1933 ACT REGISTRATION NO. 333-83871
1940 ACT REGISTRATION NO. 811-09495
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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. ................................ 2
POST-EFFECTIVE AMENDMENT NO. ...............................
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY OF 1940............................... X
AMENDMENT NO. .............................................. 2
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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, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
TITLE OF SECURITIES BEING REGISTERED: SHARES OF BENEFICIAL INTEREST, PAR
VALUE $.001 PER SHARE
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<PAGE>
THE LEGACY FUNDS, INC.
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CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
<S> <C> <C>
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;
Investment Process and
Strategy; Principal Risks
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
Item 7. Shareholder Information........................................... Share Price--Net Asset Value;
Purchasing Shares;
Redeeming 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 Securties ............... Management of the Trust
Item 15. Investment Advisory and Other Services ........................... Management of theTrust;
Service Agreements
Item 16. Brokerage Allocation and Other Practices ......................... Service Agreements; Portfolio
Transactions and Turnover
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
INFORMATION REQUIRED TO BE INCLUDED IN PART C IS SET FORTH UNDER THE
APPROPRIATE ITEM, SO NUMBERED, IN PART C TO THIS REGISTRATION STATEMENT.
</TABLE>
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 27, 1999
LEGACY GROWTH FUND
A diversified fund of growth-oriented equities
having the objective of long term growth in value
PROSPECTUS
[_______________], 1999
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THE LEGACY FUNDS, INC.
61 Broadway
New York, NY 10006
31st Floor
(800) 221-2598
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. This prospectus does not constitute an
offer to sell or the solicitation of an offer to sell securities in any
jurisdiction where the offer or sale is not permitted.
THIS PROSPECTUS CONTAINS INFORMATION YOU SHOULD KNOW BEFORE INVESTING, INCLUDING
INFORMATION ABOUT RISKS. PLEASE READ IT BEFORE YOU INVEST AND KEEP IT FOR FUTURE
REFERENCE.
AS WITH ALL MUTUAL FUNDS, THE U.S. SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Investment Objective 3
Investment Process and Strategy 3
Principal Risks 4
Performance Summary 4
Fees and Expenses 5
Investment Adviser 5
Portfolio Manager 6
Advisory Board 6
Additional Information about the Fund's Investments 7
Additional Risk Information 8
Share Price -- Net Asset Value 10
Purchasing Shares 10
Redeeming Shares 11
Retirement Investing 12
Account Instructions 14
Marketing, Distribution and Administration 15
Distributions and Taxation 15
Inquiries 17
Additional Information 18
<PAGE>
INVESTMENT OBJECTIVE
The objective of the Fund is to achieve long-term growth of capital for
its shareholders.
INVESTMENT PROCESS AND STRATEGY
The Fund's investment adviser, Ingalls & Snyder LLC, was founded in 1924.
The investment adviser regularly monitors the financial and investment outlook
in the United States and abroad in an effort to anticipate and understand
changing business, economic and political trends that may affect the Fund's
investments.
The Fund seeks to invest primarily in a diversified portfolio of common
stocks of growth-oriented companies, i.e. companies whose growth, cash flow and
earnings prospects are promising in the opinion of the Fund's investment
adviser. The investment adviser performs comprehensive research designed to
identify companies that offer attractive investment opportunities. In
particular, the Fund seeks companies having strong balance sheets, highly
capable managements, unique aspects to their businesses (such as unique
products, franchises or unique services), positive and growing cash flows, high
returns on equity and superior rates of growth of earnings over an extended
period. The growth-oriented companies in which the Fund invests consist
primarily of U.S. domestic companies with significant foreign sales or
operations or significant overseas growth opportunities. The investment adviser
believes that investments in these types of companies permit the Fund to
participate in both domestic and overseas growth opportunities without the
additional risks of investing directly in foreign securities. Many growth
companies pay low or no dividends, and investors should not invest in the Fund
for current income.
The majority of the holdings in the Fund will be in large capitalization
common stocks (over $10 billion market capitalization). The Fund also may invest
in foreign securities and securities of medium and small sized companies.
Holdings of medium and small sized companies normally would not represent over
fifteen percent of the net assets of the Fund. Holdings of foreign securities
normally would not represent over ten percent of the Fund's net assets.
Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets in equity securities. However, if the Fund's
investment adviser deems it beneficial for defensive purposes during adverse
market, economic or other conditions, the Fund may invest up to 100% of its
assets temporarily in short-term non-equity securities, such as investment grade
corporate bonds, commercial paper and U.S. government securities. These
defensive actions would reduce the benefit from any upswing in the equity
markets and, if the investment adviser does not correctly anticipate
fluctuations in the equity and debt securities markets, may not contribute to
achieving the Fund's investment objective.
The investment adviser anticipates that it will employ leverage by
borrowing money for the purpose of making additional investments. The Fund may
borrow from banks or other lenders and may enter into reverse repurchase
agreements. The Fund normally will limit borrowings for leverage purposes to a
maximum of ten percent of the net assets of the Fund. Money borrowed is subject
to interest costs.
In the management of the Fund's investments the investment adviser employs
a long term, limited turnover investment approach. The Fund seeks to achieve its
long term growth objective primarily by purchasing and holding common stocks
over an extended period. This limited turnover approach tends to reduce
transaction costs and reduce the realization of short term capital gains which,
when distributed to U.S. shareholders, would be taxable to them as ordinary
income.
This investment approach, however, could result in the accumulation over
time of a substantial amount of unrealized capital gains. If the Fund sells an
investment with substantial unrealized gains, those gains, when distributed to
the shareholders of the Fund will be taxable to U.S. shareholders owning shares
at that time, even though the shareholder may not have been a shareholder of the
Fund during all or a portion of the period during which the unrealized gains
were accumulated.
See "Additional Information about the Fund's Investments" on page 7.
<PAGE>
PRINCIPAL RISKS
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money. The principal risk
factors for the Fund are discussed below. Before you invest, please make sure
you understand the risks that apply to your investment.
MARKET AND INVESTMENT RISKS. 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 growth-oriented 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.
PORTFOLIO STRATEGY RISKS. The Fund's investment success depends on the
skill of the investment adviser in evaluating, selecting and monitoring the
Fund's assets. If the investment adviser's conclusions about growth rates or
stock values are incorrect, the Fund may not perform as anticipated.
RISKS ASSOCIATED WITH FOREIGN OPERATIONS OF PORTFOLIO COMPANIES. To the
extent the Fund invests in companies with significant foreign sales or
operations, the Fund's investments are subject to certain risks of foreign
markets. These risks include, the risk of currency fluctuations,
nationalization, expropriation, confiscatory taxation, political changes and
diplomatic developments that could adversely affect the foreign operations of
companies in which the Fund invests and the value of the Fund's investments.
RISKS OF LEVERAGE. The Fund may employ leverage by borrowing money for the
purpose of making additional investments. This 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
borrowings for leverage purposes to a maximum of ten percent of the net assets
of the Fund. Money borrowed is subject to interest costs.
YEAR 2000 RISKS. 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 1, 2000. This is
commonly known as the "Year 2000 Issue." The Fund has taken steps it believes
are reasonably designed to address the Year 2000 Issue with respect to the
computer systems it uses, and has received representations from its software and
service providers that they have adapted their mission critical customer
applications for a successful conversion to the millennium change date. However,
there can be no assurance that the operations of and services provided to the
Fund and its shareholders will not be adversely affected.
The Year 2000 Issue affects practically all companies, organizations and
markets, including companies in which the Fund invests and the markets in which
they trade. At this time, no one knows precisely what the degree of impact of
the Year 2000 Issue will be. To the extent impact of the Year 2000 Issue on
investments made by the Fund or on the securities markets or the economy is
negative, it could seriously affect the Fund's investment performance.
Businesses in foreign countries generally may have undertaken less extensive
efforts than U.S. companies to identify and correct Year 2000 problems affecting
them. Accordingly, there may be a greater risk that the Year 2000 Issue will
result in adverse consequences in foreign economies and markets, which could
adversely affect companies, such as the ones in which the Fund invests, that
have significant foreign sales or operations.
PERFORMANCE SUMMARY
The bar chart and performance table customarily contained in mutual fund
prospectuses is not included because the Fund is new and does not have a full
fiscal year of operating history.
<PAGE>
FEES AND EXPENSES
The following tables describe the fees and estimated expenses that you may
pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)........ None+
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Management Fees.............................. 1.00%
Distribution and Service (12b-1) Fees........ 0.50%
Other Expenses............................... 0.90%
Total Annual Fund Operating Expenses......... 2.40%*
Less fee waiver and expense reimbursement.... (0.70%)**
Net Expenses................................. 1.70%
+ 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.
* The Fund is new. Therefore, the amount of "Other Expenses" and "Total Annual
Operating Expenses" are based on estimated amounts for the first year of
operations and do not reflect any fee waiver or expense limitation.
** Ingalls & Snyder has contractually agreed to waive its advisory fee or
reimburse the Fund's expenses to the extent necessary to ensure that Total
Annual Fund Operating Expenses on an annualized basis do not exceed 1.70% of
the Fund's average net assets for the first year of operations. This
contractual fee waiver may not be discontinued or modified by Ingalls &
Snyder during the stated period.
EXAMPLE
The following example is intended to 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 for the time periods indicated and then
redeem all of your shares at the end of those periods. The example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS
$173 $682*
* This example assumes that Ingalls & Snyder's agreement to waive fees and
reimburse the Fund's expenses is not extended beyond its initial period.
<PAGE>
INVESTMENT ADVISER
Ingalls & Snyder LLC, 61 Broadway, New York, NY 10006-2802, serves as the
investment adviser for the Fund and is responsible for managing the Fund's
portfolio of securities. As investment adviser, Ingalls & Snyder identifies
companies for investment, determines when securities should be purchased or sold
by the Fund and selects brokers or dealers, which may include Ingalls & Snyder,
to execute transactions for the Fund's portfolio. For its services the
investment adviser receives an annual fee equal to 1.00% of the Fund's average
net assets. Ingalls & Snyder has contractually agreed to waive its advisory fee
or reimburse the Fund's expenses to the extent necessary to ensure that Total
Annual Fund Operating Expenses on an annualized basis do not exceed 1.70% of the
Fund's average net assets for the first year of operations. This contractual fee
waiver may not be discontinued or modified by Ingalls & Snyder during the stated
period.
Ingalls & Snyder was founded in 1924. Registered as an investment adviser
with the U.S. Securities and Exchange Commission under the Investment Advisors
Act of 1940, the firm provides investment services to clients of substance,
including retirement plans, IRAs, corporations, individuals, trusts, estates,
and charitable organizations located in the United States and abroad. Ingalls &
Snyder also is a registered broker-dealer and a member of the New York and
American Stock Exchanges and the National Association of Securities Dealers.
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 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. As Portfolio Manager, Mr. Belknap has
primary responsibility for managing the Fund's investment portfolio.
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. At the date of this prospectus, he
manages discretionary portfolios using techniques substantially the same as
those to be used by the Fund with aggregate assets of approximately $180
million. Mr. Belknap 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. 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.
ADVISORY BOARD
The Advisory Board consists of persons who are, in the judgment of the
investment adviser, knowledgeable about business, trade, political and economic
matters. The Portfolio Manager may consult with individual members of the
Advisory Board from time to time concerning business, trade, political and
economic matters in the United States or abroad. Members of the Advisory Board
do not possess any authority or responsibility with respect to the Fund's
investments. The Portfolio Manager does not discuss specific investments with
member of the Advisory Board, nor do members of the Advisory Board give
investment advice to the Fund. The members of the Advisory Board are listed
below.
<PAGE>
Thomas H. Belknap, Esq.<F1> 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. Private Investor
Morgan Stanley Dean Witter, Inc. New York
New York
Mr. W. Neville Conyers Mr. Lewis M. Weston
Chairman Retired Partner
Bermuda Aviation Services Goldman Sachs & Co.
Hamilton, Bermuda New York
Mr. Christopher Wetherhill Mr. Marc Declerck
Managing Director Havaux & Cie Ltd.
Hemisphere Management Brussels
Hamilton, Bermuda
Mr. Christopher Finn Mr. Edward Wheeler
Managing Director-International Senior Vice President
The Carlyle Group Inc. The Buckingham Research Group,
New York London
Mr. Jolmer D. Gerritse Mr. Robert D. White
Managing Director Chief Operating Officer
SNS Securities N.V. Investor Select Advisors, Inc.
Amsterdam Dublin
Mr. John G. Hunter Roger T. Wickers, Esq.
Managing Director Senior Vice President and General
Counsel, Ret.
