authorize and permit any
of its directors, officers and employees who may be elected as Trustees or
officers of the Fund to serve in the capacities in which they are elected.
5. BOOKS AND RECORDS. The Adviser shall keep the Fund's books and
records required to be maintained by it pursuant to paragraph 2(e) of this
Agreement. The Adviser agrees that all records which it maintains for the Fund
are the property to the Fund and it will promptly surrender any of such records
to the Fund upon the Fund's request. The Adviser further agrees to preserve for
the period prescribed by Rule 31a-2 of the Commission under the 1940 Act any
such records as are required to be maintained by the Adviser with respect to the
Fund hereunder or by Rule 31a-1 of the Commission under the 1940 Act, as such
rule may be amended from time to time, and any other applicable rule that may be
adopted by the Commission.
6. EXPENSES. During the term of this Agreement the Adviser will pay all
expenses (including without limitation the compensation of all its directors,
officers and employees serving as Trustees or officers of the Fund pursuant to
paragraph 4 of this Agreement) incurred by it in connection with its activities
under this Agreement other than the cost of the securities and investments
purchased for the Fund (including taxes and brokerage commissions, if any). The
Adviser also shall pay the salaries, fees and expenses of Trustees, officers and
employees of the Fund who are affiliated persons of the Adviser or affiliated
persons of any affiliated person of the Adviser. The Adviser shall arrange for
providing and maintaining a bond issued by a reputable insurance company
authorized to do business in the place where the bond is issued against larceny
and embezzlement covering each officer and employee of the Fund and/or the
Adviser who may singly or jointly with others have access to funds or securities
of the Fund, with direct or indirect authority to draw upon such funds or to
direct generally the disposition of such funds. The bond shall be in such
reasonable amount as a majority of the Trustees who are not "interested persons"
of the Fund, as defined in the 1940 Act, shall determine, with due consideration
given to the aggregate assets of the Fund to which any such officer or employee
may have access. The insurance premiums on fidelity, errors and omissions and
other coverages including the expense of obtaining and maintaining a fidelity
bond as required by Section 17(g) of the 1940 Act shall be paid by the Fund. All
other expenses shall be borne by the Fund, subject to the limitations and
reimbursements provided for in paragraphs 7 and 8 hereof.
7. COMPENSATION AND GENERAL EXPENSE LIMITATION.
(a) For the services provided and expenses borne by the Adviser pursuant
to this Agreement, the Fund shall pay to the Adviser compensation of 1.00%
per annum of the Fund's average daily net assets paid monthly. The fee
payable to the Adviser pursuant to this paragraph 7 (the "Advisory Fee")
shall commence on the date hereof (the "Effective Date") and shall be
accrued daily, subject to adjustment as provided below in this paragraph 7
and subject to further adjustment as provided in paragraph 8, and the fee
for each month will be paid to the Adviser during the succeeding month.
<PAGE>
[(b) In the event this Agreement becomes effective on a date other than
the first day of any fiscal year, solely for the purpose of computing the
amount of the Advisory Fee for such fiscal year, such first fiscal year
shall be deemed to begin on the Effective Date and to end on December 31
of such year. In the event this Agreement terminates on a date other than
the last day of any fiscal year, solely for the purpose of computing the
amount of the Advisory Fee for such fiscal year, such fiscal year shall be
deemed to begin on January 1 of such year and to end on the date of the
termination of this Agreement.]
[8. BLUE SKY LIMITATION ON EXPENSES.
(a) In the event the Expenses (as defined in paragraph 8(b) below) of
the Fund for any fiscal year exceed the lowest applicable annual expense
limitations, if any, established pursuant to the statutes or regulations
of any jurisdictions in which Fund Shares are then qualified for offer and
sale (such excess hereinafter called the "Blue Sky Excess Expense"), the
compensation due to the Adviser under paragraph 7 for the fiscal year in
question shall be reduced by an amount equal to the Blue Sky Excess
Expense of the Fund, and if the Blue Sky Excess Expense of the Fund
exceeds the fees of the Fund payable to the Adviser with respect to the
Fund for the fiscal year in question, the Adviser shall, to the extent
required by such statute or regulations, reimburse the Fund for the amount
of such excess. If for any month the Expenses shall exceed 1/12th of the
percentage of average daily net assets allowable as Expenses, the payment
to the Adviser for that month shall be reduced, and, if necessary, the
Adviser shall make a refund payment to the Fund so that the Expenses will
not exceed such percentage. As of the end of the fiscal year, however, the
foregoing computations shall be readjusted so that the aggregate
compensation payable to the Adviser for the year is equal to the amount
provided for in paragraph 7 hereof, reduced by an amount equal to the Blue
Sky Excess Expense of the Fund. The aggregate of the repayments, if any,
by the Adviser to the Fund for the year shall be the amount necessary to
reimburse the Fund for the amount of such excess.
(b) For purposes of paragraph 8(a) of this Agreement, the term
"Expenses" means the general expenses of the Fund, including without
limitation fees payable to the Adviser, the Fund's administrator, if any,
the Fund's transfer agent, if any, and to the Fund's custodian; but the
Expenses shall exclude any interest, taxes, brokerage commissions and
litigation and indemnification expenses and other extraordinary expenses
not incurred in the ordinary course of the Fund's business.]
9. LIMITATION OF LIABILITY. The Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which this Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or a
loss resulting
<PAGE>
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
10. EFFECTIVE DATE AND TERM. This Agreement shall become effective on
the date hereof. This Agreement shall remain in effect until ________, 2000, and
shall continue in effect thereafter for successive twelve-month periods (or for
such shorter periods as may be specified by the Fund's Board of Trustees)
subject to termination as hereinafter provided, if such continuance is approved
at least annually (a) by vote of the Fund's Board of Trustees, cast in person at
a meeting called for the purpose of voting on such approval, and (b) by vote of
a majority of the Trustees of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval. The annual approvals provided for herein shall be effective to
continue this Agreement from year to year (or for such shorter period referred
to above) if given within a period beginning not more than ninety (90) days
prior to (and including) the anniversary of the date upon which the most recent
previous continuance of this Agreement became effective, notwithstanding the
fact that more than three hundred sixty-five (365) days may have elapsed since
the date on which such approval was last given. This Agreement may be terminated
(i) by the Fund at any time, without the payment of any penalty, by the Board of
Trustees of the Fund or by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, on 30 (thirty) days'
written notice to the Adviser, or (ii) after [________, 2000], by the Adviser at
any time, without the payment of any penalty, on 90 (ninety) days' written
notice to the Fund. This Agreement will automatically and immediately terminate
in the event of its assignment (as defined in the 1940 Act).
11. AMENDMENT OF AGREEMENT. This Agreement may be amended by mutual
consent, provided that the amendment is approved (a) by vote of a majority of
those Trustees of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment, and (b), if required
by the 1940 Act, by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund.
12. NOTICES. Notices of any kind to be given to the Adviser by the Fund
shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 61 Broadway, New York, NY 10006, Attention: [Executive Vice
President], or at such other address or to such other individual as shall be
specified by the Adviser to the Fund in accordance with this paragraph 12.
Notices of any kind to be given to the Fund by the Adviser shall be in writing
and shall be duly given if mailed or delivered to the Fund at [c/o Ingalls &
Snyder, LLC, 61 Broadway, New York, NY 10006], Attention: [President], or at
such other address or to such other individual as shall be specified by the Fund
to the Adviser in accordance with this paragraph 12, with copies to each of the
Fund's Trustees at their respective addresses set forth in the Fund's
Registration Statement and to the legal counsel to the Fund.
<PAGE>
13. AUTHORITY. The Trustees have authorized the execution of this
Agreement in their capacity as Trustees and not individually. The Adviser agrees
that neither the stockholders nor the Trustees nor any officer, employee,
representative or agent of the Fund shall be personally liable upon, nor shall
resort be had to their private property for the satisfaction of, obligations
given, executed or delivered on behalf of or by the Fund, that the stockholders,
Trustees, officers, employees, representatives and agents of the Fund shall not
be personally liable hereunder, and that the Adviser shall look solely to the
property of the Fund for the satisfaction of any claim hereunder.
14. CONTROLLING LAW. This Agreement shall be governed by the construed
in accordance with the laws of the state of New York.
15. MULTIPLE COUNTERPARTS. This Agreement may be executed simultaneously
in several counterparts, each of which shall be deemed to be an original, but
which together shall constitute one and the same instrument.
16. CAPTIONS. The captions of the paragraphs are for descriptive
purposes only and they are not intended to limit or otherwise affect the content
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
THE LEGACY FUNDS, INC.
By:
--------------------------------------
Theodore F. Ells, Esq.
Chairman of the Board of Trustees
INGALLS & SNYDER LLC
By:
--------------------------------------
Edward Oberst
Managing Director
EXHIBIT 23(E)
DISTRIBUTION AGREEMENT
<PAGE>
DISTRIBUTION AGREEMENT
----------------------
This Distribution Agreement is made as of the ___ day of _______, 1999,
between THE LEGACY FUNDS, INC., a Delaware business trust (herein called the
"Fund"), and INGALLS & SNYDER, LLC, a New York limited liability company (herein
called the "Distributor").
WHEREAS, the Fund is an open-end management investment company and is so
registered under the Investment Company Act of 1940, and will register one or
more distinct series of shares of beneficial interest ("Shares") for sale to the
public under the Securities Act of 1933, as amended (the "1933 Act"), and will
qualify its shares for sale to the public under various state securities laws;
and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "1934 Act") and under the state
securities laws of each state where such registration is required for the
distribution of the Fund's Shares, and is also a member of the National
Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund desires to retain the Distributor as [the principal
underwriter and [national] distributor in connection with the offering and sale
of the [Class A] Shares [of each series listed on Schedule A (as amended from
time to time) to this Agreement] and the Distributor is willing to act as
principal underwriter and [national] distributor for the Fund on the terms and
conditions hereinafter set forth];
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein the parties hereto agree as follows:
I. DELIVERY OF DOCUMENTS
---------------------
The Fund has delivered to Distributor copies of each of the following
documents and will deliver to it all future amendments and supplements thereto,
if any:
(a) The Fund's Certificate of Trust and all amendments thereto (such
Certificate of Trust, as currently in effect and as it shall from time to time
be amended, herein called the Fund's "Certificate of Trust");
(b) The Fund's Agreement and Declaration of Trust and all amendments
thereto (such Agreement and Declaration of Trust, as currently in effect and as
it shall from time to time be amended, herein called the "Agreement and
Declaration of Trust");
(c) The By-Laws of the Fund (such By-Laws, as currently in effect
and as it shall from time to time be amended, herein called the "By-Laws");
(d) Resolutions of the Board of Trustees of the Fund authorizing the
execution and delivery of this Agreement;
<PAGE>
(e) The Fund's initial Registration Statement under the Investment
Company Act of 1940, as amended (the "1940 Act"), on Form N-1A as it is to be
filed with the Securities and Exchange Commission (the "Commission"), said
Registration Statement, as will be declared effective and as amended or
supplemented from time to time, is herein called the "Registration Statement";
(f) Notification of Registration of the Fund under the 1940 Act on
Form N-8A as filed with the Commission; and
(g) The Prospectus and Statement of Additional Information, if any,
of the Fund (such prospectus and statement of additional information, as will be
filed with the Securities and Exchange Commission and as they shall from time to
time be amended and supplemented, herein called the "Prospectus").