The Management Exchange Inc. The Keystone Group
New York Boston
Mr. William J. Loschert Mr. Henry K. Wingate
Chairman Educational Consultant
ACE UK Limited Sandisfield, Mass.
London
Mr. William J. McDonough, Jr. Mr. John S. Wadsworth, Jr.
Executive Vice President Chairman
Foote, Cohn & Belding Morgan Stanley Dean Witter Asia
Limited
New York
Members of the Advisory Board do not receive any compensation from the
Fund for service in that capacity.
- --------------------
<F1>
Thomas H. Belknap is the brother of Robert E. Belknap, who is a trustee
and the President and Portfolio Manager of the Fund.
<PAGE>
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 seeks to invest primarily in a diversified
portfolio of common stocks of growth-oriented companies, i.e. companies whose
growth, cash flow and earnings prospects are promising in the opinion of the
Fund's investment adviser. Specifically, the Fund normally requires that such
companies have a strong balance sheet, a highly capable management, a unique
aspect to its business (such as unique products, franchises or unique services),
a positive and growing cash flow, a high return on equity and a superior rate of
growth of earnings over an extended period. The growth-oriented companies in
which the Fund invests consist primarily of U.S. domestic companies with
significant foreign sales or operations or significant overseas growth
opportunities. The investment adviser believes that investments in these types
of companies permit the Fund to participate in both domestic and overseas growth
opportunities without the additional risks of investing directly in foreign
securities. Many growth companies pay low or no dividends, and investors should
not invest in the Fund for current income.
Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets 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 or in anticipation of redemptions. Such money market investments
include short-term obligations of the U.S. government, investment grade
corporate bonds, commercial paper or money market mutual funds. If the Fund's
investment adviser deems it beneficial for defensive purposes during adverse
market, economic or other conditions, the Fund may invest up to 100% of its
assets temporarily in non-equity securities, such as investment grade corporate
bonds, commercial paper and government securities.
STOCK SELECTION PROCESS. The investment adviser identifies stocks for
investment using its own research and analysis 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 characteristics, including its
debt burden, and evaluates its ability to generate sustained above-average
growth of its business and earnings relative to other companies.
Once the Fund identifies a company meeting its criteria, it seeks to
acquire the company's stock at reasonable prices. In attempting to determine
reasonable price levels, the investment adviser utilizes a variety of
measurement methods, including a comparison of a company's price-to-earnings
ratio with its growth rate and an evaluation of its ratio of sales to market
capitalization and evaluates 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 (generally companies with a market capitalization in excess
of $10 billion), but also may invest up to 15% of its assets in medium and
smaller sized companies which in the opinion of the adviser offer good prospects
for future growth.
The Fund employs a long-term investment strategy under which stocks are
normally held for extended periods of time. However, if the price of a stock
owned in the Fund moves up significantly, particularly if this movement occurs
in a short period of time, the investment adviser may sell shares to reduce
exposure to the stock. Likewise if the price of a stock owned in the Fund moves
down, the adviser may take advantage of the decline to purchase additional
shares. In addition, the Fund may sell a particular investment if it no longer
meets the Fund's investment criteria.
In selling securities, the investment adviser seeks to minimize adverse
tax consequences to shareholders by minimizing the requirement for taxable
distributions. For example, when selling securities the investment adviser
generally will select those shares purchased at the highest price in order to
minimize or offset the realization of capital gains. When this approach would
produce short-term gains, however, the Fund may endeavor to convert those gains
to long-term status by selling the highest cost shares having a long term
holding period.
<PAGE>
ADDITIONAL RISK INFORMATION
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 growth-oriented 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.
If the adviser determines that the condition of the financial markets
calls for a temporary defensive position, the Fund may invest a substantial
portion (up to 100%) of its assets in short-term fixed income securities such as
investment grade corporate bonds, commercial paper and U.S. government
securities. These defensive actions would reduce the benefit from any upswing in
the equity markets and, if the investment adviser does not correctly anticipate
fluctuations in the equity and debt securities markets, may not contribute to
achieving the Fund's investment objective.
To the extent that the Fund invests in foreign companies or companies with
substantial foreign sales or operations, its investments may involve political,
economic or currency risks not ordinarily associated with U.S. securities or the
securities of companies with purely domestic operations. Foreign securities may
experience greater and more rapid change in value than investments in U.S.
securities. Foreign securities generally are more volatile and less liquid than
U.S. securities, in part because of greater political and economic risks and
because there is less public information available about foreign companies.
Issuers of foreign securities generally are not subject to the same degree of
regulation as are U.S. issuers. The reporting, accounting and auditing standards
of foreign countries may differ, in some cases significantly, from U.S.
standards. Some foreign countries have or may experience in the future economic
and political problems. Certain countries may impose limitations on the ability
of foreigners to invest in or withdraw assets from their securities markets, and
additional political, economic or financial restrictions may be imposed under
emergency conditions.
To the extent the Fund invests in foreign securities that are denominated
in foreign currencies, the Fund also may be subject to currency risk. This is
the risk of losses that could result from a decline in the value of foreign
currencies relative to the U.S. dollar, which would reduce the value of the
Fund's portfolio securities denominated in those currencies. In addition,
nationalization, expropriation or confiscatory taxation, or political changes or
diplomatic developments could adversely affect the Fund's investments in a
foreign company or the foreign operations of companies in which the Fund
invests. In the event of nationalization, expropriation, or other confiscation
of the Fund's investment, the Fund could lose its entire investment.
The Fund may employ leverage by borrowing money for the purpose of making
additional investments. This 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 borrowings for
leverage purposes to a maximum of ten percent of the total assets of the Fund.
Money borrowed is subject to interest costs.
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 1, 2000. This is commonly known as
the "Year 2000 Issue." The Fund has taken steps it believes are reasonably
designed to address the Year 2000 Issue with respect to the computer systems it
uses, and has received representations from its software and service providers
that they have adapted their mission critical customer applications for a
successful conversion to the millennium change date. However, there can be no
assurance that the operations of and services provided to the Fund and its
shareholders will not be adversely affected.
The Year 2000 Issue affects practically all companies, organizations and
markets, including companies in which the Fund invests and the markets in which
they trade. At this time, no one knows precisely what the degree of impact of
the Year 2000 Issue will be. To the extent impact of the Year 2000 Issue on
investments made by the Fund or on the securities markets or the economy, it
could seriously affect the Fund's investment performance.
<PAGE>
The introduction of a new single European currency, the "euro," may result
in uncertainties for European companies, domestic companies with substantial
sales or operations in Europe and European markets. The euro was introduced on
January 1, 1999, by 11 European Union member countries who are participating in
the European Monetary Union ("EMU"). The introduction of the euro results in the
redenomination of certain European debt and equity securities and may result in
differences in various accounting, tax and/or legal treatments that would not
otherwise occur. The euro creates the risk that (i) European markets may become
more volatile, which could adversely affect the value of any securities held by
the Fund which are traded on European securities markets, and (ii) that
companies in which the Fund invests may be adversely affected by their failure
(or the failure of other companies with which they do business) to adequately
address the operational aspects of the conversion to the euro. At this early
stage, no one knows what the degree of impact of the introduction of the euro
will be. To the extent that the market impact or effect on a portfolio holding
is negative, the Fund's investment performance could be hurt.
SHARE PRICE -- NET ASSET VALUe
The price of the Fund's shares is their net asset value per share. The
Fund's net asset value per share is determined by computing the total value of
the Fund's securities, cash and other assets, subtracting all of its expenses
and liabilities, and then dividing by the total number of shares of the Fund
outstanding. The Fund's net asset value is calculated as of the close of the New
York Stock Exchange (usually 4:00 PM Eastern time) every day the exchange is
open. Shares will not be priced on days the New York Stock Exchange is closed.
The Fund's securities are valued 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 Fund's net asset value.
Because the Fund may invest up to 10% of the Fund's net assets in foreign
securities, which may be traded primarily on foreign securities exchanges that
trade on weekends or other days when the Fund does not price its shares, the net
asset value of the Fund's shares may change on days when shareholders will not
be able to purchase or redeem the Fund's shares.
PURCHASING SHARES
One may purchase shares of the Fund without any sales charge through
Ingalls & Snyder LLC, the Fund's principal underwriter and distributor, by
submitting a completed application 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 13 of this Prospectus as well as in the Fund's Shareholder Application.
Please call Ingalls & Snyder at 800-221-2598 with any questions.
Shares of the Fund also may be purchased through an investment adviser,
financial planner, broker, dealer or other investment professional or through a
fund supermarket, retirement plan or other intermediary. These parties may
charge transaction fees and may set different minimum investments or limitations
on buying, selling or redeeming shares. The intermediaries are responsible for
transmitting purchase orders and funds and for crediting their customers'
accounts following redemptions made in accordance with their customer agreements
and the Fund's Prospectus. Other persons may receive compensation for the
marketing and shareholder servicing activities in the form of 12b-1 fees payable
by the Fund under its Distribution Plan adopted under Rule 12b-1 under the 1940
Act.
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 is $1,000 ($500 for Education IRAs)
and there 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. Your order will be priced at the net asset value per
share next calculated after receipt of your completed purchase order. Orders are
complete when a purchase order accompanied by payment is received and, in the
case of new accounts, is accompanied by a completed and signed Shareholder
Application. If you make a purchase with a check that does not clear, the
purchase will be cancelled, and you will be responsible for any losses or fees
incurred in that transaction.
<PAGE>
IN-KIND PURCHASES. In connection with the initial subscriptions for shares
of the Fund at the time the Fund commences operations, the Fund may permit
investors to purchase shares by transferring to the Fund securities which
satisfy certain diversification requirements imposed by the Internal Revenue
Code. Under current IRS rules, transfers meeting such requirements will be
tax-free to the transferring investors. The Fund will not accept in-kind
transfers of portfolios that do not meet the IRS diversification requirements.
The tax basis to such investors of the Fund shares being so purchased in kind
will be the adjusted tax basis of the securities being transferred and the tax
basis to the Fund of said securities being transferred to the Fund will be the
same as the adjusted tax basis of said securities in the hands of the investors
immediately prior to the transfers. 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 net asset value.
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. If a check or draft submitted for the purchase of
shares is returned unpaid to the Fund, the Fund may impose a $10 charge for each
returned item. The Fund reserves the right to reject any purchase order or to
suspend the offering of its shares.
REDEEMING SHARES
HOW TO REDEEM: You may redeem your shares of the Fund on any business day
that the Fund calculates its net asset value per share. Redemption requests
should be made through Ingalls & Snyder by telephone by calling 800-221-2598 or
by mail. Redemption requests in excess of $50,000 and redemption requests for
IRA accounts must be made in writing and may require a signature guarantee. (See
"Signature Guarantees" below.)
Your shares will be redeemed at the net asset value per share next
calculated after your redemption request is received by Ingalls & Snyder. See
"Account Instructions" below for instructions for submitting redemption requests
in good order. If your redemption request is in good order, the Fund will
normally send you your redemption proceeds no later than seven calendar days
after receipt of the redemption request. The Fund can send payments by wire to
any bank previously designated by you in the Shareholder Application. A $25.00
fee is charged for each wire redemption.
If you purchase shares by check and request a redemption of those shares
soon after the purchase, the Fund will honor the redemption request, but will
not mail the proceeds until your purchase check has cleared (usually within 10
days). If you make a purchase with a check that does not clear, the purchase
will be cancelled and you will be responsible for any losses or fees incurred in
that transaction.
Checks will be made payable to you and will be sent to your address of
record. If the proceeds of the redemption are requested to be sent to an address
other than the address of record or if the address of record has been changed
within 30 days of the redemption request, the request must be in writing with
your signature(s) guaranteed. The Fund is not responsible for interest on
redemption amounts due to lost or misdirected mail.
SIGNATURE GUARANTEES: Signature guarantees are needed for:
o Redemption requests over $50,000
o Redemption requests to be sent to an address other than the address
of record
o Any redemption request if the address of record has been changed
within 30 days prior to receipt of the redemption request
o Obtaining or changing telephone redemption privileges.
<PAGE>
Signature guarantees can be obtained from banks and securities dealers,
but not from a notary public. Ingalls & Snyder may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees and guardians.
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." The Fund may
redeem shares in kind if the amount represents more than the lesser of $250,000
or 1% of the Fund's net assets. 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 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 on shares held in these accounts will be
automatically re-invested. 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.
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
tax-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.
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 and/or penalties.
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).
EDUCATION IRA: In an Education 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,
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
<PAGE>
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 associations 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>
<TABLE>
<CAPTION>
ACCOUNT INSTRUCTIONS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT TO REDEEM SHARES
- -------------------------------------------------------------------------------------------------------------------------
Regular Account Minimum: $5,000 Regular Account Minimum: $1,000 All requests to redeem shares from IRA
Retirement Account Minimum: Retirement Account Minimum: None accounts must be in writing
$1,000 ($500 for Education IRAs)
- -------------------------------------------------------------------------------------------------------------------------
In Writing In Writing In Writing
------------ ------------ ------------
Complete the application. Send a letter of instruction that Send a letter of instruction that
Make your check* payable to: includes: includes:
"Legacy Growth Fund"
- your name(s) and signature(s) - your name(s) and signature(s)
- your account number - your account number
- the Fund name - the Fund name
- the dollar amount you want to buy. - the dollar amount or number of
shares you want to redeem
- a signature guarantee, if applicable.
Mail your application and check to: Mail your letter, along with your Proceeds will be sent to the address of
check made payable to "Legacy record unless specified in the letter
Ingalls & Snyder LLC. Growth Fund" to: and accompanied by a signature guarantee.
61 Broadway Mail your letter to:
New York, NY 10006 Ingalls & Snyder LLC
Attn: Legacy Growth Fund 61 Broadway Ingalls & Snyder LLC
New York, NY 10006 61 Broadway
Attn: Legacy Growth Fund New York, NY 10006
Attn: Legacy Growth Fund
- -------------------------------------------------------------------------------------------------------------------------
By Wire By Wire By Wire
--------- --------- ---------
To obtain instructions for wire To obtain instructions for wire Be sure the Fund has your bank account
purchases, please call Ingalls & purchases, please call Ingalls & information on file. Proceeds will be
Snyder LLC at 800-221-2598. Snyder LLC at 800-221-2598. wired to your bank. There is a $25.00
wire fee charged for this service.
- -------------------------------------------------------------------------------------------------------------------------
By Telephone
------------
For accounts redeeming shares (other
than IRA accounts), please call Ingalls
& Snyder at 800-221-2598 and select how
you would like to receive the proceeds:
- Mail check to address of record
- Wire funds to a designated institution
($25 wire fee)
- Mail check to a previously designated
alternative address.
Redemption requests in excess of $50,000
must be made in writing.
- -------------------------------------------------------------------------------------------------------------------------
* All checks should be in U.S. dollars and drawn on 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.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 generally are 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 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, or to compensate the distributor or
others for their activities, 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 servicing
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 0.50%
per year of the average 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 be used
primarily 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 Services, 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, beginning in December, 2000. 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 Fund's net asset value per share.
THE FOLLOWING DISCUSSION OF SELECTED FEDERAL INCOME TAX CONSIDERATIONS
THAT MAY AFFECT THE FUND AND ITS SHAREHOLDERS IS BASED UPON THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, TREASURY REGULATIONS, COURT DECISIONS AND IRS RULINGS
NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE. IT DOES NOT PURPORT TO DEAL
WITH ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO THE
FUND AND ITS SHAREHOLDERS. BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, PLEASE BE
SURE TO CONSULT YOUR TAX PROFESSIONAL REGARDING FEDERAL, STATE, LOCAL AND
FOREIGN TAX CONSEQUENCES.
FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO U.S. INVESTORS.
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 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. In
addition, if the Fund permits investors to purchase shares by transferring
securities to the Fund in connection with the initial subscription for shares of
the Fund, the tax basis of the transferred securities in the hands of the Fund
will be the same as the adjusted tax basis of the securities in the hands of the
investors immediately prior to the transfers. If the fair market value of the
transferred securities (on the date of the transfer) is greater or less than the
tax basis of such securities, the built-in gains or built-in losses with respect
to such securities, to the extent realized by the Fund on subsequent sales or
other dispositions of such securities, will be recognized by all U.S.
shareholders when the Fund determines and distributes its net capital gains.
<PAGE>
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. 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 (i) you do not
provide a correct taxpayer identification number ("TIN"), (ii) you fail to
certify that your TIN is correct or to provide other required certifications or
(iii) the IRS instructs the Fund to do so. The Fund will make annual reports to
the Internal Revenue Service and the Fund's shareholders regarding the amount of
distributions.
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.
Any 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 the Fund from domestic (U.S.) sources. The Fund will send to
shareholders a statement each year reporting 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.
FEDERAL INCOME TAX CONSIDERATIONS APPLICABLE TO FOREIGN INVESTORS. For
purposes of this discussion a "Non-U.S. Investor" is an investor who is not a
United States Person where the term "United States Person" means (i) an
individual who is a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any state thereof, (iii) an estate the income of
which is subject to federal income taxation regardless of its source or (iv) a
trust whose administration is subject to the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust.
Non-U.S. Investors may be subject to U.S. withholding tax on dividends
received from the Fund at the rate of 30% unless the dividends are effectively
connected with the conduct of a trade or business within the United States by
the Non-U.S. Investor, in which case these amounts will be subject to U.S.
federal income tax on a net income basis at rates that apply to United States
Persons generally. Applicable income tax treaties may provide for a lower rate
of withholding. Distributions of capital gain will not be subject to U.S.
withholding tax. A Non-U.S. Investor generally will not be subject to U.S.
federal income tax on capital gain distributions or gain recognized on the sale
or exchange of Fund shares unless the distributions or gain is effectively
connected with the conduct of a trade or business within the United States or,
in the case of a Non-U.S. Investor who is a nonresident alien individual and
holds the Fund shares as a capital asset, such investor is present in the United
States for 183 or more days in the taxable year of the distribution or sale or
exchange and either has a "tax home" (as defined for U.S. federal income tax
purposes) in the United States or an office or other fixed place of business in
the United States to which its investment activities or the sale or exchange is
attributable.
Information reporting and the Fund will make annual reports to the
Internal Revenue Service and the Fund's shareholders regarding the amount of
distributions. A U.S. backup withholding tax of 31% will not generally apply to
dividends distributed to Non-U.S. Investors outside the United States that are
subject to the 30% withholding discussed above or that are not be subject to
backup withholding because a tax treaty applies that reduces or eliminates such
withholding. Backup withholding may apply to capital gain distributions and
gross redemption proceeds unless certification of foreign residency requirements
are met. In addition, information reporting and backup withholding requirements
may apply to gross proceeds paid to a Non-U.S. Investor upon the sale or
<PAGE>
exchange of Fund shares by or through a U.S. or foreign office of a U.S. or
foreign broker, unless certain documentary evidence or certification
requirements are met or the investor otherwise establishes an exemption.
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
800-221-2598
INVESTMENT ADVISER CUSTODIAN
INGALLS & SNYDER LLC FIRSTAR BANK MILWAUKEE, N.A.
61 Broadway 615 East Michigan Street
New York, NY 10006 Milwaukee, WI 53202
DISTRIBUTOR LEGAL COUNSEL
INGALLS & SNYDER LLC HUGHES HUBBARD & REED LLP
61 Broadway One Battery Park Plaza
New York, NY 10006 New York, NY 10004
ADMINISTRATOR, FUND ACCOUNTANT AUDITORS
& TRANSFER AGENT ARTHUR ANDERSEN LLP
FIRSTAR MUTUAL FUND SERVICES, LLC 100 East Wisconsin Avenue
615 East Michigan Street Milwaukee, WI 53202
Milwaukee, WI 53202
ADDITIONAL INFORMATION
The Statement of Additional Information ("SAI") of the Fund 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 the fiscal year.
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 EDGAR Database on 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 electronic request at the following E-mail
address: [email protected], or by writing to the Commission's Public Reference
Section, Washington, DC 20549-0102. You may call the Commission at
1-202-942-8090 for information about the operation of the Public Reference Room.
Investment Company Act File No. 811-09495
<PAGE>
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 27, 1999
LEGACY GROWTH FUND
A diversified fund of growth-oriented equities
having the objective of long term growth in value
STATEMENT OF ADDITIONAL INFORMATION
[_______________________], 1999
THE LEGACY FUNDS, INC.
61 Broadway
New York, NY 10006
(800) 221-2598
This Statement of Additional Information relates to the Legacy Growth Fund which
is a series of The Legacy Funds, Inc., a registered open-end management
investment company commonly known as a mutual fund. This Statement of Additional
Information is not a prospectus and should be read in conjunction with the
Prospectus for the Fund dated [ ], 1999. The Prospectus may be obtained by
writing or calling the Fund at the address and number shown above.
<PAGE>
TABLE OF CONTENTS
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS 3
CONVERTIBLE SECURITIES 3
WARRANTS AND RIGHTS 4
ILLIQUID SECURITIES 4
RULE 144A SECURITIES 5
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS 5
AMERICAN DEPOSITORY RECEIPTS 5
U.S. GOVERNMENT SECURITIES 6
BANK OBLIGATIONS 6
LOANS OF PORTFOLIO SECURITIES 6
REPURCHASE AGREEMENTS 7
REVERSE REPURCHASE AGREEMENTS 8
BORROWING 8
FUTURES 9
OPTIONS 10
OTHER INVESTMENTS 14
INVESTMENT RESTRICTIONS 15
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS 15
NON-FUNDAMENTAL POLICIES AND RESTRICTIONS 16
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES 16
PURCHASING SHARES 16
REDEEMING SHARES 18
MANAGEMENT OF THE TRUST 20
TRUSTEES AND OFFICERS 20
COMPENSATION OF TRUSTEES; SHAREHOLDINGS 21
ADVISORY BOARD 22
INVESTMENT ADVISER AND ADVISORY AGREEMENT 26
CODE OF ETHICS 27
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 28
SERVICE AGREEMENTS 28
ADMINISTRATOR 28
FUND ACCOUNTING 28
TRANSFER AGENT 29
CUSTODIAN 29
DISTRIBUTOR 29
DISTRIBUTION PLAN 29
INDEPENDENT ACCOUNTANTS 31
PORTFOLIO TRANSACTIONS AND TURNOVER 31
SHARES OF BENEFICIAL INTEREST 33
DIVIDENDS 34
ADDITIONAL INFORMATION CONCERNING DISTRIBUTIONS AND TAXES 34
DISTRIBUTIONS 34
TAXES 34
INVESTMENT PERFORMANCE 35
TOTAL RETURN INFORMATION 35
YIELD INFORMATION 36
PERFORMANCE RANKINGS 37
FINANCIAL STATEMENTS 38
INDEPENDENT ACCOUNTANTS' REPORT 41
<PAGE>
GENERAL INFORMATION
The Legacy Growth Fund (the "Fund") is a series of The Legacy Funds, Inc., a
business trust organized in the state of Delaware on July 15, 1999 (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 growth-oriented companies, i.e. companies whose growth, cash
flow and earnings prospects are promising in the opinion of the Fund's
investment adviser. 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 without the approval of shareholders. Shareholders would receive written
notice 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 invests
primarily in common stocks but also may invest in any type of security whose
characteristics are consistent with the Fund's investment program.
Under normal market conditions, it is the Fund's policy to invest
substantially all of its assets 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 or in anticipation of redemptions. Such money market investments
include short-term obligations of the U.S. Government, investment grade
corporate bonds, commercial paper or money market mutual funds. If the Fund's
investment adviser deems it beneficial for defensive purposes during adverse
market, economic or other conditions, the Fund may invest up to 100% of its
assets temporarily in short-term non-equity securities, such as investment grade
corporate bonds, commercial paper and U.S. Government securities.
The Fund also may invest in the following:
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.
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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 comparably rated 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 Investment Adviser anticipates such stock will provide
the Fund with opportunities that 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
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 investments
may include privately placed securities which are not registered for sale under
the Securities Act of 1933, as amended (the "1933 Act").
<PAGE>
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 Investment 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 monitor and periodically review the Investment Adviser's
selection of Rule 144A securities, as well as the Investment 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 144A, the Board of Trustees and the
Investment 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
fluctuations, and no interest or dividends accrue 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
are issued under an agreement between the issuer of the underlying security and
a depository, whereas "unsponsored" ADRs are issued without participation of the
<PAGE>
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 Fund's 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. Securities of the Federal National Mortgage Association ("FNMA")
are supported by the discretionary authority of the U.S. Government to purchase
the agency's obligations. Other U.S. Government securities, 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 or
guaranteed by the U.S. Government, its agents or institutions, and are therefore
not U.S. Government securities even though the underlying bond represented by
such an instrument 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
<PAGE>
term of the 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 Fund 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 Fund in an amount equal to the repurchase price. Any
assets held in any segregated securities, options, futures, forward contracts or
other derivative transactions will 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 Fund 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 Fund's limitations on borrowing.
BORROWING
The Fund may borrow money up to 15% 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 15% 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.