II. DISTRIBUTION
------------
1. APPOINTMENT OF DISTRIBUTOR. The Fund hereby appoints Distributor to
serve as the [principal underwriter and] distributor of the Fund's Shares to
sell Shares to the public on behalf of the Fund and Distributor hereby accepts
such appointment and agrees to render the services and duties set forth in this
Section II. The Fund hereby agrees during the term of this Agreement to sell
Shares of the Fund through the Distributor on the terms and conditions set forth
below.
2. SERVICES AND DUTIES.
--------------------
(a) Except as provided below, the Fund agrees to offer for sale
exclusively through Distributor as agent, from time to time during the term of
this Agreement, Shares of the Fund (whether authorized but unissued or treasury
shares, in the Fund's sole discretion) upon the terms and at the net asset value
as described in the Prospectus. Distributor will act only in its own behalf as
principal in making agreements with selected dealers or others for the sale of
Shares, and shall offer Shares only at the net asset value thereof as set forth
in the Prospectus. Distributor shall devote its best efforts to effect sales of
Shares of the Fund, but shall not be obligated to sell any certain number of
Shares. All subscriptions for Shares solicited by the Distributor shall be
directed to the Fund for acceptance in the ordinary course of business following
the procedures set forth in the Fund's Prospectus as in effect from time to
time. The Fund reserves the right to offer Shares directly to investors,
including offers in connection with (i) the merger or consolidation of the Fund
or its series or classes with any other investment company or series or class
thereof, (ii) the Fund's acquisition by purchase or otherwise of all or
substantially all of the assets or stock of any other investment company or
(iii) reinvestment in Shares by the Fund's stockholders of dividends or other
distributions or any other offering by the Fund of securities to its
stockholders.
(b) In all matters relating to the sale of Shares, Distributor will
act in conformity with the Fund's Certificate of Trust, Agreement and
Declaration of Trust, By-Laws, and Prospectus and with the instructions and
directions of the Board of Trustees of the Fund and will conform to and comply
with the requirements of the 1933 Act, and the 1940 Act, the regulations of the
<PAGE>
National Association of Securities Dealers, Inc. and all other applicable
federal or state laws and regulations. In connection with such sales,
Distributor acknowledges and agrees that it is not authorized to provide any
information or make any representations other than as contained in the Fund's
Registration Statement and Prospectus and any sales literature specifically
approved by the Fund. The Distributor shall adopt and follow procedures for the
confirmation of sales to investors and selected dealers, the collection of
amounts payable by investors and selected dealers on such sales and the
cancellation of unsettled transactions, as may be necessary to comply with the
requirements of the National Association of Securities Dealers, Inc. (NASD).
[The Distributor shall have the right to enter into selected dealer agreements
with registered and qualified securities dealers and other financial
institutions of its choice for the sale of Shares, provided that the Fund shall
approve the forms of such agreements. Within the United States, the Distributor
shall offer and sell Shares only to such selected dealers as are members in good
standing of the NASD. Shares sold to selected dealers shall be for resale by
such dealers only at the offering price determined as set forth in the
Prospectus.]
(c) Distributor will bear the cost of (i) printing and distributing
the Prospectus and Statement of Additional Information (including any supplement
thereto) to persons who are not either shareholders of, or counsel, independent
accountants or other persons providing similar services to, the Fund, and (ii)
preparing, printing and distributing any literature, advertisement or material
which is primarily intended to result in the sale of the Shares; PROVIDED,
HOWEVER, that Distributor shall not be obligated to bear the expenses incurred
by the Fund in connection with the preparation and printing of any amendment to
any Registration Statement or Prospectus necessary for the continued effective
registration of the Shares under the 1933 Act.
(d) All Shares of the Fund offered for sale by Distributor shall be
offered for sale to the public at the net asset value (determined in the manner
set forth in the Fund's Certificate of Trust and then current Prospectus). No
broker-dealer or other person who enters into a selling agreement with
Distributor shall be authorized to act as agent for the Fund in connection with
the offering or sale of its Shares to the public or otherwise.
[The Distributor in its sole discretion may repurchase Shares offered for
sale by the shareholders. Repurchase of Shares by the Distributor shall be at
the price determined in accordance with, and in the manner set forth in, the
most current Prospectus. At the end of each business day, the Distributor shall
notify, by any appropriate means, the Fund and its transfer agent of the orders
for repurchase of Shares received by the Distributor since the last such report,
the amount to be paid for such Shares, and the identity of the shareholders
offering Shares for repurchase. The Fund reserves the right to suspend such
repurchase right upon written notice to the Distributor. The Distributor further
agrees to act as agent for the Fund to receive and transmit promptly to the
Fund's transfer agent shareholder requests for redemption of Shares.]
[The Distributor shall prepare reports for the Board regarding its
activities under this Agreement as from time to time shall be reasonably
requested by the Board.]
[The Distributor shall at all times during the term of this Agreement
remain registered as a broker-dealer under the 1934 Act and with each state
where such registration is required for the distribution of the Fund's Shares,
<PAGE>
and shall also remain a member in good standing of the NASD. The Distributor
shall immediately notify the Fund in writing if it receives written notification
that such registrations or membership have been temporarily or permanently
suspended, limited or terminated.]
3. SALES OF SHARES.
----------------
(a) The Fund shall pay all costs and expenses in connection with the
registration of the Shares under the 1933 Act, and all expenses in connection
with maintaining facilities for the issue and transfer of the Shares and for
supplying information, prices and other data to be furnished by the Fund
hereunder, and all expenses in connection with preparing, printing and
distributing the Prospectus except as set forth in subsection 2(c) of Section II
hereof and except for those costs and expenses borne by the Distributor pursuant
to a Distribution Plan and subject to the requirements of Rule 12b-1 under the
1940 Act.
(b) The Fund shall execute all documents, furnish all information
and otherwise take all actions which may be reasonably necessary in the
discretion of the Fund's officers in connection with the qualification of the
Shares for sale in such states as Distributor may designate to the Fund and the
Fund may approve, and the Fund shall pay all filing fees which may be incurred
in connection with such qualification. Distributor shall pay all expenses
connected with its qualification as a dealer under state or federal laws and,
except as otherwise specifically provided in this Agreement, all other expenses
incurred by Distributor in connection with the sale of the Shares as
contemplated in this Agreement.
(c) The Fund shall have the right to suspend the offering and sale
of Shares of the Fund at any time in the absolute discretion of the Fund in
response to conditions in the securities markets or otherwise, and to suspend
the redemption of Shares of the Fund at any time permitted by the 1940 Act or
the rules of the commission ("Rules"). Upon notice of any such suspension of the
offering and sale of Shares, the Distributor shall cease to offer Shares. The
Distributor shall not make or cause to be made any offers of Shares in any state
or other jurisdiction where such Shares are not then qualified for offer or sale
or exempt from such qualification.
(d) All orders for the Fund's Shares shall be transmitted promptly
to the Fund's transfer agent, unless otherwise directed by the Fund.
(e) The Fund reserves the right to reject any order for Shares.
IIA. COMPENSATION
------------
[The Fund shall pay to the Distributor as compensation for services under
the Rule 12b-1 Plan(s) adopted by the Fund and this Agreement a distribution fee
with respect to the Fund's classes and/or series of Shares as described in each
of the Fund's respective Plans and this Agreement.]
[So long as a Plan or any amendment thereto is in effect, the Distributor
shall inform the Board of Trustees of the commissions with respect to the
<PAGE>
relevant class and/or series of Shares to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and financial institutions
which have dealer agreements with the Distributor. So long as a Plan (or any
amendment thereto) is in effect, at the request of the Board of Trustees or any
agent or representative of the Fund, the Distributor shall provide such
additional information as may reasonably be requested concerning the activities
of the Distributor hereunder and the costs incurred in performing such
activities with respect to the relevant class and/or series of Shares.]
[As compensation for the services performed and the expenses assumed by
the Distributor under this Agreement including, but not limited to, any
commissions paid for sales of Shares, the Distributor shall be entitled to [the]
fees and expenses [set forth in Schedule B to this Agreement] which are payable
[promptly after the last day of each month]. Such fees shall be paid to the
Distributor by the Fund pursuant to its Rule 12b-1 plan or, if Rule 12b-1
payments are not sufficient to pay such fees and expenses, or if the Rule 12b-1
plan is discontinued, or if the [Fund or the] Fund's sponsor otherwise
determines that Rule 12b-1 fees shall not, in whole or in part, be used to pay
the Distributor, the [Fund or the] Fund`s sponsor shall be responsible for the
payment of the amount of such fees not covered by Rule 12b-1 payments.]
III. LIMITATION OF LIABILITY
-----------------------
Distributor shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Fund in connection with the matters to which
this Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
IV. CONFIDENTIALITY
---------------
Distributor will treat confidentially and as proprietary information of
the Fund all records and other information relative to the Fund, to the Fund's
prior or present shareholders and to those persons or entities who respond to
Distributor inquiries concerning investment in the Fund, and, except as provided
below, will not use such records and information for any purpose other than the
performance of its responsibilities and duties hereunder or the performance of
its responsibilities and duties with regard to sales of the shares of any
portfolio which may be added to the Fund in the future. Any other use by
Distributor of the information and records referred to above may be made only
after prior notification to and approval in writing by the Fund. Such approval
shall not be unreasonably withheld and may not be withheld where (i) Distributor
may be exposed to civil or criminal contempt proceedings for failure to divulge
such information; (ii) Distributor is requested to divulge such information by
duly constituted authorities; or (iii) Distributor is so requested by the Fund.
V. INDEMNIFICATION
---------------
1. FUND REPRESENTATIONS. The Fund represents and warrants to Distributor
that at all times the Registration Statement and Prospectus will, in all
material respects, conform to the applicable requirements of the 1933 Act and
the rules thereunder, that the Registration Statement did not contain at the
<PAGE>
time it became effective and will not contain at the time any subsequent
amendment thereto becomes effective any untrue statement of material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements contained therein not misleading and that the Prospectus
does not contain and will not contain at any time when it is authorized for use
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation or warranty in this subsection shall apply to statements
or omissions made in reliance upon and in conformity with written information
furnished to the Fund by or on behalf of or otherwise approved by and with
respect to Distributor or its affiliates expressly for use in the Registration
Statement or Prospectus.