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. When the income and gains on
securities purchased with the proceeds of borrowings exceed the costs of such
borrowings, the Fund's earnings or net asset value will increase faster than
otherwise would be the case; conversely, if such income and gains fail to exceed
<PAGE>
such costs, the Fund's earnings or net asset value would decline faster than
would otherwise be the case. 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 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 total 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 total 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 total
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 (other than stock under futures contracts) provide for the
delivery of securities, deliveries usually do not occur. Contracts generally are
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 rates 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
<PAGE>
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 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 option
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
<PAGE>
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, 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 as the Investment 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 and the option is
exercised, the Fund will forego any market appreciation over the option exercise
price.
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
<PAGE>
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
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 on securities
owned by the Fund.
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 of 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 premium paid for a put option and any transactions
costs would reduce any profit from the sale of the security. 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
<PAGE>
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.
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 an unusually large 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 writer of a covered call 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
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.
<PAGE>
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 Statement of Additional Information
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
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions which
cannot be cannot be changed without the approval of a "majority of the
outstanding voting securities" of the Fund. Under the 1940 Act, a "majority of
the outstanding voting securities of a fund means the vote of: (i) more than 50%
of the outstanding voting securities of the fund; or (ii) 67% or more of the
voting securities of the fund present at a meeting, if the holders of more than
50% of the outstanding voting securities are present or represented by proxy,
which ever is less.
CONCENTRATION. The Fund will not make investments that will result in the
concentration (as that term any be defined in the 1940 Act, any rule or order
thereunder or any SEC staff interpretation thereof) of its investments in the
securities of issuers primarily engaged in the same industry, provided that this
restriction does not limit the Fund from investing in obligations issued or
guaranteed by the U.S. Government, or its agencies or instrumentalities. The SEC
staff currently takes the position that a fund concentrates its investments in a
particular industry if more than 25% of its net assets is invested in issuers
within the industry.
SENIOR SECURITIES. The Fund may not issue senior securities, except as the
1940 Act, any rule or order thereunder, or SEC staff interpretation thereof, may
permit.
UNDERWRITING. The Fund may not underwrite the securities of other issuers,
except that the Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances where it
may be considered to be an underwriter under the Securities Act of 1933.
REAL ESTATE. The Fund may not purchase or sell real estate, unless acquired
as a result of ownership of securities or other instruments and provided that
this restriction does not prevent the Fund from investing in issuers which
invest, deal or otherwise engage in transactions in real estate or interests
therein, or investing in securities that are secured by real estate or interests
therein.
COMMODITIES. The Fund may not purchase or sell physical commodities, unless
acquired as a result of ownership of securities or other instruments and
provided that this restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities.
BORROWING. The Fund may employ leverage by borrowing money for the purpose
of making additional investments, which could result in increased volatility of
the Fund's net asset value. In order to limit such risk, the Fund is required to
limit the percentage of its assets that can be exposed to such leveraging
techniques to 15% of the asset value of the Fund.
LENDING. The Fund may not make loans, provided that this restriction does
not prevent the Fund from purchasing debt obligations, entering into
<PAGE>
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 5% of its net assets
in securities which it cannot 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 are sold by the Fund without any sales charge and are offered on a
continuous basis by the distributor.
Shares of the Fund also may be purchased through an investment adviser,
financial planner, broker, dealer or other investment professional or through a
fund supermarket, retirement plan or other intermediary. These parties may
charge transaction fees and may set different minimum investments or limitations
<PAGE>
on buying, selling or redeeming shares. The intermediaries are responsible for
transmitting purchase orders and funds and for crediting their customers'
accounts following redemptions made in accordance with their customer agreements
and the Fund's Prospectus. Other persons may receive compensation for the
marketing and shareholder servicing activities in the form of 12b-1 fees payable
by the Fund under its Distribution and Shareholders Servicing Plan adopted under
Rule 12b-1 under the 1940 Act.
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 retirement accounts or
Education IRAs. 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
next computed after receipt of the purchase order. Net Asset Value 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.
The Fund's net asset value per share is determined by dividing the total
value of the Fund's securities, cash and other assets, subtracting all of its
expenses and liabilities, and then dividing by the total number of shares
outstanding. 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.
Shares will not be priced on days the New York Stock Exchange is closed.
Cash and any receivables are valued at their realizable amounts. Interest
is recorded as accrued and dividends are recorded on the ex-dividend date. The
Fund's securities are valued at their market value, which usually means the last
quoted sale price on the security's principal exchange on that day. 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
<PAGE>
the scheduled close of the NYSE. The value of these securities used in computing
net asset value is determined as of such time. 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 Fund's
net asset value.
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,
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.
REDEEMING SHARES
Shares of the Fund may be redeemed on any business day that the Fund
calculates its net asset value. Shares will not be priced on days the New York
Stock Exchange is closed. The redemption price will be the next net asset value
per share calculated after the redemption order is accepted by the Fund's
transfer agent. No fees are imposed by the Fund when shares are redeemed.
Shares of the Fund may be redeemed 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 redeem or transfer shares require a signature
guarantee. For example, a signature guarantee may be required if shares are sold
worth $50,000 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
<PAGE>
Fund determines that the custodian has completed collection of the purchase
check, which may take up to 10 days. 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.
If dividend checks are returned to the Fund as undeliverable or 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 their net asset value
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 the lesser of $250,000 or 1%
of the Fund's net 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.
<PAGE>
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
The Trust is governed by a Board of Trustees, which has overall
responsibility for management of the Trust. The Trustees are experienced
business persons who meet periodically throughout the year to oversee the
Trust's activities, review contractual arrangements with companies that provide
services to the Fund and review the performance of the Fund. 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 (*).
<TABLE>
<CAPTION>
POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE REGISTRANT DURING THE PAST 5 YEARS
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Theodore F. Ells, Esq. Chairman of the Board of Partner of the Law Firm
28 West 44th Street Trustees Craig & Ells
New York, NY 10036
Age 59
Robert E. Belknap*<F1> Trustee, President and Senior Director of Ingalls &
61 Broadway Portfolio Manager Snyder LLC
New York, NY 10006
Age 61
Steven M. Foote* Trustee Managing Director of Ingalls
61 Broadway & Snyder LLC
New York, NY 10006
Age 38
- ----------
<FN>
<F1>
Mr. Belknap is the brother of Thomas H. Belknap, who serves on the Fund's
Advisory Committee.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Barnabas B. B. Breed, Esq. Trustee, Treasurer, Secretary Principal of the Law Firm of
Tower Suite 3500 Breed & Associates
The French Building
551 Fifth Avenue
New York, NY 10017
Age 55
Joseph Neuberger Treasurer Senior Vice President of
Firstar Mutual Fund Services,
LLC, Administrator of the
Fund
Erin Probst Secretary Compliance Administrator of
Firstar Mutual Fund Services,
LLC, Administrator of the
Fund
</TABLE>
The following individual has agreed to serve as a Trustee of the Fund upon the
effectiveness of the Fund's Registration Statement:
<TABLE>
<CAPTION>
<S> <C> <C>
Steven L. Wood Trustee Managing Director of the Real
2250 Century Square Estate Development Firm of
1501 Fourth Avenue Century Pacific, L.P.
Seattle, WA 98101
Age 52
</TABLE>
COMPENSATION OF TRUSTEES; SHAREHOLDINGS
The Trust does not compensate the Trustees who are officers or employees of
the Investment 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, and would
receive the annual compensation shown below from the Trust for serving on the
<PAGE>
Board and attending all such meetings. The Trust does not offer any retirement
benefits for Trustees.
<TABLE>
<CAPTION>
TOTAL
COMPENSATION
NAME OF TRUSTEE TITLE FROM TRUST
- --------------------------------------------------------------------------------
<S> <C> <C>
Theodore F. Ells, Esq. Chairman of the Board of $1,000
Trustees
Steven L. Wood Trustee $1,000
Steven M. Foote Trustee None
Barnabas B. B. Breed Trustee $1,000
Robert E. Belknap Trustee and President None
</TABLE>
As of the date of this Statement of Additional Information, all the
outstanding shares of the Fund are owned by Ingalls & Snyder, and none are owned
individually by the officers and Trustees of the Fund.
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
effect 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:
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE DURING THE PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C>
Thomas H. Belknap, Esq.<F1> Partner of the Law firm of
One International Place Hill & Barlow
Boston, MA 02110-2607
Age 59
Mr. David G. Booth Managing Director, Ret., of the
15 Garden Place investment firm Morgan Stanley Dean
Brooklyn, NY 11201 Witter, Inc.
Age 45
Mr. W. Neville Conyers Chairman of Bermuda Aviation Services
PO Box HM 1554 Limited/Aircraft Services Bermuda
Hamilton HM FX Limited
Bermuda
Age 70
Mr. Marc Declerck Agent Delegue of the investment firm of
Place du Champs de Mars Havaux & Cie
2 Marsveldplain
Brussels 1050, Belgium
Age 41
Mr. Christopher Finn Managing Director - International
20 Berkeley Square of the merchant banking firm The
London W1X 6NB Carlyle Group
United Kingdom
Age 42
- ----------
<FN>
<F1>
Mr. Belknap is the brother of Robert E. Belknap, who serves as a trustee and as
the President and Portfolio Manager of the Fund
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE DURING THE PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C>
Mr. Jolmer D. Gerritse Managing Director of the
Nieuwezijds Voorburgwal 162 investment firm SNS Securities N.V.
1012 SJ Amsterdam
The Netherlands
Age 48
Mr. John G. Hunter Managing Director of the conference
123 East 54th Street management company The Management
New York, NY 10022 Exchange, Inc.
Age 62
Mr. William J. Loschert Chairman of the insurance company
Crosby Court ACE UK Limited
38 Bishopsgate
London EC2N 4DL
United Kingdom
Age 60
Mr. Wynant D. Vanderpoel President of private investment company
79 East 79th Street The Vanderpoel Group
New York, N.Y. 10021
Age 60
Mr. C. P. T. Vaughan-Johnson Deputy Chairman of the private bank
1 Hobart Place Duncan Lawrie Limited
London SW1W 0HU
England
Age 65
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE DURING THE PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C>
Mr. John S. Wadsworth, Jr. Chairman of Morgan Stanley Dean Witter Asia
Queens Garden Tower A, 3102 Limited
9 Old Peak Road
Hong Kong
Age 61
Mr. Lewis M. Weston Retired Partner of the investment banking firm
85 Broad Street Goldman, Sachs & Co.
New York, NY 10004
Age 73
Mr. Christopher Wetherhill Managing Director of the mutual fund
P. O. Box HM 951 services firm Hemisphere Management Ltd.
Hamilton HM DX
Bermuda
Age 51
Mr. Edward W. Wheeler Senior Vice President of the investment
630 3rd Avenue research firm The Buckingham Research
New York, NY 10017 Group, Inc.
Age 56
Mr. Robert D. White Chief Operating Officer of the investment firm
414 East 75th Street Investor Select Advisors, Inc.
New York, NY 10021
Age 30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE DURING THE PAST 5 YEARS
- -------------------------------------------------------------------------------
<S> <C>
Roger T. Wickers, Esq. Senior Vice President and General Counsel,
99 Springfield Point Ret., of the mutual fund management company
Wolfeboro, NH 03894 The Keystone Group
Age 64
Mr. Henry K. Wingate Independent Educational Consultant
P.O. Box 197
Sandisfield, MA 01255
Age 61
</TABLE>
INVESTMENT ADVISER AND ADVISORY AGREEMENT
Ingalls & Snyder LLC ("Ingalls & Snyder" or the "Investment 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 also is a registered broker-dealer and a member of the New York
and American Stock Exchanges and the National Association of Securities Dealers.
Ingalls & Snyder serves as investment adviser to the Fund pursuant to an
Investment Advisory Agreement with the Trust dated as of [_______________] (the
"Advisory Agreement"). The Advisory Agreement was approved by the sole
shareholder of the Fund on [_____________], 1999.
Under the Advisory Agreement, the Investment 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
Statement of Additional Information and the resolutions of the Trustees. The
Investment 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 Investment 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 Investment Adviser a monthly fee equal to
an annual rate of 1.00% of the Fund's average daily net assets. The Investment
Adviser has contractually agreed to waive its advisory fee or reimburse the
Fund's expenses to the extent necessary to ensure that the total operating
expenses of the Fund on an annualized basis do not exceed 1.70% of average daily
<PAGE>
net assets during the Fund's first year of operations, which ends on October 31,
2000, on an annualized basis. This contractual arrangement may not be terminated
by the Investment Adviser during the stated period.
During the term of the Advisory Agreement, the Investment 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 Investment Adviser under the Advisory
Agreement are not exclusive, and the Investment Adviser is free to perform
similar services for others.
Ingalls & Snyder is an independent, privately owned firm. Its shareholders
consist of twenty-five directors, none of whom owns more than 25% of its
outstanding stock.