2. DISTRIBUTOR REPRESENTATIONS. Distributor represents and warrants to the
Fund that it is duly incorporated as a New York limited liability company and is
registered as a broker-dealer under the Securities Exchange Act of 1934 and the
laws of each state where such registration is required for the distribution of
the Fund's Shares and is and at all times will remain duly authorized and
licensed to carry out its services as contemplated herein.
3. FUND INDEMNIFICATION. The Fund will indemnify, defend and hold harmless
Distributor, its several directors and officers, and any person who controls
Distributor within the meaning of Section 15 of the 1933 Act, from and against
any losses, claims, damages or liabilities, joint or several, to which any of
them may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus or in any application or other document executed by or on behalf of
the Fund, or arise out of, or are based upon, information furnished by or on
behalf of the Fund filed in any state in order to qualify the Shares under the
securities or blue sky laws thereof ("Blue Sky Application"), or arise out of,
or are based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse Distributor, its several directors and
officers, and any person who controls Distributor within the meaning of Section
15 of the 1933 Act, for any legal or other expenses reasonably incurred by any
of them in investigating, defending or preparing to defend any such action,
proceeding or claim; PROVIDED, HOWEVER, that the Fund shall not be liable in any
case to the extent that such loss, claim, damage or liability arises out of, or
is based upon, any untrue statement, alleged untrue statement, or omission or
alleged omission made in the Registration Statement, the Prospectus, any Blue
Sky Application or any application or other document executed by or on behalf of
the Fund in reliance upon and in conformity with written information furnished
to the Fund by or on behalf of or otherwise approved by and with respect to
Distributor or its affiliates specifically for inclusion therein.
The Fund shall not indemnify any person pursuant to this subsection 3
unless the court or other body before which the proceeding was brought has
rendered a final decision on the merits that such person was not liable by
reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties, or his reckless disregard of obligations and duties,
<PAGE>
under this Agreement ("disabling conduct") or, in the absence of such a
decision, a reasonable determination (based upon a review of the facts) that
such person was not liable by reason of disabling conduct has been made by the
vote of a majority of a quorum of trustees of the Fund who are neither
"interested persons" of the Fund (as defined in the 1940 Act) nor parties to the
proceeding, or by an independent legal counsel in a written opinion.
The Fund shall advance reasonable attorneys' fees and other expenses
incurred by any person in defending any claim, demand, action or suit which is
the subject of a claim for indemnification pursuant to this subsection 3, so
long as: (i) such person shall undertake to repay all such advances unless it is
ultimately determined that he is entitled to indemnification hereunder; and (ii)
such person shall provide security for such undertaking, or the Fund shall be
insured against losses arising by reason of any lawful advances, or a majority
of a quorum of the disinterested, non-party trustees of the Fund (or an
independent legal counsel in a written opinion) shall determine based on a
review of readily available facts (as opposed to a full trial-type inquiry) that
there is a reasonable likelihood that such person ultimately will be found
entitled to indemnification hereunder.
4. DISTRIBUTOR INDEMNIFICATION. Distributor will indemnify, defend and
hold harmless the Fund, the Fund's several officers and trustees and any person
who controls the Fund within the meaning of Section 15 of the 1933 Act, from and
against any losses, claims, damages or liabilities joint or several, to which
any of them may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
hereof) arise out of, or are based upon, any breach of its representations and
warranties in subsection 2 of this Section V or its agreements in subsection 2
or 3 of Section II hereof, or which arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any Blue Sky Application or any
application or other document executed by or on behalf of the Fund, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, which
statement or omission was made in reliance upon or in conformity with
information furnished in writing to the Fund or any of its several officers and
trustees by or on behalf of or otherwise approved by and with respect to
Distributor specifically for inclusion therein, and will reimburse the Fund, the
Fund's several officers and trustees, and any person who controls the Fund or
any Fund within the meaning of Section 15 of the 1933 Act, for any legal or
other expenses reasonably incurred by any of them in investigating, defending or
preparing to defend any such action, proceeding or claim.
The Distributor shall advance reasonable attorneys' fees and other
expenses incurred by any person in defending any claim, demand, action or suit
which is the subject of a claim for indemnification pursuant to this subsection
4, so long as: (i) such person shall undertake to repay all such advances unless
it is ultimately determined that he is entitled to indemnification hereunder;
and (ii) such person shall provide security for such undertaking, or the Fund
shall be insured against losses arising by reason of any lawful advances, or a
majority of a quorum of the disinterested, non-party trustees of the Fund (or an
independent legal counsel in a written opinion) shall determine based on a
review of readily available facts (as opposed to a full trial-type inquiry) that
there is a reasonable likelihood that such person ultimately will be found
entitled to indemnification hereunder.
<PAGE>
5. GENERAL INDEMNITY PROVISIONS. No indemnifying party shall be liable
under its indemnity agreement contained in subsection 3 or 4 hereof with respect
to any claim made against such indemnifying party unless the indemnified party
shall have notified the indemnifying party in writing within twenty (20) days
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon the indemnified party (or after the
indemnified party shall have received notice of such service on any designated
agent), but failure to notify the indemnifying party of any such claim shall not
relieve it from any liability which it may otherwise have to the indemnified
party. The indemnifying party will be entitled to participate at its own expense
in the defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, and if the indemnifying party elects to assume the
defense, such defense shall be conducted by counsel chosen by it and reasonably
satisfactory to the indemnified party. In the event the indemnifying party
elects to assume the defense of any such suit and retain such counsel, the
indemnified party shall bear the fees and expenses of any additional counsel
retained by the indemnified party.
[6. INDEMNITY IN CONNECTION WITH THE ACCEPTANCE OF ORDERS TO PURCHASE FUND
SHARES PRIOR TO RECEIPT OF PAYMENT (NEXT DAY SETTLEMENT). The Prospectus of the
Fund, as amended or supplemented from time to time, may authorize the Fund to
accept orders to purchase shares of the Fund prior to receipt of payment
therefor in Federal funds. The parties recognize that in the event any such
purchase order is canceled as a result of the failure of the investor to make
timely payment for such shares, the Fund may suffer dilution in the event the
net asset value per share of the Fund applicable on the date such purchase order
is canceled is less than the purchase price per share applicable to such
purchase order and that the Fund may incur fees and other losses and expenses in
connection with the processing and cancellation of such purchase order. In the
event of any such cancellation of any such purchase order, the Distributor will
(i) pay to the Fund an amount equal to the decline in the price of the shares
from price applicable at the time the purchase order was accepted (i.e. the net
asset value per share of the Fund next determined after the acceptance of such
purchase order) to the price applicable at the time the purchase order was
canceled (i.e. the net asset value per share of the Fund next determined after
the cancellation of such purchase order), less the net amount, if any, of any
Gain on Canceled Shares (as defined below) accrued from the beginning of the
fiscal year of the Fund in which the cancellation takes place to the date of
such cancellation, (ii) reimburse the Fund for any and all fees and other losses
and expenses incurred in connection with the processing and cancellation of such
purchase order and (iii) pay all legal fees incurred in connection with any
legal action taken against an investor for nonpayment or taken by an investor
against the Fund as a result of the cancellation. As used herein, "Gain on
Canceled Shares" shall mean the amount, if any, by which the aggregate purchase
price applicable to all orders to purchase shares of the Fund that are accepted
but subsequently canceled for nonpayment (measured by the respective net asset
values per share of the Fund next determined after the acceptance of such
purchase orders) exceeds the aggregate value of such shares at the time of
cancellation (measured by the respective net asset values per share of the Fund
next determined after the cancellation of such purchase orders).]
<PAGE>
VI. DURATION AND TERMINATION
------------------------
This Agreement shall become effective as of the date first above written,
and, unless sooner terminated as provided herein, shall remain in effect until
[_________, 2000]. Thereafter, if not terminated, this Agreement shall continue
automatically for successive terms of one year expiring on _______ of each year,
provided that such continuance is specifically approved at least annually (a) by
a majority of those members of the Board of Trustees of the Fund who are not
"interested persons" of the Fund and who have no direct or indirect financial
interest in the operation of this Distribution Agreement (the "Disinterested
Trustees"), pursuant to a vote cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the Fund
or by vote of a majority of the outstanding voting securities of the Fund;
PROVIDED, HOWEVER, that this Agreement shall automatically terminate in the
event of its assignment and may be terminated by the Fund at any time, without
the payment of any penalty, by vote of a majority of the Disinterested Trustees
or by a vote of a majority of the outstanding voting securities on 60 days'
written notice to, or by the Distributor at any time, without the payment of any
penalty, on 60 days' written notice to the Fund. The terms "assignment" and
"vote of a majority of the outstanding voting securities" shall have the
meanings set forth in the 1940 Act and the rules and regulations thereunder.
VII. AMENDMENT OF THIS AGREEMENT
---------------------------
No provision of this Agreement may be changed, waived, discharged, or
terminated except by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge, or termination is sought. This
Agreement may be amended with the approval of the Board of Trustees of the Fund,
or of a majority of the outstanding voting securities of the [applicable class
and/or series of the] Fund; provided, that in either case, such amendment also
shall be approved by a majority of the Independent Trustees.
VIII. NOTICES
-------
Notice of any kind to be given to the Distributor by the Fund shall be in
writing and shall be duly given if mailed or delivered to the Distributor at 61
Broadway, New York, NY 10006, Attention: [Edward Oberst, Managing Director], or
at such other address or to such other individual as shall be specified by the
Distributor to the Fund in accordance with this Section VIII. Notices of any
kind to be given to the Fund by the Distributor shall be in writing and shall be
duly given if mailed or delivered to the Fund at its address set forth in the
then-current Prospectus, Attention: [Chairman of the Board of Trustees], or at
such other address or to such other individual as shall be specified by the Fund
to the Distributor in accordance with this Section, with copies to each of the
Fund's Trustees at their respective addresses set forth in the Fund's
Registration Statement and to the legal counsel to the Fund.
IX. CONSTRUCTION; GOVERNING LAW
---------------------------
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. Subject to the
provisions of Section VI hereof, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
<PAGE>
shall be governed by New York law; PROVIDED, however, that nothing herein shall
be construed in a manner inconsistent with the 1940 Act or any rule or
regulation of the Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their officers designated below as of the day and year first above
written.
THE LEGACY FUNDS, INC.
By:
-----------------------------------------
Theodore F. Ells, Esq.
Chairman of the Board of Trustees
INGALLS & SNYDER, LLC
By:
-----------------------------------------
Edward Oberst
Managing Director
EXHIBIT 23(G)
CUSTODIAN SERVICING AGREEMENT
<PAGE>
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT made as of August 2, 1999, between XYZ Funds, Inc., a
Maryland corporation (hereinafter called the "Company"), and Firstar Bank
Milwaukee, N.A., a Wisconsin corporation (hereinafter called "Custodian").
WHEREAS, the Company is an open-end management investment company which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create separate series, each with
its own separate investment portfolio; and
WHEREAS, the Company desires that the securities and cash of the XYZ Fund
and each additional series of the Company listed on Exhibit A attached hereto
(each, a "Fund"), as may be amended from time to time, shall be hereafter held
and administered by Custodian pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and Custodian agree as follows:
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Company by any two of the
President, a Vice President, the Secretary and the Treasurer of the Company, or
any other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean the Board of Directors of the Company.
2. NAMES, TITLES, AND SIGNATURES OF THE COMPANY'S OFFICERS
An officer of the Company will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Directors, together with any changes which may occur from time to time.
<PAGE>
3. RECEIPT AND DISBURSEMENT OF MONEY
A. Custodian shall open and maintain a separate account or accounts in the
name of the Company, subject only to draft or order by Custodian acting pursuant
to the terms of this Agreement. Custodian shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Company. Custodian shall make payments of cash to, or for the
account of, the Company from such cash only:
(a) for the purchase of securities for the portfolio of the Fund
upon the delivery of such securities to Custodian, registered
in the name of the Company or of the nominee of Custodian
referred to in Section 7 or in proper form for transfer;
(b) for the purchase or redemption of shares of the common stock
of the Fund upon delivery thereof to Custodian, or upon proper
instructions from the Company;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing and
custodian services, expenses for printing and postage and
payments under any Rule 12b-1 plan);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund
held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution of
the Board of Directors of the Company.
Before making any such payment, Custodian shall receive (and may rely
upon) an officers' certificate requesting such payment and stating that it is
for a purpose permitted under the terms of items (a), (b), (c), or (d) of this
Subsection A, and also, in respect of item (e), upon receipt of an officers'
certificate specifying the amount of such payment, setting forth the purpose for
which such payment is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not precede the
disbursement of cash for the purpose of purchasing a money market instrument, or
any other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Company issues appropriate oral
or facsimile instructions to Custodian and an appropriate officers' certificate
is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received by Custodian for the
account of the Company.
<PAGE>
C. Custodian shall, upon receipt of proper instructions, make federal
funds available to the Company as of specified times agreed upon from time to
time by the Company and the Custodian in the amount of checks received in
payment for shares of the Fund which are deposited into the Fund's account.
D. If so directed by the Company, Custodian will invest any and all
available cash in overnight cash-equivalent investments as specified by the
investment manager.
4. SEGREGATED ACCOUNTS
Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account(s) for and on behalf of the Fund, into which
account(s) may be transferred cash and/or securities.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any securities of
the Company held by it pursuant to this Agreement. Custodian agrees to transfer,
exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund upon
receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or otherwise
become payable;
(c) for examination by any broker selling any such securities in
accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities alone or
other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their terms into
other securities;
(f) upon exercise of subscription, purchase or other similar rights
represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock of the
Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
<PAGE>
As to any deliveries made by Custodian pursuant to items (a), (b), (d),
(e), (f), and (g), securities or cash receivable in exchange therefor shall be
deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an officers' certificate
specifying the securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made, provided, however, that an officers' certificate need not precede
any such transfer, exchange or delivery of a money market instrument, or any
other security with same or next-day settlement, if the President, a Vice
President, the Secretary or the Treasurer of the Company issues appropriate oral
or facsimile instructions to Custodian and an appropriate officers' certificate
is received by Custodian within two business days thereafter.
6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to the
contrary, Custodian shall: (a) present for payment all coupons and other income
items held by it for the account of the Fund, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of the Fund; (b) collect interest and cash dividends received, with notice to
the Company, for the account of the Fund; (c) hold for the account of the Fund
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder; and (d) execute, as agent on behalf of
the Company, all necessary ownership certificates required by the Internal
Revenue Code of 1986, as amended (the "Code") or the Income Tax Regulations (the
"Regulations") of the United States Treasury Department (the "Treasury
Department") or under the laws of any state now or hereafter in effect,
inserting the Company's name on such certificates as the owner of the securities
covered thereby, to the extent it may lawfully do so.
7. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate, Custodian shall
register all securities, except such as are in bearer form, in the name of a
registered nominee of Custodian as defined in the Code and any Regulations of
the Treasury Department issued thereunder or in any provision of any subsequent
federal tax law exempting such transaction from liability for stock transfer
taxes, and shall execute and deliver all such certificates in connection
therewith as may be required by such laws or regulations or under the laws of
any state. All securities held by Custodian hereunder shall be at all times
identifiable in its records as being held in an account or accounts of Custodian
containing only the assets of the Company.
The Company shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which it
<PAGE>
may hold for the account of the Company and which may from time to time be
registered in the name of the Company.
8. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of the
securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the Company
all notices, proxies and proxy soliciting materials with respect to such
securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Company), but
without indicating the manner in which such proxies are to be voted.
9. TRANSFER TAX AND OTHER DISBURSEMENTS
The Company shall pay or reimburse Custodian from time to time for any
transfer taxes payable upon transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in connection with
securities delivered to it or by it under this Agreement as may be required
under the provisions of the Code and any Regulations of the Treasury Department
issued thereunder, or under the laws of any state, to exempt from taxation any
exempt transfers and/or deliveries of any such securities.
10. CONCERNING CUSTODIAN
Custodian shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon in writing
between the two parties. Until modified in writing, such compensation shall be
as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith upon any
certificate herein described or certified copy of any resolution of the Board,
and may rely on the genuineness of any such document which it may in good faith
believe to have been validly executed.
The Company agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including reasonable counsel fees) incurred or assessed against it or by its
nominee in connection with the performance of this Agreement, except such as may
arise from its or its nominee's own bad faith, negligent action, negligent
failure to act or willful misconduct. Custodian is authorized to charge any
account of the Fund for such items. In the event of any advance of cash for any
purpose made by Custodian resulting from orders or instructions of the Company,
or in the event that Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or its
nominee's own bad faith, negligent action, negligent failure to act or willful
<PAGE>
misconduct, any property at any time held for the account of the Company shall
be security therefor.
Custodian agrees to indemnify and hold harmless the Company from all
charges, expenses, assessments, and claims/liabilities (including reasonable
counsel fees) incurred or assessed against it in connection with the performance
of this Agreement, except such as may arise from the Fund's own bad faith,
negligent action, negligent failure to act, or willful misconduct.
11. SUBCUSTODIANS
Custodian is hereby authorized to engage another bank or trust company as
a subcustodian for all or any part of the Company's assets, so long as any such
bank or trust company is itself qualified under the 1940 Act and the rules and
regulations thereunder and provided further that, if the Custodian utilizes the
services of a subcustodian, the Custodian shall remain fully liable and
responsible for any losses caused to the Company by the subcustodian as fully as
if the Custodian was directly responsible for any such losses under the terms of
this Agreement.
Notwithstanding anything contained herein, if the Company requires the
Custodian to engage specific subcustodians for the safekeeping and/or clearing
of assets, the Company agrees to indemnify and hold harmless Custodian from all
claims, expenses and liabilities incurred or assessed against it in connection
with the use of such subcustodian in regard to the Company's assets, except as
may arise from Custodian's own bad faith, negligent action, negligent failure to
act or willful misconduct.
12. REPORTS BY CUSTODIAN
Custodian shall furnish the Company periodically as agreed upon with a
statement summarizing all transactions and entries for the account of Company.
Custodian shall furnish to the Company, at the end of every month, a list of the
portfolio securities for the Fund showing the aggregate cost of each issue. The
books and records of Custodian pertaining to its actions under this Agreement
shall be open to inspection and audit at reasonable times by officers of, and by
auditors employed by, the Company.
13. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Company, or by Custodian, on
ninety (90) days notice prior to the two year anniversary, given in writing and
sent by registered mail to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
<PAGE>
or to the Company at:
Legacy Funds, Inc.
61 Broadway
New York, NY 10006-2802
Attn: Corporate Secretary
as the case may be. Upon any termination of this Agreement, pending appointment
of a successor to Custodian or a vote of the shareholders of the Fund to
dissolve or to function without a custodian of its cash, securities and other
property, Custodian shall not deliver cash, securities or other property of the
Fund to the Company, but may deliver them to a bank or trust company of its own
selection that meets the requirements of the 1940 Act as a Custodian for the
Company to be held under terms similar to those of this Agreement, provided,
however, that Custodian shall not be required to make any such delivery or
payment until full payment shall have been made by the Company of all
liabilities constituting a charge on or against the properties then held by
Custodian or on or against Custodian, and until full payment shall have been
made to Custodian of all its fees, compensation, costs and expenses, subject to
the provisions of Section 10 of this Agreement.
If the Company elects to terminate this Agreement prior to the two year
anniversary of this Agreement, for reasons other than unacceptable service
levels, the Company agrees to reimburse Firstar for the difference between the
termination date and the anniversary date in the two year fees based on the
current fees of the Company.
This Agreement may not be assigned by Custodian without the consent of the
Company, authorized or approved by a resolution of its Board of Directors.
14. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES
No provision of this Agreement shall be deemed to prevent the use by
Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board of Directors of the Company approves by resolution
the use of such central securities clearing agency or securities depository.
15. RECORDS
Custodian shall keep records relating to its services to be performed
hereunder, in the form and manner, and for such period, as it may deem advisable
and is agreeable to the Company but not inconsistent with the rules and
regulations of appropriate government authorities, in particular Section 31 of
the 1940 Act and the rules thereunder. Custodian agrees that all such records
prepared or maintained by the Custodian relating to the services performed by
Custodian hereunder are the property of the Company and will be preserved,
maintained, and made available in accordance with such section and rules of the
1940 Act and will be promptly surrendered to the Company on and in accordance
with its request.
<PAGE>
16. GOVERNING LAW
This Agreement shall be governed by Wisconsin law. However, nothing herein
shall be construed in a manner inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer in one or more counterparts as of the day
and year first written above.
XYZ FUNDS, INC. FIRSTAR BANK MILWAUKEE, N.A.
By: By:
------------------------------- -------------------------------
Print: Print:
---------------------------- ----------------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
----------------------------- -----------------------------
Attest: Attest:
--------------------------- ---------------------------
<PAGE>
CUSTODY SERVICES
ANNUAL FEE SCHEDULE - DOMESTIC FUNDS
EXHIBIT A
Separate Series of XYZ Funds, Inc.
NAME OF SERIES DATE ADDED
-----------------------------------------------
XYZ Fund August 2, 1999
Class A
Annual fee based upon market value
2 basis points (.0002) on assets of the the fund
Minimum annual fee per fund - $3,000
Investment transactions (purchase, sale, exchange, tender, redemption, maturity,
receipt, delivery):
$10.00 per book entry security (depository or Federal Reserve
system)
$25.00 per definitive security (physical)
$25.00 per mutual fund trade
$75.00 per Euroclear
$ 8.00 per principal reduction on pass-through certificates
$35.00 per option/futures contract
$15.00 per variation margin
$15.00 per Fed wire deposit or withdrawal
Variable Amount Demand Notes: Used as a short-term investment, variable amount
notes offer safety and prevailing high interest rates. Our charge, which is 1/4
of 1%, is deducted from the variable amount note income at the time it is
credited to your account.