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 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 Investment 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
Investment Adviser, cast in person at a meeting called for the purpose of voting
upon such approval.
Under the terms of the Advisory Agreement, the Investment 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 Investment Adviser and the Trust 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 Investment Adviser have adopted a Code of Ethics that
governs the conduct of employees of the Fund and the Investment Adviser who may
have access to information about the Fund's securities transactions. The Code
<PAGE>
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 trading of initial public
offerings and limited offerings and requires reporting of personal securities
transactions. Violations of the code are subject to review by the Trustees and
could result in severe penalties.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Ingalls & Snyder provided the initial capital for the Fund by purchasing
10,000 shares for $100,000. These shares were acquired for investment and can be
disposed of only by redemption. As of the date of this Statement of Additional
Information Ingalls & Snyder owned 100% of the outstanding shares of the Fund.
So long as Ingalls & Snyder owns more than 25% of the outstanding shares of the
Fund, it will be deemed to control the Fund. As a controlling shareholder,
Ingalls & Snyder would be able to exercise a controlling or substantial
influence over the outcome of each matter submitted to a vote of the
shareholders of the Fund, including the election of Trustees.
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
limited liability company, pursuant to which Firstar performs management-related
and other services for the Fund. Firstar serves as the Administrator, Transfer
Agent, Dividend Disbursing Agent and Fund Accountant. Firstar Bank Milwaukee,
N.A. ("Firstar Bank"), which is an affiliate of Firstar, serves as the Fund's
custodian. The principal offices of Firstar and Firstar Bank are located at 615
East Michigan Street, Milwaukee, WI 53202.
ADMINISTRATOR
Pursuant to a Fund Administration Servicing Agreement with the Trust (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 Investment
Adviser. As Administrator, Firstar receives asset-based fees at the annual rate
of 0.06% of the first $200 million of average daily net assets, 0.05% of the
next $500 million of average daily net assets and 0.03% of average daily net
assets above $700 million, subject to a minimum annual fee of $30,000.
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 a Fund Accounting Servicing Agreement with the Trust, 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, calculating yield, dividends and capital gain
distributions and providing certain tax accounting services.
<PAGE>
Under the Fund Accounting Servicing Agreement, Firstar receives asset-based
fees at the annual rate of $23,000 for the first $40 million of average daily
net assets, 0.015% of the next $200 million of average daily net assets and
0.01% of average daily net assets above $240 million.
TRANSFER AGENT
Pursuant to a Transfer Agent Servicing Agreement with the Trust (the
"Transfer Agent Agreement"), Firstar acts as the Trust's transfer agent and
dividend disbursing agent. In that capacity, Firstar is responsible for
processing orders for Fund shares and for performing certain shareholder
services for the Fund, including maintenance of shareholder records. Firstar is
compensated based on an annual fee of $15 per shareholder account outside of the
omnibus account plus a minimum annual fee of the greater of $15,000 or .005% of
the average net assets of the Fund.
CUSTODIAN
Pursuant to a Custodian Servicing Agreement with the Trust, Firstar Bank
acts as the custodian of the Fund's securities and cash and in that capacity
delivers and receives payment for portfolio securities sold, receives and pays
for portfolio securities purchased, collects income from investments. Firstar
Bank 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. Firstar Bank
receives asset-based fees at the annual rate of 0.01% of the average net assets
of the Fund plus specified charges for portfolio transactions.
DISTRIBUTOR
Ingalls & Snyder LLC (the "Distributor"), located at 61 Broadway, New York, NY
10006, serves as the principal underwriter and distributor for the shares of
the Fund pursuant to a Distribution Agreement with the Trust dated as of
[________________], 1999 (the "Distribution Agreement"). The distributor is
registered as a broker-dealer under the Securities Exchange Act of 1934, as
amended, 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 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 assets of the Fund to compensate
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
<PAGE>
maximum amount payable under the Plan is 0.50% 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 Investment 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 November 22, 1999.
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 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 operation 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, Arthur Andersen LLP, will audit the
Fund's annual financial statements and review the Fund's tax returns. Arthur
Andersen LLP is located at 100 East Wisconsin Avenue, Milwaukee, WI 53202.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Investment Adviser is responsible for decisions to buy and sell
securities and other investments for the Fund, the selection of brokers, dealers
and futures commission merchants to effect the transactions and the negotiation
of brokerage commissions, if any.
Broker-dealers may receive brokerage commissions on portfolio transactions,
including options and the purchase and sale of underlying securities upon the
exercise of options. On foreign securities exchanges, commissions may be fixed.
Orders may be directed to any broker or futures commission merchant including,
to the extent and in the manner permitted by applicable law, Ingalls & Snyder.
Brokerage commissions on United States securities, options and futures exchanges
or boards of trade are subject to negotiation between the Investment Adviser and
the broker or futures commission merchant. In the over-the-counter markets,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities may be purchased directly from the issuer, in which
case no commissions or discounts are paid. The Fund will not deal with Ingalls &
Snyder in any transaction in which Ingalls & Snyder (or any affiliate) acts as
principal, except in accordance with rules of the SEC. Thus, it will not deal in
the over-the-counter market with Ingalls & Snyder acting as market maker, and it
will not execute a negotiated trade with Ingalls & Snyder if execution involves
Ingalls & Snyder acting as principal with respect to any part of the Fund's
order.
In placing orders for portfolio securities of the Fund, the Investment
Adviser's primary objective is to obtain the best combination of favorable price
and efficient execution consistent with obtaining investment research and
research related services at reasonable cost. There is no pre-existing
commitment to place orders with any broker, dealer or futures commission
merchant. In selecting a particular broker, dealer or futures commission
merchant, the Investment Adviser considers a number of factors, including: the
broker's, dealer's or futures commission merchant's commission rate and other
transaction costs; the nature of the portfolio transaction; the size of the
transaction; the desired timing of the trade; trading patterns and activity
expected in the market for the particular transaction; confidentiality; the
execution, clearance and settlement capabilities of the firms; the firm's
ability to handle difficult trades; the availability of research and research
related services through such firms; the Investment Adviser's knowledge of the
financial stability of the firms; the Investment Adviser's knowledge of actual
or apparent operational problems of firms; and prior performance in servicing
the Investment Adviser and its clients. In consideration of these factors, the
<PAGE>
Fund may pay transaction costs in excess of that which another broker, dealer or
futures commission merchant might have charged for effecting the same
transaction.
In transactions with respect to 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 Adviser, better prices and executions are available
elsewhere.
The allocation of orders among firms and the commission rates paid will be
reviewed periodically by the Fund's Trustees.
The research and research related services considered by the Investment
Adviser in selecting brokers, dealers and futures commission merchants include,
among other things, information as to the availability of securities for
purchase or sale, statistical or factual information or opinions pertaining to
investments, research reports, research compilations, economic data, and
investment related periodicals and seminars. The Investment Adviser may use
research and research related 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. 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.
Subject to the above considerations, Ingalls & Snyder may act as securities
broker for the Fund, and there is no limit on the percentage of the Fund's
orders that may be directed to Ingalls & Snyder. In order for Ingalls & Snyder
(or any affiliate) to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by Ingalls & Snyder (or any
affiliate) must be reasonable and fair compared to the commissions, fees or
other remuneration paid to other firms in connection with comparable
transactions involving similar securities being purchased or sold on an exchange
or board of trade during a comparable period of time. This standard would allow
Ingalls & Snyder (or any affiliate) to receive no more than the remuneration
which would be expected to be received by an unaffiliated firm in a commensurate
arm's-length transaction. Furthermore, the Trustees of the Fund, including a
majority of the non-interested Trustees, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to Ingalls & Snyder (or any affiliate) are consistent with the foregoing
standard. In accordance with Section 11(a) of the Securities Exchange Act of
1934, as amended, Ingalls & Snyder may not retain compensation for effecting
transactions on a national securities exchange for the Fund unless the Fund has
expressly authorized the retention of such compensation. Ingalls & Snyder must
furnish to the Fund at least annually a statement setting forth the total amount
of all compensation retained by Ingalls & Snyder from transactions effected for
the Fund during the applicable period. Brokerage and futures transactions with
Ingalls & Snyder (or any affiliate) also are subject to such fiduciary standards
as may be imposed upon Ingalls & Snyder (or such affiliate) by applicable law.
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.
<PAGE>
There may be occasions when other investment advisory clients advised by the
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 Investment 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 $0.001 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 a majority 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 stock certificates
representing shares of the Fund will 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 will be 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 that fund, but, as shareholders of such a fund,
would not be entitled to share in the distribution of assets belonging to any
other fund.
<PAGE>
DIVIDENDS
A shareholder will automatically receive all dividend and capital gain
distributions in additional full and fractional shares of the Fund unless the
shareholder elects to receive such dividends or distributions in cash.
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.
ADDITIONAL INFORMATION CONCERNING 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
THE FOLLOWING IS A SUMMARY OF SELECTED FEDERAL INCOME TAX CONSIDERATIONS
THAT MAY AFFECT THE FUND AND ITS SHAREHOLDERS AND IS BASED UPON THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), TREASURY REGULATIONS, COURT
DECISIONS AND IRS RULINGS NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE. IT
DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF U.S. FEDERAL INCOME TAXATION THAT
MAY BE RELEVANT TO THE FUND AND ITS SHAREHOLDERS. BECAUSE EVERYONE'S TAX
SITUATION IS UNIQUE, PLEASE BE SURE TO CONSULT YOUR TAX PROFESSIONAL REGARDING
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES.
<PAGE>
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 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, 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 capital gain net income earned during the twelve
month period ending October 31 (in addition to undistributed 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.
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
shareholders, performance will be stated in terms of total return or yield. Both
"total return" and "yield" figures will be based on the historical performance
of the Fund.
TOTAL RETURN INFORMATION
The Fund may from time to time provide or advertise performance information,
including its total return and average annual total return. Total return shows
the percentage change in the value of an investment in the Fund over a specified
period, assuming (i) a hypothetical investment of $1,000 at the beginning of the
period, (ii) reinvestment of all dividends and distributions and (iii) deduction
of all applicable charges and expenses, including sales charges, if any. Average
annual total return represents the annual compounded growth rate that would
produce the total return achieved over the applicable period. Under rules of the
SEC, the performance information presented by the Fund must include the Fund's
average annual total return. Under the rules of the SEC, the Fund's total return
information must be calculated according to the following formula:
<PAGE>
N
P (1 + T) = ERV
In advertising its total return and average annual total
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the applicable periods.
When the period covered by the performance information is less than one
year, the return quoted will be the total return rather than average annual
total return. The performance information provided or advertised by the Fund
would not reflect any deduction or adjustment for sales or other charges that
may be imposed by any investment adviser, financial planner, broker, dealer or
other investment professional or through a fund supermarket, retirement plan or
other intermediary other than the Distributor.
The Fund also may compare its total return and average annual total return
to 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.
YIELD INFORMATION
From time to time, the Fund also 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:
((a - b )6 )
((----- + 1 ) - 1 )
YIELD = 2 x(( 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
<PAGE>
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 paid by the Fund over the same period or the rate of income
reported in the Fund's financial statements.
PERFORMANCE RANKINGS
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
LEGACY GROWTH FUND
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <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>
LEGACY GROWTH FUND
Statement of Operations
For the Period July 15, 1999 (inception) through [ ]
<TABLE>
<CAPTION>
<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 July 15, 1999 (inception) through [____________]
1. Organization
The Legacy Growth Fund (the "Fund") is a series of The Legacy Funds (the
"Trust"), a business trust organized on July 15, 1999, 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 "Investment Adviser"), on [________________], 1999.
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 Investment 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
Investment Adviser, with whom certain officers and Trustees of the Trust
are affiliated, to furnish advisory services to the Fund. Under the terms
<PAGE>
of the Agreement, the Trust, on behalf of the Fund, compensates the
Investment Adviser for its management services at the annual rate of 1% of
the Fund's average daily assets.
The Investment 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
Investment 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 Investment 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 0.50% 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.
<PAGE>
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 July 15, 1999 (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. (See Exhibit 23(a)(1).)
(2) Certificate of Trust of Registrant dated July 14, 1999.
(Previously filed as Exhibit 23(a)(2) to the
Registration Statement on Form N-1A on July 27, 1999.)
(b) By-Laws of the Registrant. (Previously filed as Exhibit 23(b) to the
Registration Statement on Form N-1A on July 27, 1999.)
(c) Instruments Defining Rights of Security Holders
(1) Agreement and Declaration of Trust. (See Exhibit
23(a)(1).)
(2) Certificate of Trust. (See Exhibit 23(a)(2).)