Plus out-of-pocket expenses. Foreign securities custody services quoted
separately.
Fees and out-of-pocket expenses are billed to the Fund monthly, based upon
market value at the beginning of the month.
EXHIBIT 23(H)(1)
FUND ADMINISTRATION SERVICING AGREEMENT
<PAGE>
FUND ADMINISTRATION SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of August,
1999, by and between XYZ Funds, Inc., a Maryland corporation (hereinafter
referred to as the "Company"), and Firstar Mutual Fund Services, LLC, a
Wisconsin limited liability company (hereinafter referred to as "Firstar").
WHEREAS, the Company is an open-end management investment company which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create separate series, each with
its own separate investment portfolio;
WHEREAS, Firstar is in the business of providing, among other things, fund
administration services to investment companies; and
WHEREAS, the Company desires to retain Firstar to act as Administrator for
the XYZ Fund and for each additional series of the Company listed on Exhibit A
attached hereto (each, a "Fund"), as may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and Firstar agree as follows:
1. APPOINTMENT OF ADMINISTRATOR
The Company hereby appoints Firstar as Administrator of the Company on the
terms and conditions set forth in this Agreement, and Firstar hereby accepts
such appointment and agrees to perform the services and duties set forth in this
Agreement in consideration of the compensation provided for herein.
2. DUTIES AND RESPONSIBILITIES OF FIRSTAR
A. General Fund Management
1. Act as liaison among all Fund service providers
2. Coordinate board communication by:
a. Assisting Company counsel in establishing meeting
agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director and
officer liability coverage, and making the necessary SEC
filings relating thereto
e. Preparing minutes of meetings of the board and
shareholders
<PAGE>
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit process
c. Provide office facilities
4. Assist in overall operations of the Fund
5. Pay Fund expenses upon written authorization from the Company
B. Compliance
1. Regulatory Compliance
a. Monitor compliance with 1940 Act requirements,
including:
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of Ethics for the disinterested directors of
the Fund (if requested by the Fund)
b. Monitor Fund's compliance with the policies and
investment limitations of the Company as set forth in
its Prospectus and Statement of Additional Information
2. Blue Sky Compliance
a. Prepare and file with the appropriate state securities
authorities any and all required compliance filings
relating to the registration of the securities of the
Company so as to enable the Company to make a continuous
offering of its shares in all states
b. Monitor status and maintain registrations in each state
3. SEC Registration and Reporting
a. Assist Company counsel in updating Prospectus and
Statement of Additional Information and in preparing
proxy statements and Rule 24f-2 notices
b. Prepare annual and semiannual reports
c. Coordinate the printing of publicly disseminated
Prospectuses and reports
d. File fidelity bond under Rule 17g-1
e. File shareholder reports under Rule 30b2-1
<PAGE>
4. IRS Compliance
a. Monitor Company's status as a regulated investment
company under Subchapter M through review of the
following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions (including excise tax
distributions)
C. Financial Reporting
1. Provide financial data required by Fund's Prospectus and
Statement of Additional Information
2. Prepare financial reports for shareholders, the board, the
SEC, and independent auditors
3. Supervise the Company's Custodian and Company Accountants
in the maintenance of the Company's general ledger and in
the preparation of the Fund's financial statements,
including oversight of expense accruals and payments, of
the determination of net asset value of the Company's net
assets and of the Company's shares, and of the declaration
and payment of dividends and other distributions to
shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal and
state tax returns including Forms 1120/8610 with any necessary
schedules
2. Prepare state income breakdowns where relevant
3. File Form 1099 Miscellaneous for payments to directors and
other service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
3. COMPENSATION
The Company, on behalf of the Fund, agrees to pay Firstar for the
performance of the duties listed in this Agreement, the fees and out-of-pocket
expenses as set forth in the attached Exhibit A.
<PAGE>
These fees may be changed from time to time, subject to mutual written
Agreement between the Company and Firstar.
The Company agrees to pay all fees and reimbursable expenses within ten
(10) business days following the receipt of the billing notice.
4. PERFORMANCE OF SERVICE; LIMITATION OF LIABILITY
A. Firstar shall exercise reasonable care in the performance of its duties
under this Agreement. Firstar shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company in connection with
matters to which this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power supplies beyond
Firstar's control, except a loss resulting from Firstar's refusal or failure to
comply with the terms of this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance of its duties under this
Agreement. Notwithstanding any other provision of this Agreement, the Company
shall indemnify and hold harmless Firstar from and against any and all claims,
demands, losses, expenses, and liabilities (whether with or without basis in
fact or law) of any and every nature (including reasonable attorneys' fees)
which Firstar may sustain or incur or which may be asserted against Firstar by
any person arising out of any action taken or omitted to be taken by it in
performing the services hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral instruction provided to
Firstar by any duly authorized officer of the Company, such duly authorized
officer to be included in a list of authorized officers furnished to Firstar and
as amended from time to time in writing by resolution of the Board of Directors
of the Company.
Firstar shall indemnify and hold the Company harmless from and
against any and all claims, demands, losses, expenses, and liabilities (whether
with or without basis in fact or law) of any and every nature (including
reasonable attorneys' fees) which the Company may sustain or incur or which may
be asserted against the Company by any person arising out of any action taken or
omitted to be taken by Firstar as a result of Firstar's refusal or failure to
comply with the terms of this Agreement, its bad faith, negligence, or willful
misconduct.
In the event of a mechanical breakdown or failure of communication
or power supplies beyond its control, Firstar shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond Firstar's control. Firstar will make every reasonable effort to restore
any lost or damaged data and correct any errors resulting from such a breakdown
at the expense of Firstar. Firstar agrees that it shall, at all times, have
reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of the Company shall
be entitled to inspect Firstar's premises and operating capabilities at any time
during regular business hours of Firstar, upon reasonable notice to Firstar.
Regardless of the above, Firstar reserves the right to reprocess and
correct administrative errors at its own expense.
<PAGE>
B. In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the indemnitor may be asked to
indemnify or hold the indemnitee harmless, the indemnitor shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will use all reasonable care to
notify the indemnitor promptly concerning any situation which presents or
appears likely to present the probability of a claim for indemnification. The
indemnitor shall have the option to defend the indemnitee against any claim
which may be the subject of this indemnification. In the event that the
indemnitor so elects, it will so notify the indemnitee and thereupon the
indemnitor shall take over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or other expenses for which it
shall seek indemnification under this section. The indemnitee shall in no case
confess any claim or make any compromise in any case in which the indemnitor
will be asked to indemnify the indemnitee except with the indemnitor's prior
written consent.
5. PROPRIETARY AND CONFIDENTIAL INFORMATION
Firstar agrees on behalf of itself and its directors, officers, and
employees to treat confidentially and as proprietary information of the Company
all records and other information relative to the Company and prior, present, or
potential shareholders of the Company (and clients of said shareholders), and
not to use such records and information for any purpose other than the
performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Company, which approval shall not
be unreasonably withheld and may not be withheld where Firstar may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Company.
6. DATA NECESSARY TO PERFORM SERVICES
The Company or its agent, which may be Firstar, shall furnish to Firstar
the data necessary to perform the services described herein at times and in such
form as mutually agreed upon.
7. TERM OF AGREEMENT
This Agreement shall become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue automatically in effect for
successive two year periods. The Agreement may be terminated by either party
upon giving ninety (90) days prior written notice to the two year anniversary to
the other party.
If the Company elects to terminate this Agreement prior to the two year
anniversary of this Agreement, for reasons other than unacceptable service
levels, the Company agrees to reimburse Firstar for the difference between the
termination date and the anniversary date in the two year fees based on the
current fees of the Company.
<PAGE>
8. NOTICES
Notices of any kind to be given by either party to the other party shall
be in writing and shall be duly given if mailed or delivered as follows: Notice
to Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
Legacy Funds, Inc.
61 Broadway
New York, NY 10006-2802
Attn: Corporate Secretary
9. DUTIES IN THE EVENT OF TERMINATION
In the event that, in connection with termination, a successor to any of
Firstar's duties or responsibilities hereunder is designated by the Company by
written notice to Firstar, Firstar will promptly, upon such termination and at
the expense of the Company, transfer to such successor all relevant books,
records, correspondence, and other data established or maintained by Firstar
under this Agreement in a form reasonably acceptable to the Company (if such
form differs from the form in which Firstar has maintained, the Company shall
pay any expenses associated with transferring the data to such form), and will
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Firstar's personnel in the establishment of books,
records, and other data by such successor.
10. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation promulgated by the Securities and Exchange Commission
thereunder.
11. RECORDS
Firstar shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem advisable
and is agreeable to the Company but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
the 1940 Act and the rules thereunder. Firstar agrees that all such records
prepared or maintained by Firstar relating to the services to be performed by
Firstar hereunder are the property of the Company and will be preserved,
maintained, and made available in accordance with such section and rules of the
1940 Act and will be promptly surrendered to the Company on and in accordance
with its request.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by a duly authorized officer in one or more counterparts as of the day
and year first written above.
XYZ FUNDS, INC. FIRSTAR MUTUAL FUND
By: By:
------------------------------- -------------------------------
Print: Print:
---------------------------- ----------------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
----------------------------- -----------------------------
Attest: Attest:
--------------------------- ---------------------------
<PAGE>
FUND ADMINISTRATION AND COMPLIANCE
ANNUAL FEE SCHEDULE - DOMESTIC FUNDS
EXHIBIT A
Separate Series of XYZ Funds, Inc.
NAME OF SERIES DATE ADDED
----------------------------------
XYZ Fund August 2, 1999
Class A
Annual fee based upon average assets per Fund
7 basis points on the first $200 million
6 basis points on the next $500 million
4 basis points on the balance
Minimum annual fee: $30,000 per Fund or Class
Plus out-of-pocket expense reimbursements, including but not limited to:
Postage
Programming
Stationery
Proxies
Retention of records
Special reports
Federal and state regulatory filing fees
Certain insurance premiums
Expenses from board of directors meetings
Auditing and legal expenses
Fees and out-of-pocket expense reimbursements are billed to the Fund monthly.
EXHIBIT 23(H)(2)
FUND ACCOUNTING SERVICING AGREEMENT
<PAGE>
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of
August, 1999, by and between XYZ Funds, Inc., a Maryland corporation
(hereinafter referred to as the "Company"), and Firstar Mutual Fund Services,
LLC, a Wisconsin limited liability company (hereinafter referred to as
"Firstar").
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create separate series, each
with its own separate investment portfolio;
WHEREAS, Firstar is in the business of providing, among other
things, mutual fund accounting services to investment companies; and
WHEREAS, the Company desires to retain Firstar to provide accounting
services to the XYZ Fund and each additional series of the Company listed on
Exhibit A attached hereto (each, a "Fund"), as it may be amended from time to
time.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Company and Firstar agree as follows:
1. APPOINTMENT OF FUND ACCOUNTANT
The Company hereby appoints Firstar as Fund Accountant of the Company on
the terms and conditions set forth in this Agreement, and Firstar hereby accepts
such appointment and agrees to perform the services and duties set forth in this
Agreement in consideration of the compensation provided for herein.
2. DUTIES AND RESPONSIBILITIES OF FIRSTAR
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis using
security trade information communicated from the investment manager.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Directors of the Company and apply those
prices to the portfolio positions. For those securities where market
quotations are not readily available, the Board of Directors of the
Company shall approve, in good faith, the method for determining the fair
value for such securities.
(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments for the
accounting period.
<PAGE>
(4) Determine gain/loss on security sales and identify them
as, short-term or long-term; account for periodic distributions of gains
or losses to shareholders and maintain undistributed gain or loss balances
as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Company as to methodology, rate or dollar
amount.
(2) Record payments for Fund expenses upon receipt of written
authorization from the Company.
(3) Account for Fund expenditures and maintain expense accrual
balances at the level of accounting detail, as agreed upon by Firstar and
the Company.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for Fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other Fund share activity as
reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Company.
(3) Determine net investment income (earnings) for the Fund as
of each valuation date. Account for periodic distributions of earnings to
shareholders and maintain undistributed net investment income balances as
of each valuation date.
(4) Maintain a general ledger and other accounts, books, and
financial records for the Fund in the form as agreed upon.
(5) Determine the net asset value of the Fund according to the
accounting policies and procedures set forth in the Fund's Prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of Fund operations at
such time as required by the nature and characteristics of the Fund.
(7) Communicate, at an agreed upon time, the per share price
for each valuation date to parties as agreed upon from time to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
<PAGE>
D. Tax Accounting Services:
(1) Maintain accounting records for the investment portfolio
of the Fund to support the tax reporting required for IRS-defined
regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using the
tax lot relief method designated by the Company.
(4) Provide the necessary financial information to support the
taxable components of income and capital gains distributions to the
transfer agent to support tax reporting to the shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the Fund's accounting records
available to the Company, the Securities and Exchange Commission, and the
outside auditors.
(2) Maintain accounting records according to the 1940 Act and
regulations provided thereunder.
3. PRICING OF SECURITIES
For each valuation date, obtain prices from a pricing source selected by
Firstar but approved by the Company's Board of Directors and apply those prices
to the portfolio positions of the Fund. For those securities where market
quotations are not readily available, the Company's Board of Directors shall
approve, in good faith, the method for determining the fair value for such
securities.
If the Company desires to provide a price which varies from the pricing
source, the Company shall promptly notify and supply Firstar with the valuation
of any such security on each valuation date. All pricing changes made by the
Company will be in writing and must specifically identify the securities to be
changed by CUSIP, name of security, new price or rate to be applied, and, if
applicable, the time period for which the new price(s) is/are effective.
4. CHANGES IN ACCOUNTING PROCEDURES
Any resolution passed by the Board of Directors of the Company that
affects accounting practices and procedures under this Agreement shall be
effective upon written receipt and acceptance by the Firstar.
<PAGE>
5. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC.
Firstar reserves the right to make changes from time to time, as it deems
advisable, relating to its services, systems, programs, rules, operating
schedules and equipment, so long as such changes do not adversely affect the
service provided to the Company under this Agreement.
6. COMPENSATION
Firstar shall be compensated for providing the services set forth in this
Agreement in accordance with the Fee Schedule attached hereto as Exhibit A and
as mutually agreed upon and amended from time to time. The Company agrees to pay
all fees and reimbursable expenses within ten (10) business days following the
receipt of the billing notice.
7. PERFORMANCE OF SERVICE; LIMITATION OF LIABILITY
A. Firstar shall exercise reasonable care in the performance of its
duties under this Agreement. Firstar shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Company in
connection with matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of communication or
power supplies beyond Firstar's control, except a loss resulting from
Firstar's refusal or failure to comply with the terms of this Agreement or
from bad faith, negligence, or willful misconduct on its part in the
performance of its duties under this Agreement. Notwithstanding any other
provision of this Agreement, the Company shall indemnify and hold harmless
Firstar from and against any and all claims, demands, losses, expenses,
and liabilities (whether with or without basis in fact or law) of any and
every nature (including reasonable attorneys' fees) which Firstar may
sustain or incur or which may be asserted against Firstar by any person
arising out of any action taken or omitted to be taken by it in performing
the services hereunder (i) in accordance with the foregoing standards, or
(ii) in reliance upon any written or oral instruction provided to Firstar
by any duly authorized officer of the Company, such duly authorized
officer to be included in a list of authorized officers furnished to
Firstar and as amended from time to time in writing by resolution of the
Board of Directors of the Company.
Firstar shall indemnify and hold the Company harmless from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which the Company may sustain or
incur or which may be asserted against the Company by any person arising
out of any action taken or omitted to be taken by Firstar as a result of
Firstar's refusal or failure to comply with the terms of this Agreement,
its bad faith, negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of communication
or power supplies beyond its control, Firstar shall take all reasonable
steps to minimize service interruptions for any period that such
interruption continues beyond Firstar's control. Firstar will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of Firstar. Firstar
agrees that it shall, at all times, have reasonable contingency plans with
<PAGE>
appropriate parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate equipment
is available. Representatives of the Company shall be entitled to inspect
Firstar's premises and operating capabilities at any time during regular
business hours of Firstar, upon reasonable notice to Firstar.
Regardless of the above, Firstar reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the indemnitor
may be asked to indemnify or hold the indemnitee harmless, the indemnitor
shall be fully and promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that the indemnitee
will use all reasonable care to notify the indemnitor promptly concerning
any situation which presents or appears likely to present the probability
of a claim for indemnification. The indemnitor shall have the option to
defend the indemnitee against any claim which may be the subject of this
indemnification. In the event that the indemnitor so elects, it will so
notify the indemnitee and thereupon the indemnitor shall take over
complete defense of the claim, and the indemnitee shall in such situation
initiate no further legal or other expenses for which it shall seek
indemnification under this section. Indemnitee shall in no case confess
any claim or make any compromise in any case in which the indemnitor will
be asked to indemnify the indemnitee except with the indemnitor's prior
written consent.
8. NO AGENCY RELATIONSHIP
Nothing herein contained shall be deemed to authorize or empower Firstar
to act as agent for the other party to this Agreement, or to conduct business in
the name of, or for the account of the other party to this Agreement.
9. RECORDS
Firstar shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem advisable
and is agreeable to the Company but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
the 1940 Act, and the rules thereunder. Firstar agrees that all such records
prepared or maintained by Firstar relating to the services to be performed by
Firstar hereunder are the property of the Company and will be preserved,
maintained, and made available in accordance with such section and rules of the
1940 Act and will be promptly surrendered to the Company on and in accordance
with its request.
10. DATA NECESSARY TO PERFORM SERVICES
The Company or its agent, which may be Firstar, shall furnish to Firstar
the data necessary to perform the services described herein at such times and in
such form as mutually agreed upon. If Firstar is also acting as the transfer
<PAGE>
agent for the Company, nothing herein shall be deemed to relieve Firstar of any
of its obligations under the Transfer Agent Servicing Agreement.
11. NOTIFICATION OF ERROR
The Company will notify Firstar of any balancing or control error caused
by Firstar within three (3) business days after receipt of any reports rendered
by Firstar to the Company, or within three (3) business days after discovery of
any error or omission not covered in the balancing or control procedure, or
within three (3) business days of receiving notice from any shareholder.
12. PROPRIETARY AND CONFIDENTIAL INFORMATION
Firstar agrees on behalf of itself and its directors, officers, and
employees to treat confidentially and as proprietary information of the Company
all records and other information relative to the Company and prior, present, or
potential shareholders of the Company (and clients of said shareholders), and
not to use such records and information for any purpose other than the
performance of its responsibilities and duties hereunder, except after prior
notification to and approval in writing by the Company, which approval shall not
be unreasonably withheld and may not be withheld where Firstar may be exposed to
civil or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Company.
13. TERM OF AGREEMENT
This Agreement shall become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue automatically in effect for
successive two year periods. This Agreement may be terminated by either party
upon giving ninety (90) days prior written notice to the two year anniversary to
the other party.
If the Company elects to terminate this Agreement prior to the two year
anniversary date of this Agreement, for reasons other than unacceptable service
levels, the Company agrees to reimburse Firstar for the difference between the
termination date and the anniversary date in the two year fees based on the
current fees of the Company.
14. NOTICES
Notices of any kind to be given by either party to the other party shall
be in writing and shall be duly given if mailed or delivered as follows: Notice
to Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
<PAGE>
and notice to the Company shall be sent to:
Legacy Funds, Inc.
61 Broadway
New York, N.Y. 10006-2802
Attn: Corporate Secretary
15. DUTIES IN THE EVENT OF TERMINATION
In the event that in connection with termination, a successor to any of
Firstar's duties or responsibilities hereunder is designated by the Company by
written notice to Firstar, Firstar will promptly, upon such termination and at
the expense of the Company transfer to such successor all relevant books,
records, correspondence and other data established or maintained by Firstar
under this Agreement in a form reasonably acceptable to the Company (if such
form differs from the form in which Firstar has maintained the same, the Company
shall pay any expenses associated with transferring the same to such form), and
will cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Firstar's personnel in the establishment of books,
records and other data by such successor.
16. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Wisconsin. However, nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or regulation promulgated by the SEC
thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by a duly authorized officer in one or more counterparts as of the
day and year first written above.
XYZ FUNDS, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
By: By:
------------------------------- -------------------------------
Print: Print:
---------------------------- ----------------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
----------------------------- -----------------------------
Attest: Attest:
--------------------------- ---------------------------
<PAGE>
FUND ACCOUNTING SERVICES
ANNUAL FEE SCHEDULE
EXHIBIT A
Separate Series of XYZ Funds, Inc.
NAME OF SERIES DATE ADDED
- ----------------------------------
XYZ Fund August 2, 1999
Domestic Equity Funds
$22,000 for the first $40 million
1 basis point on the next $200 million
1/2 basis point on the balance
Each class is an additional 25% of the charge of the initial class.
Fees and out-of-pocket expenses are billed to the Fund monthly.
EXHIBIT 23(H)(3)
TRANSFER AGENT SERVICING AGREEMENT
<PAGE>
TRANSFER AGENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this 2nd day of August,
1999, by and between XYZ Funds, Inc., a Maryland corporation (hereinafter
referred to as the "Company"), and Firstar Mutual Fund Services, LLC, a
Wisconsin limited liability company (hereinafter referred to as the "Firstar").