(3) By-Laws of Registrant. (Previously filed as Exhibit
23(b) to the Registration Statement of Form N-1A on July
27,1999.)
(d) Investment Advisory Agreement between the Registrant and Ingalls &
Snyder, LLC. (See Exhibit 23(d).)
(e) Distribution Agreement between the Registrant and Ingalls & Snyder,
LLC. (See Exhibit 23(e).)
(f) Not Applicable
(g) Custodian Servicing Agreement between the Registrant and Firstar
Bank Milwaukee, N.A. (See Exhibit 23(g)(1).)
(h) Other Material Contracts
(1) Fund Administration Servicing Agreement between the
Registrant and Firstar Mutual Fund Services, LLC.
(See Exhibit 23(h)(1).)
(2) Fund Accounting Servicing Agreement between the
Registrant and Firstar Mutual Fund Services, LLC.
(See Exhibit 23(h)(2).)
(3) Transfer Agency Servicing Agreement between the
Registrant and Firstar Mutual Fund Services, LLC.
(See Exhibit 23(h)(3).)
<PAGE>
(i) Legal Opinion and Consent of Hughes Hubbard & Reed LLP to be filed
by Amendment.
(j) Consent of independent auditors to be filed by Amendment.
(k) Omitted Financial Statements, if any, to be filed by Amendment.
(l) Initial Capital Agreements to be filed by Amendment.
(m) Distribution Plan. (See Exhibit 23(m).)
(n) Not Applicable
(o) Not Applicable
(p) Secretary's Certificate and Powers of Attorney. (See Exhibit 23(p).)
Item 24. Persons Controlled by or under Common Control with Fund
Prior to the commencement of the public offering of the shares of the Fund
all of the outstanding shares of the Trust will be owned by Ingalls & Snyder,
LLC.
Thomas O. Boucher, Jr. and Robert L. Gipson, who are a Managing Director
and a Senior Director, respectively, of Ingalls & Snyder are general partners of
Ingalls & Snyder Value Partners, L.P. ("Value Partners"). Value Partners is a
private investment fund organized as a New York limited partnership for which
Ingalls & Snyder acts as investment adviser.
Item 25. Indemnification
Reference is made to Section 7.02 of the Registrant's Agreement and
Declaration of Trust, which provides that, subject to the provisions of the
Fund's Bylaws, the Trust out of its assets may indemnify and hold harmless each
and every Trustee and officer of the Trust from and against any and all claims,
demands, costs, losses, expenses, and damages whatsoever arising out of or
related to such Trustee's performance of his or her duties as a Trustee or
officer of the Trust, except that the Trust is not obligated to indemnify, hold
harmless or protect any Trustee or officer from or against any liability to the
Trust or any shareholder to which he or she would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
Article VI of the Fund's Bylaws provide that the Trust is obligated to
indemnify the Trustees and officers of the Trust if the Trustee or officer 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 the Trust) by reason of the fact that such the
Trustee or officer is or was a Trustee or officer of the Trust, against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding, if it is determined that
the Trustee or officer acted in good faith and reasonably believed: (a) in the
case of conduct in his official capacity, that his conduct was in the Trust's
best interests and (b) in all other cases, that his conduct was at least not
<PAGE>
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.
In the case of actions by or in the right of the Trust, the Trust is
obligated to indemnify any Trustee or officers who was or is a party or is
threatened to be made a party to any such proceeding by or in the right of the
Trust to procure a judgment in its favor by reason of the fact that that person
is or was a Trustee or officer of the Trust, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of that action if the Trustee or officer acted in good faith, in a manner that
he believed to be in the best interests of the Trust and with such care,
including reasonable inquiry, as an ordinarily prudent person in a like position
would use under similar circumstances.
There is 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 Trustee's or officer's office with
the Trust. Indemnification may not be made:
(i) In respect of any proceeding as to which the Trustee or officer
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
(ii) 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 the
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
(iii) 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 indemnification is approved based on a determination that
indemnification of the Trustee or officer is proper in the circumstances because
the Trustee or officer has met the applicable standard of conduct and is not
prohibited from indemnification because of the disabling conduct described
above, 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;
(B) a written opinion by an independent legal counsel; or
(C) the shareholders.
To the extent that a Trustee or officer has been successful, on the merits
or otherwise, in the defense of any proceeding before the court or other body
before whom the proceeding was brought, the Trustee or officer shall be
indemnified against expenses actually and reasonably incurred by the Trustee or
<PAGE>
officer 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 Trustee or officer was not liable by reason of
the disabling conduct described above.
Expenses incurred in defending any proceeding may be advanced by the Trust
before the final disposition of the proceeding if (a) receipt of a written
affirmation by the Trustee or officer of his good faith belief that he has met
the standard of conduct necessary for indemnification and a written undertaking
by or on behalf of the Trustee or officer 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.
The Trust intends to purchase and maintain insurance which will insure
Trustees and officers of the Trust against any liability asserted against or
incurred by the Trustee or officer in such capacity or arising out of the
Trustee's or officer's status as such to the fullest extent permitted by law.
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.
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
<TABLE>
The name and address of each director, officer and partner of Ingalls & Snyder, LLC, together with
their positions with Ingalls & Snyder, their positions, if any, with the Fund and their other business
connections for the past two years are set forth below.
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES BUSINESS AND
BUSINESS ADDRESS WITH INGALLS & SNYDER, LLC WITH FUND OTHER CONNECTIONS
<S> <C> <C> <C>
Roscoe Cuningham Ingalls Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Lawton Storrs Lamb Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
William Reed Simmons Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Edward H. Oberst Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES BUSINESS AND
BUSINESS ADDRESS WITH INGALLS & SNYDER, LLC WITH FUND OTHER CONNECTIONS
<S> <C> <C> <C>
D. Roger B. Liddell Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Thomas O. Boucher, Jr. Managing Director None General Partner of
Ingalls & Snyder, LLC Ingalls & Snyder Value
61 Broadway Partners, L.P.
New York, New York 10006 61 Broadway
New York, New York 10006
John Joseph Dougherty Managing Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Steven Michael Foote Managing Director Trustee None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Robert E. Belknap Senior Director Trustee and portfolio None
Ingalls & Snyder, LLC manager
61 Broadway
New York, New York 10006
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICES BUSINESS AND
BUSINESS ADDRESS WITH INGALLS & SNYDER, LLC WITH FUND OTHER CONNECTIONS
<S> <C> <C> <C>
Alexander M. Blanton Senior Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Horace S. Boone Senior Director None None
Ingalls & Snyder, LLC
61 Broadway
New York, New York 10006
Robert Livingston Gipson Senior Director None General Partner of
Ingalls & Snyder, LLC Ingalls & Snyder Value
61 Broadway Partners, L.P.
New York, New York 10006 61 Broadway
New York, New York 10006
</TABLE>
<PAGE>
Item 27. Principal Underwriters
(a) Not Applicable.
(b) Please see Item 26.
(c) Not applicable.
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 and Firstar Bank
Milwaukee, N.A., 615 East Michigan Street, P.O. Box 701, Milwaukee, Wisconsin,
53201-0701.
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
See Item 25.
<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 or amendment to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of New York, and State of New York, on December 23,
1999.
THE LEGACY FUNDS, INC.
By: /S/ ROBERT E. BELKNAP*
_______________________________
Robert E. Belknap
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or amendment has been signed below by the following
persons in the capacities and on the dates indicated:
/S/ ROBERT E. BELKNAP * President and Trustee December 23,
___________________________ (Principal Executive 1999 --
(Robert E. Belknap) Officer)
/S/ JOSEPH NEUBERGER * Treasurer (Principal December 23,
___________________________ Financial Officer) 1999 --
(Joseph Neuberger)
/S/ THEODORE F. ELLS * Trustee December 23,
___________________________ 1999 --
(Theodore F. Ells)
/S/ STEVEN M. FOOTE * Trustee December 23,
___________________________ 1999 --
(Steven M. Foote)
/S/ BARNABAS B. B. BREED * Trustee December 23,
___________________________ 1999 --
(Barnabas B. B. Breed)
* By: /S/ ELIZABETH LARSON
_________________________
Elizabeth Larson
Attorney-in-Fact
EXHIBIT 23(A)(1)
AGREEMENT AND DECLARATION OF TRUST
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
of
THE LEGACY FUNDS, INC.
a Delaware Business Trust
Principal Place of Business:
61 Broadway
New York, NY 10006
WHEREAS, this AGREEMENT AND DECLARATION OF TRUST is made and entered
into as of the date set forth below by the Trustees named hereunder for the
purpose of forming a Delaware business trust in accordance with the
provisions hereinafter set forth,
NOW, THEREFORE, the Trustees hereby direct that a Certificate of Trust
be filed with the Office of the Secretary of State of the State of Delaware
and do hereby declare that the Trustees will hold IN TRUST all cash,
securities and other assets which the Trust now possesses or may hereafter
acquire from time to time in any manner and manage and dispose of the same
upon the following terms and conditions for the pro rata benefit of the
holders of Shares in this Trust.
ARTICLE I.
Name and Definitions
Section 1.01. NAME. This trust shall be known as "The Legacy
Funds, Inc." and the Trustees shall conduct the business of the Trust under
that name or any other name as they may from time to time determine.
Section 1.02. DEFINITIONS. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Delaware business trust
established by this Agreement and Declaration of Trust, as amended from time
to time;
(b) The "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or for the
account of the Trust;
(c) "Trustees" refers to the persons who have signed this
Agreement and Declaration of Trust, so long as they continue in office in
accordance with the terms hereof, and all other persons who may from time to
time be duly elected or appointed to serve on the Board of Trustees in
<PAGE>
accordance with the provisions hereof, and reference herein to a Trustee or
the Trustees shall refer to such person or persons in their capacity as
trustees hereunder;
(d) "Shares" means the shares of beneficial interest into which
the beneficial interest in the Trust shall be divided from time to time and
includes fractions of Shares as well as whole Shares;
(e) "Shareholder" means a record owner of outstanding Shares;
(f) "Person" means and includes individuals, corporations,
partnerships, limited liability companies, trusts, foundations, plans,
associations, joint ventures, estates and other entities, whether or not
legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act of 1940
and the Rules and Regulations thereunder, all as amended from time to time.
References herein to specific sections of the 1940 Act shall be deemed to
include such Rules and Regulations as are applicable to such sections;
(h) The terms "Commission" and "Principal Underwriter" shall
have the respective meanings given them in Section 2(a)(7) and Section
(2)(a)(29) of the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust, as amended or restated from time to time;
(j) "By-Laws" shall mean the By-Laws of the Trust as amended
from time to time;
(k) The term "Interested Person" has the meaning given it in
Section 2(a)(19) of the 1940 Act;
(l) "Investment Manager" or "Manager" means a party furnishing
services to the Trust pursuant to any contract described in Section 4.06(a)
hereof;
(m) "Series" refers to each Series of Shares established and
designated under or in accordance with the provisions of Article III.
ARTICLE II.
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of a management investment company registered under the 1940 Act
through one or more Series investing primarily in securities.
<PAGE>
ARTICLE III.
Shares
Section 3.01. DIVISION OF BENEFICIAL INTEREST. The beneficial
interest in the Trust shall at all times be divided into an unlimited number
of Shares, with a par value of $ .001 per Share. The Trustees may authorize
the division of Shares into separate Series and the division of Series into
separate classes of Shares. The different Series shall be established and
designated, and the variations in the relative rights and preferences as
between the different Series shall be fixed and determined, by the Trustees.
If only one Series shall be established, the Shares shall have the rights and
preferences provided for herein and in Section 3.06 hereof to the extent
relevant and not otherwise provided for herein.
Subject to the provisions of Section 3.06, each Share shall have voting
rights as provided in Article V hereof, and holders of the Shares of any
Series shall be entitled to receive dividends, when, if and as declared with
respect thereto in the manner provided in Section 6.01 hereof. No Share
shall have any priority or preference over any other Share of the same Series
with respect to dividends or distributions of the Trust or otherwise. All
dividends and distributions shall be made ratably among all Shareholders of a
Series (or class) from the assets held with respect to such Series according
to the number of Shares of such Series (or class) held of record by such
Shareholders on the record date for any dividend or distribution or on the
date of termination of the Trust, as the case may be. Shareholders shall
have no preemptive or other right to subscribe to any additional Shares or
other securities issued by the Trust or any Series. The Trustees may from
time to time divide or combine the Shares of a Series into a greater or
lesser number of Shares of such Series without thereby materially changing
the proportionate beneficial interest of such Shares in the assets held with
respect to that Series or materially affecting the rights of Shares of any
other Series. Pursuant to the powers contained herein, a single initial
Series of shares of beneficial interest of the Trust shall be established and
designated as The Legacy Growth Fund and an unlimited number of shares of
beneficial interest are hereby allocated to such Series.