WHEREAS, the Company is an open-end management investment company which is
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create separate series, each with
its own separate investment portfolio;
WHEREAS, Firstar is in the business of administering transfer and dividend
disbursing agent functions for investment companies; and
WHEREAS, the Company desires to retain Firstar to provide transfer and
dividend disbursing agent services to the XYZ Fund and each additional series of
the Company listed on Exhibit A attached hereto (each, a "Fund"), as may be
amended from time to time.
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and Firstar agree as follows:
1. APPOINTMENT OF TRANSFER AGENT
The Company hereby appoints Firstar as Transfer Agent of the Company on
the terms and conditions set forth in this Agreement, and Firstar hereby accepts
such appointment and agrees to perform the services and duties set forth in this
Agreement in consideration of the compensation provided for herein.
2. DUTIES AND RESPONSIBILITIES OF FIRSTAR
Firstar shall perform all of the customary services of a transfer agent
and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders with prompt delivery, where appropriate, of
payment and supporting documentation to the Company's custodian, and
issue the appropriate number of uncertificated shares with such
uncertificated shares being held in the appropriate shareholder
account;
<PAGE>
C. Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Company's
custodian;
D. Pay monies upon receipt from the Company's custodian, where
relevant, in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareholder's
instructions;
F. Process exchanges between funds and/or classes of shares of funds
both within the same family of funds and with the Firstar Money
Market Funds, if applicable;
G. Prepare and transmit payments for dividends and distributions
declared by the Company with respect to the Fund;
H. Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
I. Record the issuance of shares of the Fund and maintain, pursuant to
Rule 17ad-10(e) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), a record of the total number
of shares of the Fund which are authorized, issued and outstanding;
J. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
K. Mail shareholder reports and prospectuses to current shareholders;
L. Prepare and file U.S. Treasury Department Forms 1099 and other
appropriate information returns required with respect to dividends
and distributions for all shareholders;
M. Provide shareholder account information upon request and prepare and
mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed
upon with the Company;
N. Provide a Blue Sky System which will enable the Company to
monitor the total number of shares of the Fund sold in each
state. In addition, the Company or its agent, including Firstar,
shall identify to Firstar in writing those transactions and
assets to be treated as exempt from the Blue Sky reporting for
each state. The responsibility of Firstar for the Company's Blue
Sky state registration status under this Agreement is solely
limited to the initial compliance by the Company and the
reporting of such transactions to the Company or its agent.
<PAGE>
O. Answer telephone calls and correspondence from shareholders
relating to their accounts during Firstar's normal business
hours. Firstar shall strive to promptly respond to all such
telephone or written inquiries from shareholders. Copies of all
correspondence from shareholders involving complaints about the
management of the Company, services provided by or for the
Company, Firstar or others, shall be promptly forwarded to the
Company. Firstar shall keep records of substantive shareholder
telephone calls and correspondence and replies thereto, and of
the lapse of time between receipt of such calls and
correspondence and replies.
P. Prepare such reports as may be reasonably requested from time to
time by the Company or its Board of Directors relating to fees paid
out under a Fund's Rule 12b-1 plan.
3. COMPENSATION
The Company agrees to pay Firstar for the performance of the duties listed
in this Agreement as set forth on Exhibit A attached hereto; the fees and
out-of-pocket expenses include, but are not limited to the following: printing,
postage, forms, stationery, record retention (if requested by the Company),
mailing, insertion, programming (if requested by the Company), labels,
shareholder lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Company and Firstar.
The Company agrees to pay all fees and reimbursable expenses within ten
(10) business days following the receipt of the billing notice.
4. REPRESENTATIONS OF FIRSTAR
Firstar represents and warrants to the Company that:
A. It is a limited liability company duly organized, existing and in
good standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Exchange Act.
C. It is duly qualified to carry on its business in the State of
Wisconsin;
D. It is empowered under applicable laws and by its charter and bylaws
to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize it
to enter and perform this Agreement;
<PAGE>
F. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement; and
G. It will comply with all applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act"), and the Exchange
Act, the 1940 Act, and any laws, rules, and regulations of
governmental authorities having jurisdiction.
5. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to Firstar that:
A. The Company is an open-end diversified investment company under
the 1940 Act;
B. The Company is a corporation organized, existing, and in good
standing under the laws of Maryland;
C. The Company is empowered under applicable laws and by its Articles
of Incorporation and Bylaws to enter into and perform this
Agreement;
D. All necessary proceedings required by the Articles of Incorporation
have been taken to authorize it to enter into and perform this
Agreement;
E. The Company will comply with all applicable requirements of the
Securities Act, the Exchange Act, the 1940 Act, and any laws, rules
and regulations of governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act will be made
effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made,
with respect to all shares of the Company being offered for sale.
6. COVENANTS OF THE COMPANY AND FIRSTAR
The Company shall furnish Firstar a certified copy of the resolution of
the Board of Directors of the Fund authorizing the appointment of Firstar and
the execution of this Agreement. The Company shall provide to Firstar a copy of
its Articles of Incorporation and Bylaws, and all amendments thereto.
Firstar shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable and as required under
the Exchange Act. To the extent required by Section 31 of the 1940 Act, and the
rules thereunder, Firstar agrees that all such records prepared or maintained by
Firstar relating to the services to be performed by Firstar hereunder are the
property of the Company and will be preserved, maintained and made available in
<PAGE>
accordance with such section and rules and will be surrendered to the Company on
and in accordance with its request.
7. PERFORMANCE OF SERVICE; LIMITATION OF LIABILITY
Firstar shall exercise reasonable care in the performance of its duties
under this Agreement. Firstar shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company in connection with
matters to which this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power supplies beyond
Firstar's control, except a loss resulting from Firstar's refusal or failure to
comply with the terms of this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance of its duties under this
Agreement. Notwithstanding any other provision of this Agreement, the Company
shall indemnify and hold harmless Firstar from and against any and all claims,
demands, losses, expenses, and liabilities (whether with or without basis in
fact or law) of any and every nature (including reasonable attorneys' fees)
which Firstar may sustain or incur or which may be asserted against Firstar by
any person arising out of any action taken or omitted to be taken by it in
performing the services hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral instruction provided to
Firstar by any duly authorized officer of the Company, such duly authorized
officer to be included in a list of authorized officers furnished to Firstar and
as amended from time to time in writing by resolution of the Board of Directors
of the Company.
Firstar shall indemnify and hold the Company harmless from and against any
and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which the Company may sustain or incur or which may be asserted
against the Company by any person arising out of any action taken or omitted to
be taken by Firstar as a result of Firstar's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence, or willful misconduct.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, Firstar shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond Firstar's control. Firstar will make every reasonable effort to restore
any lost or damaged data and correct any errors resulting from such a breakdown
at the expense of Firstar. Firstar agrees that it shall, at all times, have
reasonable contingency plans with appropriate parties, making reasonable
provision for emergency use of electrical data processing equipment to the
extent appropriate equipment is available. Representatives of the Company shall
be entitled to inspect Firstar's premises and operating capabilities at any time
during regular business hours of Firstar, upon reasonable notice to Firstar.
Regardless of the above, Firstar reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the indemnitor may be asked to
<PAGE>
indemnify or hold the indemnitee harmless, the indemnitor shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will use all reasonable care to
notify the indemnitor promptly concerning any situation which presents or
appears likely to present the probability of a claim for indemnification. The
indemnitor shall have the option to defend the indemnitee against any claim
which may be the subject of this indemnification. In the event that the
indemnitor so elects, it will so notify the indemnitee and thereupon the
indemnitor shall take over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or other expenses for which it
shall seek indemnification under this section. The indemnitee shall in no case
confess any claim or make any compromise in any case in which the indemnitor
will be asked to indemnify the indemnitee except with the indemnitor's prior
written consent.
8. PROPRIETARY AND CONFIDENTIAL INFORMATION
Firstar agrees on behalf of itself and its directors, officers, and
employees to treat confidentially and as proprietary information of the Company
all records and other information relative to the Company and prior, present, or
potential shareholders (and clients of said shareholders) and not to use such
records and information for any purpose other than the performance of its
responsibilities and duties hereunder, except after prior notification to and
approval in writing by the Company, which approval shall not be unreasonably
withheld and may not be withheld where Firstar may be exposed to civil or
criminal contempt proceedings for failure to comply after being requested to
divulge such information by duly constituted authorities, or when so requested
by the Company.
9. TERM OF AGREEMENT; AMENDMENT
This Agreement shall become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue automatically in effect for
successive two year periods. The Agreement may be terminated by either party
upon giving ninety (90) days prior written notice to the two year anniversary
date.
If the Company elects to terminate this Agreement prior to the two year
anniversary of this Agreement, for reasons other than unacceptable service
levels, the Company agrees to reimburse Firstar for the difference between the
termination date and the anniversary date in two year fees based on the current
fees of the Company.
10. NOTICES
Notices of any kind to be given by either party to the other party shall
be in writing and shall be duly given if mailed or delivered as follows: Notice
to Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
<PAGE>
and notice to the Company shall be sent to:
Legacy Funds, Inc.
61 Broadway
New York, NY 10006-2802
Attention: Corporate Secretary
11. DUTIES IN THE EVENT OF TERMINATION
In the event that, in connection with termination, a successor to any of
Firstar's duties or responsibilities hereunder is designated by the Company by
written notice to Firstar, Firstar will promptly, upon such termination and at
the expense of the Company, transfer to such successor all relevant books,
records, correspondence, and other data established or maintained by Firstar
under this Agreement in a form reasonably acceptable to the Company (if such
form differs from the form in which Firstar has maintained, the Company shall
pay any expenses associated with transferring the data to such form), and will
cooperate in the transfer of such duties and responsibilities, including
provision for assistance from Firstar's personnel in the establishment of books,
records, and other data by such successor.
12. GOVERNING LAW
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation promulgated by the Securities and Exchange Commission
thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by a duly authorized officer in one or more counterparts as of the day and year
first written above.
XYZ FUNDS, INC. FIRSTAR MUTUAL FUND
SERVICES, LLC
By: By:
------------------------------- -------------------------------
Print: Print:
---------------------------- ----------------------------
Title: Title:
---------------------------- ----------------------------
Date: Date:
----------------------------- -----------------------------
Attest: Attest:
--------------------------- ---------------------------
<PAGE>
TRANSFER AGENT AND SHAREHOLDER SERVICING
LOAD FUND ANNUAL FEE SCHEDULE
EXHIBIT A
Separate Series of XYZ Funds, Inc.