Section 3.02. OWNERSHIP OF SHARES. The ownership of Shares shall
be recorded on the books of the Trust or a transfer or similar agent for the
Trust, which books shall be maintained separately for the Shares of each
Series. No certificates evidencing the ownership of Shares shall be issued
except as the Board of Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for the
transfer of Shares of each Series (or class) and similar matters. The record
books of the Trust as kept by the Trust or any transfer or similar agent, as
the case may be, shall be conclusive as to the identity of the Shareholders
of each Series and as to the number of Shares of each Series held from time
to time by each Shareholder.
Section 3.03. INVESTMENTS IN THE TRUST. Investments may be
accepted by the Trust from such Persons, at such times, on such terms, and
for such consideration as the Trustees from time to time may authorize. Each
investment shall be credited to the Shareholder's account in the form of full
and fractional Shares of the Trust, in such Series (or class) as the
purchaser shall select, at the net asset value per Share next determined for
<PAGE>
such Series (or class) after receipt of the investment; provided, however,
that the Trustees may, in their sole discretion, impose a sales charge or
redemption fee upon investments in the Trust.
Section 3.04. STATUS OF SHARES AND LIMITATION OF PERSONAL
Liability. Shares shall be deemed to be personal property giving only the
rights provided in this instrument and the By-Laws of the Trust. Every
Shareholder by virtue of having become a Shareholder shall be held to have
expressly assented and agreed to the terms hereof. The death of a
Shareholder during the existence of the Trust shall not operate to terminate
the Trust, nor entitle the representative of any deceased Shareholder to an
accounting or to take any action in court or elsewhere against the Trust or
the Trustees, but shall entitle such representative only to the rights of
said deceased Shareholder under this Declaration of Trust. Ownership of
Shares shall not entitle a Shareholder to any title in or to the whole or any
part of the Trust Property or right to call for a partition or division of
the same or for an accounting, nor shall the ownership of Shares constitute
the Shareholders as partners or joint venturers. Neither the Trust nor the
Trustees, nor any officer, employee or agent of the Trust shall have any
power to bind personally any Shareholder, or to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever other than such as
the Shareholder may at any time agree to pay.
Section 3.05. POWER OF BOARD OF TRUSTEES TO CHANGE PROVISIONS
RELATING TO SHARES. Notwithstanding any other provision of this Declaration
of Trust to the contrary, and without limiting the power of the Board of
Trustees to amend the Declaration of Trust as provided elsewhere herein, the
Board of Trustees shall have the power to amend this Declaration of Trust, at
any time and from time to time, in such manner as the Board of Trustees may
determine in their sole discretion, without the need for Shareholder action,
so as to add to, delete, replace or otherwise modify any provisions relating
to the Shares contained in this Declaration of Trust, provided that before
adopting any such amendment without Shareholder approval the Board of
Trustees shall determine that it is consistent with the fair and equitable
treatment of all Shareholders and that Shareholder approval is not required
by the 1940 Act or other applicable law. If Shares have been issued,
Shareholder approval shall be required by the Shareholders of the affected
Series (or class) to adopt any amendments to this Declaration of Trust which
would adversely affect to a material degree the rights and preferences of the
Shares of any Series (or class) or to increase or decrease the par value of
the Shares of any Series (or class).
Section 3.06. ESTABLISHMENT AND DESIGNATION OF SHARES. The
establishment and designation of any Series (or class) of Shares shall be
effective upon the adoption by a majority of the Trustees, of a resolution
which sets forth such establishment and designation and the relative rights
and preferences of such Series (or class). Each such resolution shall be
incorporated herein by reference upon adoption. Shares of each Series (or
class) established pursuant to this Section 3.06, unless otherwise provided
in the resolution establishing such Series, shall have the following relative
rights and preferences:
(a) ASSETS HELD WITH RESPECT TO A PARTICULAR SERIES. All
consideration received by the Trust for the issue or sale of Shares of a
Series, including dividends and distributions paid by, and reinvested in,
such Series, together with all assets in which such consideration is invested
or reinvested, all income, earnings, profits, and proceeds thereof from
whatever source derived, including, without limitation, any proceeds derived
<PAGE>
from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form the
same may be, shall irrevocably be held with respect to that Series for all
purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Trust. Such consideration, assets, income,
earnings, profits and proceeds thereof, from whatever source derived,
including, without limitation, any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds, in whatever form the same may be, are herein
referred to as "assets held with respect to" that Series. In the event that
there are any assets, income, earnings, profits and proceeds thereof, funds
or payments which are not readily identifiable as assets held with respect to
any particular Series (collectively "General Assets"), the Trustees shall
allocate such General Assets to, between or among any one or more of the
Series in such manner and on such basis as the Trustees, in their sole
discretion, deem fair and equitable, and any General Asset so allocated to a
particular Series shall be held with respect to that Series. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes in absence of manifest error.
(b) LIABILITIES OF A PARTICULAR SERIES. The assets of the
Trust held with respect to each Series shall be charged with the liabilities
of the Trust with respect to such Series and all expenses, costs, charges and
reserves attributable to such Series, and any general liabilities of the
Trust which are not readily identifiable as being held in respect of a Series
shall be allocated and charged by the Trustees to and among any one or more
Series in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The liabilities, expenses, costs,
charges, and reserves so charged to a Series are herein referred to as
"liabilities of" that Series. Each allocation of liabilities, expenses,
costs, charges and reserves by the Trustees shall be conclusive and binding
upon the holders of all Series for all purposes in absence of manifest
error. All Persons who have extended credit which has been allocated to a
particular Series, or who have a claim or contract which has been allocated
to a Series, shall look exclusively to the assets held with respect to such
Series for payment of such credit, claim, or contract. In the absence of an
express agreement so limiting the claims of such creditors, claimants and
contracting parties, each creditor, claimant and contracting party shall be
deemed nevertheless to have agreed to such limitation unless an express
provision to the contrary has been incorporated in the written contract or
other document establishing the contractual relationship.
(c) DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS, AND REPURCHASES. No
dividend or distribution including, without limitation, any distribution paid
upon termination of the Trust or of any Series (or class) with respect to, or
any redemption or repurchase of, the Shares of any Series (or class) shall be
effected by the Trust other than from the assets held with respect to such
Series, nor shall any Shareholder of any Series otherwise have any right or
claim against the assets held with respect to any other Series except to the
extent that such Shareholder has such a right or claim hereunder as a
Shareholder of such other Series. The Trustees shall have full discretion to
determine which items shall be treated as income and which items as capital;
and each such determination and allocation shall be conclusive and binding
upon the Shareholders in absence of manifest error.
(d) VOTING. All Shares of the Trust entitled to vote on a
matter shall vote without differentiation between the separate Series on a
<PAGE>
one-vote-per-Share basis; provided however, if a matter to be voted on
affects only the interests of one or more Series (or classes of a Series) but
not all Series (or classes of a Series), then only the Shareholders of such
affected Series (or classes) shall be entitled to vote on the matter.
(e) EQUALITY. All the Shares of each Series shall represent an
equal proportionate undivided interest in the assets held with respect to
such Series (subject to the liabilities of such Series and such rights and
preferences as may have been established and designated with respect to
classes of Shares within such Series), and each Share of a Series shall be
equal to each other Share of such Series.
(f) FRACTIONS. Any fractional Share of a Series shall have
proportionately all the rights and obligations of a whole share of such
Series, including rights with respect to voting, receipt of dividends and
distributions and redemption of Shares.
(g) EXCHANGE PRIVILEGE. The Trustees shall have the authority
to provide that the holders of Shares of any Series shall have the right to
exchange such Shares for Shares of one or more other Series in accordance
with such requirements and procedures as may be established by the Trustees.
(h) ELIMINATION OF SERIES. At any time that there are no
Shares outstanding of a Series (or class), the Trustees may abolish such
Series (or class).
ARTICLE IV.
The Board of Trustees
Section 4.01. NUMBER, ELECTION AND TENURE. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a
written instrument signed, or by resolution approved at a duly constituted
meeting, by a majority of the Board of Trustees, provided, however, that the
number of Trustees shall in no event be less than one (1) nor more than
fifteen (15). Subject to the requirements of Section 16(a) of the 1940 Act,
the Board of Trustees, by action of a majority of the Trustees then in office
at a duly constituted meeting, may fill vacancies in the Board of Trustees[,
including, without limitation, vacancies] created as a result of any increase
in the size of the Board of Trustees pursuant to this Section 4.01, and
remove Trustees with or without cause. [Such Trustees shall be divided into
three classes, which shall be as nearly equal in number as possible, and no
class shall include less than three directors. The terms of office of the
Trustees shall be as follows: That of the first class shall expire at the
next annual meeting of stockholders, the second class at the second annual
meeting and the third class at the third succeeding annual meeting. At each
annual meeting after such initial classification, directors replacing those
whose terms expire at such annual meeting shall be elected to hold office
until the third succeeding annual meeting.] Each director shall serve for
the term for which he is elected and until his successor is elected and shall
qualify.] Each Trustee shall serve during the continued lifetime of the
Trust until [his or her term of office expires,] he or she dies, resigns, is
declared bankrupt or incompetent by a court of competent jurisdiction, or is
removed. Any Trustee may resign at any time by written instrument signed by
him and delivered to any officer of the Trust or to a meeting of the
<PAGE>
Trustees. Such resignation shall be effective upon receipt unless specified
to be effective at some other time. Except to the extent expressly provided
in a written agreement with the Trust, no Trustee resigning and no Trustee
removed shall have any right to any compensation for any period following his
or her resignation or removal, or any right to damages or other payment on
account of such removal. Any Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of the Trust.
A meeting of Shareholders for the purpose of electing or removing one or more
Trustees may be called (i) by the Trustees upon their own vote, or (ii) upon
the demand of Shareholders owning 10% or more of the Shares of the Trust in
the aggregate.
Section 4.02. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The
death, declination, resignation, retirement, removal, or incapacity of one or
more Trustees, or all of them, shall not operate to annul the Trust or to
revoke any existing agency created pursuant to the terms of this Declaration
of Trust. Whenever a vacancy in the Board of Trustees shall occur, until
such vacancy is filled as provided in Section 4.01, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this
Declaration of Trust.
Section 4.03. POWERS. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the Board
of Trustees, and such Board shall have all powers necessary or convenient to
carry out that responsibility including the power to engage in transactions
of all kinds on behalf of the Trust. Trustees, in all instances, shall act
as principals and are and shall be free from the control of the
Shareholders. The Trustees shall have full power and authority to do any and
all acts and to make and execute any and all contracts, documents and
instruments that they may consider desirable, necessary or appropriate in
connection with the administration of the Trust. Without limiting the
foregoing, the Trustees may: adopt, amend and repeal By-Laws not
inconsistent with this Declaration of Trust providing for the regulation and
management of the affairs of the Trust; elect and remove such officers and
appoint and terminate such agents as they consider appropriate; appoint from
their own number and establish and terminate one or more committees
consisting of two or more Trustees who may exercise the powers and authority
of the Board of Trustees to the extent that the Trustees determine; employ
one or more Investment Manager to [manage the assets and investments of the
Trust]; employ one or more custodians of the assets of the Trust and
authorize such custodians to employ subcustodians and to deposit all or any
part of such assets in a system or systems for the central handling of
securities or with a Federal Reserve Bank, retain a transfer agent or a
shareholder servicing agent, or both; provide for the issuance and
distribution of Shares by the Trust directly or through one or more Principal
Underwriters or otherwise; redeem, repurchase and transfer Shares pursuant to
applicable law; set record dates for the determination of Shareholders with
respect to various matters; declare and pay dividends and distributions to
Shareholders of each Series from the assets of such Series; establish from
time to time, in accordance with the provisions of Section 3.06 hereof, any
Series of Shares, each such Series to operate as a separate and distinct
investment medium and with separately defined investment objectives and
policies and distinct investment purpose; and in general delegate such
authority as they consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the Trust or to any
such custodian, transfer or shareholder servicing agent, Investment Manager
or Principal Underwriter. Any determination as to what is in the interests
of the Trust made by the Trustees in good faith shall be conclusive. In
<PAGE>
construing the provisions of this Declaration of Trust, the presumption shall
be in favor of a grant of power to the Trustees, and unless otherwise
specified herein or required by the 1940 Act or other applicable law, any
action by the Board of Trustees shall be deemed effective if approved or
taken by a majority of the Trustees then in office or a majority of any duly
constituted committee of Trustees. Any action required or permitted to be
taken at any meeting of the Board of Trustees, or any committee thereof, may
be taken without a meeting if all members of the Board of Trustees or
committee (as the case may be) consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board of
Trustees, or committee, except as otherwise provided in the 1940 Act.