NAME OF SERIES DATE ADDED
-----------------------------------------------
XYZ Fund August 2, 1999
Class A
Annual Fee
$16.00 per shareholder account
Minimum annual fees of $25,000 for the first fund and $15,000 for
each additional fund
Plus Out-of-Pocket Expenses, including but not limited to:
Telephone - toll-free lines Proxies
Postage Retention of records
(with prior approval)
Programming (with prior approval) Microfilm/fiche of records
Stationery/envelopes Special reports
Mailing ACH fees
Insurance NSCC charges
ACH Shareholder Services
$125.00 per month per Fund group
$ .50 per account setup and/or change
$ .50 per ACH item
$ .50 per item for EFT payments and purchases
$ 3.50 per correction, reversal, return item
$1.00 per shareholder call
Qualified Plan Fees (Billed to Investors)
Annual maintenance fee per account $12.50/acct.(Cap at $25.00
per SSN)
Transfer to successor trustee $15.00/trans.
Distribution to participant $15.00/trans.(Exclusive of
SWP)
Refund of excess contribution $15.00/trans.
Additional Shareholder Fees (Billed to Investors)
Any outgoing wire transfer $12.00/wire
Telephone Exchange $ 5.00/exchange transaction
Return check fee $20.00/item
Stop payment $20.00/stop
(Liquidation, dividend, draft check)
Research fee $ 5.00/item
(For requested items of the second calendar year [or previous] to the
request)(Cap at $25.00)
<PAGE>
NSCC
OUT-OF-POCKET CHARGES
NSCC Interfaces
Setup
Fund/SERV, Networking ACATS, Exchanges $5,000 setup (one time)
DCCS, RAT
Commissions $5,000 setup (one time)
Processing
Fund/SERV $ 50/month
Networking $250/month
CPU Access $ 40/month
Fund/SERV Transactions $.350/trade
Networking - per item $.025/monthly dividend fund
Networking - per item $.015/non-mo. dividend fund
First Data $.100/next-day Fund/SERV trade
First Data $.150/same-day Fund/SERV trade
NSCC Implementation
8 to 10 weeks lead time
Fees and out-of-pocket expenses are billed to the Fund monthly.
<PAGE>
ADDITIONAL OUT-OF-POCKET EXPENSES
Database Select Requests $200 per select request
Postage $.31 per one ounce pre-sort
first class envelope
Shareholder Records Search $3.00 per search of lost
shareholder (based upon 2
returned mail items)
PAR System Restore $1,500 per restore
Data and Report Transmission
Monthly Service and Support $160 per month
Per Record Transmitted $.01 per record
New Fund Programming
Fund Group Setup $2,000 per fund group
Fund Addition to Existing Group $1,000 per fund
Additional Classes of Existing Fund $250 per class
Additional Programming $150 per hour
EXHIBIT 23(M)
DISTRIBUTION PLAN
<PAGE>
THE LEGACY FUNDS, INC.
DISTRIBUTION PLAN
Introduction
------------
The Distribution and Service Plan (the Plan) set forth below which is
designed to conform to the requirements of Rule 12b-1 under the Investment
Company Act of 1940 (the Investment Company Act) and Rule 2830 of the Conduct
Rules of the National Association of Securities Dealers, Inc. (NASD) has been
adopted by The Legacy Funds, Inc. (the Fund) and by Ingalls & Snyder LLC, the
Fund's distributor (the Distributor).
The Fund has entered into a distribution agreement pursuant to which the
Fund will employ the Distributor to distribute [Class A] shares issued by the
Fund ([Class A] shares). Under the Plan, the Fund wishes to pay to the
Distributor, as compensation for its services, a distribution and service fee
with respect to [Class A] shares.
A majority of the Board of Trustees of the Fund, including a majority who
are not "interested persons" of the Fund (as defined in the Investment Company
Act) and who have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it (the Rule 12b-1 Trustees), have
determined by votes cast in person at a meeting called for the purpose of voting
on this Plan that adoption of the Plan would be prudent and in the best interest
of the Fund and its shareholders. Such approval included a determination that,
in the exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that adoption and
continuation of this Plan will benefit the Fund and its shareholders.
Expenditures under this Plan by the Fund for Distribution Activities (defined
below) are primarily intended to result in the sale of [Class A] shares of the
Fund within the meaning of paragraph (a)(2) of Rule 12b-1 promulgated under the
Investment Company Act.
The purpose of the Plan is to create incentives to the Distributor and/or
other qualified broker-dealers and their account executives to provide
distribution assistance to their customers who are investors in the Fund, to
defray the costs and expenses associated with the preparation, printing and
distribution of prospectuses and sales literature and other promotional and
distribution activities and to provide for the servicing and maintenance of
shareholder accounts.
The Plan
--------
The material aspects of the Plan are as follows:
1. Distribution Activities
The Fund shall engage the Distributor to distribute [Class A] shares of
the Fund and to service shareholder accounts using all of the facilities of the
<PAGE>
Distributor's distribution network including sales personnel and branch office
and central support systems, and also using such other qualified broker-dealers
and financial institutions as the Distributor may select, including Ingalls &
Snyder LLC (Ingalls & Snyder). Services provided and activities undertaken to
distribute [Class A] shares of the Fund are referred to herein as "Distribution
Activities."
[2. Reimbursement of Expenses]
[(a) The Fund shall reimburse the Investment Adviser, the Distributor or
others for expenses incurred by such parties in the promotion and distribution
of the shares of the Fund, including but not limited to, the printing of
prospectuses and reports used for sales purposes, expenses of preparation of
sales literature and related expenses, advertisements, and other
distribution-related expenses, as well as any distribution fees paid to
securities dealers or others who have executed a servicing agreement with the
Fund or the Distributor on behalf of the Fund, which form of agreement has been
approved from time to time by the Board, including the Rule 12b-1 Trustees.]
[(b) The maximum amount which may be reimbursed by the Fund pursuant to
this Plan shall be 0.25% per annum of the Fund's average daily net assets. Such
reimbursement shall be paid on a monthly or quarterly basis as determined by the
Board. In no event, shall the payments made under this Plan, plus any other
payments deemed to be made pursuant to the Plan, exceed the amount permitted to
be paid pursuant to the Conduct Rules of the National Association of Securities
Dealers, Inc.]
3. Payment for Distribution Activities
The Fund shall pay to the Distributor as compensation for its services a
distribution fee [of .75] of 1% per annum of the average daily net assets of the
[Class A] shares of the Fund for the performance of Distribution Activities. The
Fund shall calculate and accrue daily amounts payable by the [Class A] shares of
the Fund hereunder and shall pay such amounts monthly or at such other intervals
as the Board of Trustees may determine. Amounts payable under the Plan shall be
subject to the limitations of Rule 2830 of the NASD Conduct Rules.
Amounts paid to the Distributor by the [Class A] shares of the Fund will
not be used to pay the distribution expenses incurred with respect to any other
class of shares of the Fund except that distribution expenses attributable to
the Fund as a whole will be allocated to the [Class A] shares according to the
ratio of the sale of [Class A] shares to the total sales of the Fund's shares
over the Fund's fiscal year or such other allocation method approved by the
Board of Trustees. The allocation of distribution expenses among classes will be
subject to the review of the Board of Trustees. [Payments hereunder will be
applied to distribution expenses in the order in which they are incurred, unless
otherwise determined by the Board of Trustees.]
The Distributor shall spend such amounts as it deems appropriate on
Distribution Activities which include, among others:
(a) sales commissions (including trailer commissions) paid to, or on
account of, account executives of the Distributor;
<PAGE>
(b) indirect and overhead costs of the Distributor associated with
performance of Distribution Activities including central office and branch
expenses;
[(c) amounts paid to Ingalls & Snyder for performing services under a
selected dealer agreement between Ingalls & Snyder and the Distributor for sale
of [Class A] shares of the Fund, including sales commissions and trailer
commissions paid to, or on account of, agents and indirect and overhead costs
associated with Distribution Activities;]
(d) advertising for the Fund in various forms through any available
medium, including the cost of printing and mailing Fund prospectuses, statements
of additional information and periodic financial reports and sales literature to
persons other than current shareholders of the Fund; and
(e) sales commissions (including trailer commissions) paid to, or on
account of, broker-dealers and other financial institutions (other than Ingalls
& Snyder) which have entered into selected dealer agreements with the
Distributor with respect to [Class A] shares of the Fund.
4. Quarterly Reports; Additional Information
[An appropriate officer of the Fund or The Investment Adviser and
Distributor] will provide to the Board of Trustees of the Fund for review, at
least quarterly, a written report specifying in reasonable detail the amounts
expended for Distribution Activities ([including payment of reimbursements]) and
the purposes for which such expenditures were made in compliance with the
requirements of Rule 12b-1. The Distributor will provide to the Board of
Trustees of the Fund such additional information as they shall from time to time
reasonably request, including information about Distribution Activities
undertaken or to be undertaken by the Distributor.
The Distributor will inform the Board of Trustees of the Fund of the
commissions and account servicing fees to be paid by the Distributor to account
executives of the Distributor and to broker-dealers and other financial
institutions which have selected dealer agreements with the Distributor.
5. Effectiveness; Continuation
The Plan shall continue in effect for a period of more than one year only
so long as such continuance is specifically approved at least annually by the
Fund's Board of Trustees, including the Rule 12b-1 Trustees, cast in person at a
meeting called for the purpose of voting on the Plan.
[If approved by a vote of a majority of the outstanding voting securities
of the [Class A] shares of the Fund, the Plan shall, unless earlier terminated
in accordance with its terms, continue in full force and effect thereafter for
so long as such continuance is specifically approved at least annually by a
majority of the Board of Trustees of the Fund and a majority of the Rule 12b-1
Trustees by votes cast in person at a meeting called for the purpose of voting
on the continuation of the Plan.]
<PAGE>
6. Termination
This Plan may be terminated at any time [on not more than sixty (60) days'
written notice] by (a) the vote of a majority of the Rule 12b-1 Trustees, [(b)
the vote of a majority of the outstanding voting securities (as defined in the
Investment Company Act) of the [Class A] shares of the Fund, or (c) the
Distributor, and shall terminate automatically in the event of any act that
constitutes an assignment of the investment management agreement between the
Fund on behalf of the Fund and the Investment Adviser.]
7. Amendments
The Plan may not be amended to change the distribution expenses to be paid
so as to increase materially the amounts payable under this Plan unless such
amendment shall be approved by the vote of a majority of the outstanding voting
securities (as defined in the Investment Company Act) of the [Class A] shares of
the Fund. All material amendments of the Plan shall be approved by a majority of
the Board of Trustees of the Fund and a majority of the Rule 12b-1 Trustees by
votes cast in person at a meeting called for the purpose of voting on the Plan.
8. Rule 12b-1 Trustees.
While the Plan is in effect, the selection and nomination of the Rule
12b-1 Trustees shall be committed to the discretion of the Rule 12b-1 Trustees.
9. Records
The Fund shall preserve copies of the Plan and any related agreements and
all reports made pursuant to Section 5 hereof, for a period of not less than six
years from the date of effectiveness of the Plan, such agreements or reports,
and for at least the first two years in an easily accessible place.
10. Effective Date
This Plan shall take effect on the ____ day of _________, 1999.