Without limiting the foregoing, the Trust shall have power and authority:
(a) To invest and reinvest cash and cash items, to hold cash
uninvested, and to subscribe for, invest in, reinvest in, purchase or
otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange,
distribute, write options on, lend or otherwise deal in or dispose of
contracts for the future acquisition or delivery of all types of securities,
futures contracts and options thereon, and forward currency contracts of
every nature and kind, including, without limitation, all types of bonds,
debentures, stocks, preferred stocks, negotiable or non-negotiable
instruments, obligations, evidences of indebtedness, certificates of deposit
or indebtedness, commercial paper, repurchase agreements, bankers'
acceptances, and other securities of any kind, issued, created, guaranteed,
or sponsored by any and all Persons, including, without limitation, states,
territories, and possessions of the United States and the District of
Columbia and any political subdivision, agency, or instrumentality thereof,
any foreign government or any political subdivision of the U.S. Government or
any foreign government, or any international instrumentality or organization,
or by any bank or savings institution, or by any corporation or organization
organized under the laws of the United States or of any state, territory, or
possession thereof, or by any corporation or organization organized under any
foreign law, or in "when issued" contracts for any such securities, futures
contracts and options thereon, and forward currency contracts, to change the
investments of the assets of the Trust; and to exercise any and all rights,
powers, and privileges of ownership or interest in respect of any and all
such investments of every kind and description, including, without
limitation, the right to consent and otherwise act with respect thereto, with
power to designate one or more Persons, to exercise any of said rights,
powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate,
lease, or write options with respect to or otherwise deal in any property
rights relating to any or all of the assets of the Trust or any Series;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property; and to
execute and deliver proxies or powers of attorney to such person or persons
as the Trustees shall deem proper, granting to such person or persons such
power and discretion with relation to securities or property as the Trustees
shall deem proper;
(d) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
<PAGE>
(e) To hold any security or property in a form not indicating
that it is trust property, whether in bearer, unregistered or other
negotiable form, or in its own name or in the name of a custodian or
subcustodian or a nominee or nominees or otherwise or to authorize the
custodian or a subcustodian or a nominee or nominees to deposit the same in a
securities depository, subject in each case to the applicable provisions of
the 1940 Act;
(f) To consent to, or participate in, any plan for the
reorganization, consolidation or merger of any corporation or issuer of any
security which is held in the Trust; to consent to any contract, lease,
mortgage, purchase or sale of property by such corporation or issuer; and to
pay calls or subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that connection to
deposit any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(h) To litigate, compromise, arbitrate, settle or otherwise
adjust claims in favor of or against the Trust or a Series, or any matter in
controversy, including but not limited to claims for taxes;
(i) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) To borrow funds or other property in the name of the Trust
or Series exclusively for Trust purposes;
(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary, desirable or appropriate for
the conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust or payment of distributions and
principal on its portfolio investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, Investment Manager,
Principal Underwriters, or independent contractors of the Trust, individually
against all claims and liabilities of every nature arising by reason of
holding Shares, holding, being or having held any such office or position, or
by reason of any action alleged to have been taken or omitted by any such
Person as Trustee, officer, employee, agent, Investment Manager, Principal
Underwriter, or independent contractor, including any action taken or omitted
that may be determined to constitute negligence, whether or not the Trust
would have the power to indemnify such Person against liability; and
<PAGE>
(m) To adopt, establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and
agents of the Trust. The Trust shall not be limited to investing in
obligations maturing before the possible termination of the Trust or one or
more of its Series. The Trust shall not in any way be bound or limited by
any present or future law or custom in regard to investment by fiduciaries.
The Trust shall not be required to obtain any court order to deal with any
assets of the Trust or take any other action hereunder.
Section 4.04. PAYMENT OF EXPENSES BY THE TRUST. Subject to the
provisions of Section 3.06(b), the Trustees are authorized to pay or cause to
be paid out of the principal or income of the Trust or Series, or partly out
of the principal and partly out of income, and to charge or allocate the same
to, between or among such one or more of the Series that may be established
or designated pursuant to Section 3.06, all expenses, fees, charges, taxes
and liabilities incurred or arising in connection with the Trust or Series,
or in connection with the management thereof, including, but not limited to,
the Trustees' compensation and such expenses and charges for the services of
the Trust's officers, employees, Investment Manager, Principal Underwriter,
auditors, counsel, custodian, transfer agent, Shareholder servicing agent,
and such other agents or independent contractors and such other expenses and
charges as the Trustees may deem necessary or proper to incur.
Section 4.05. OWNERSHIP OF ASSETS OF THE TRUST. Title to all of
the assets of the Trust shall at all times be considered as vested in the
Trust, except that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of the Trustees,
or in the name of the Trust, or in the name of any other Person as nominee,
on such terms as the Trustees may determine. Upon the resignation,
expiration of term, incompetency, bankruptcy, removal, or death of a Trustee
he or she shall automatically cease to have any such title in any of the
Trust Property, and the title of such Trustee in the Trust Property shall
vest automatically in the remaining Trustees. Such vesting and cessation of
title shall be effective whether or not conveyancing documents have been
executed and delivered. The Trustees may determine that the Trust or the
Trustees, acting for and on behalf of the Trust, shall be deemed to hold
beneficial ownership of any income earned on the securities owned by the
Trust, whether domestic or foreign.
Section 4.06. Service Contracts.
(a) The Trustees, at any time and from time to time, may
contract for exclusive or nonexclusive advisory, management and/or
administrative services for the Trust or for any Series with any Person; and
any such contract may contain such other terms as the Trustees may determine,
including without limitation, authority for the Investment Manager to
determine from time to time without prior consultation with the Trustees what
investments shall be purchased, held, sold or exchanged and what portion, if
any, of the assets of the Trust shall be held uninvested and to make changes
in the Trust's investments, and such contract may provide for the exercise of
such other responsibilities as may specifically be delegated to such Person.
<PAGE>
(b) The Trustees may also, at any time and from time to time,
contract with any Person or Persons, appointing such Person or Persons
exclusive or nonexclusive distributor(s) or Principal Underwriter(s) for the
Shares of one or more of the Series or other securities to be issued by the
Trust. Every such contract may contain such other terms as the Trustees may
determine.
(c) The Trustees are also empowered, at any time and from time
to time, to contract with any Person or Persons, appointing such Person or
Persons to serve as custodian(s), transfer agent(s) and/or shareholder
servicing agent(s) for the Trust or one or more of its Series. Every such
contract shall comply with such terms as may be required by the Trustees.
(d) The Trustees are further empowered, at any time and from
time to time, to contract with any Person or Persons to provide such other
services to the Trust or one or more of the Series, as the Trustees determine
to be in the best interests of the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the
Trust is a shareholder, director, officer, partner, trustee, employee,
[Investment] Manager, adviser, Principal Underwriter, distributor, or
affiliate or agent of or for any Person with which an advisory,
management or administration contract, or Principal Underwriter's or
distributor's contract, or transfer, shareholder servicing or other
type of service contract may be made, or that
(ii) any Person with which an advisory, management or
administration contract or Principal Underwriter's or distributor's
contract, or transfer, shareholder servicing or other type of service
contract may be made also has an advisory, management or administration
contract, or Principal Underwriter's or distributor's contract, or
transfer, shareholder servicing or other service contract, or has other
business or interests with any other Person,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or
executing the same, or create any liability or accountability to the
Trust or its Shareholders, provided approval of each such contract is
made pursuant to the applicable requirements of the 1940 Act.
ARTICLE V.
Shareholders' Voting Powers and Meetings
Section 5.01. VOTING POWERS. Subject to the provisions of Sections
3.05 and 3.06(d), the Shareholders shall have right to vote only (i) for the
election or removal of Trustees as provided in Section 4.01, and (ii) with
respect to such additional matters relating to the Trust as may be required
by the applicable provisions of the 1940 Act, including Section 16(a)
thereof, and (iii) on such other matters as the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to one vote as to
any matter on which it is entitled to vote and each fractional Share shall be
<PAGE>
entitled to a proportionate fractional vote. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by
proxy. A proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger.
Section 5.02. VOTING POWER AND MEETINGS. Meetings of the
Shareholders may be called by the Trustees for the purposes described in
Section 5.01. A meeting of Shareholders may be held at any time and place
designated by the Trustees. Written notice of any meeting of Shareholders
shall be given or caused to be given by the Trustees by delivering personally
or mailing such notice not more than ninety (90), nor less than ten (10) days
before such meeting, postage prepaid, stating the time and place of the
meeting, to each Shareholder at the Shareholder's address as it appears on
the records of the Trust. Whenever notice of a meeting is required to be
given to a Shareholder under this Declaration of Trust, a written waiver
thereof, executed before or after the meeting by such Shareholder or his or
her attorney thereunto authorized and filed with the records of the meeting,
or actual attendance at the meeting of Shareholders in person or by proxy,
shall be deemed equivalent to such notice.
Section 5.03. QUORUM AND REQUIRED VOTE. Except when a larger
quorum is required by the applicable provisions of the 1940 Act, the presence
in person or by proxy of a majority of the Shares entitled to vote on a
matter shall constitute a quorum at a Shareholders' meeting. Any meeting of
Shareholders may be adjourned from time to time by a majority of the votes
properly cast upon the question of adjourning a meeting to another date and
time, whether or not a quorum is present, and the meeting may be held as
adjourned within a reasonable time after the date set for the original
meeting without further notice. Subject to the provisions of Section 3.06(d)
and the applicable provisions of the 1940 Act, when a quorum is present at
any meeting, a majority of the Shares voted shall decide any questions except
only a plurality vote shall be necessary to elect Trustees.
Section 5.04. ACTION BY WRITTEN CONSENT. [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.
Section 5.05. RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any
adjournment thereof or by written consent, the Trustees may fix a time, which
shall be not more than ninety (90) nor less than ten (10) days before the
date of any meeting of Shareholders, as the record date for determining the
Shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof, and in such case only Shareholders of record on such
record date shall have such right, notwithstanding any transfer of shares on
the books of the Trust after the record date. For the purpose of determining
the Shareholders who are entitled to receive payment of any dividend or of
any other distribution, the Trustees may fix a date, which shall be on or
before the date for the payment of such dividend or distribution, as the
record date for determining the Shareholders having the right to receive such
<PAGE>
dividend or distribution. Nothing in this Section shall be construed as
precluding the Trustees from setting different record dates for different
Series.
ARTICLE VI.
Net Asset Value, Distributions, and Redemptions
Section 6.01. DETERMINATION OF NET ASSET VALUE, NET INCOME, AND
DISTRIBUTIONS. Subject to Section 3.06 hereof, the Trustees, in their
absolute discretion, may prescribe and shall set forth in the By-Laws or in a
duly adopted resolution of the Trustees such bases and time for determining
the per Share net asset value of the Shares of any Series and the declaration
and payment of dividends and distributions on the Shares of any Series, as
they may deem necessary or desirable.
Section 6.02. REDEMPTIONS AND REPURCHASES. The Trust shall
purchase such Shares as are offered by any Shareholder for redemption, upon
receipt by the Trust or a Person designated by the Trust of a request that
the Trust redeem such Shares in such form and in accordance with such
procedures for redemption as the Trustees may from time to time authorize;
and the Trust will pay therefor the net asset value thereof, in accordance
with the By-Laws and the applicable provisions of the 1940 Act. Payment for
said Shares shall be made by the Trust to the Shareholder within seven days
after the date on which the request for redemption is received in proper
form. The obligation set forth in this Section 6.02 is subject to the
provision that in the event that any time the New York Stock Exchange (the
"Exchange") is closed for other than weekends or holidays, or if permitted by
the Rules of the Commission during periods when trading on the Exchange is
restricted or during any emergency which makes it impracticable for the Trust
to dispose of the investments of the applicable Series or to determine fairly
the value of the net assets held with respect to such Series or during any
other period permitted by order of the Commission for the protection of
investors, such obligations may be suspended or postponed by the Trustees.
The redemption price may in any case or cases be paid in cash or wholly or
partly in kind in accordance with Rule 18f-1 under the 1940 Act if the
Trustees determine that such payment is advisable in the interest of the
remaining Shareholders of the Series of which the Shares being redeemed are a
part. Subject to the foregoing, the selection and quantity of securities or
other property so paid or delivered as all or part of the redemption price
shall be determined by or under authority of the Trustees. In no case shall
the Trust be liable for any delay of any corporation or other Person in
transferring securities selected for delivery as all or part of any payment
in kind.
Section 6.03. REDEMPTIONS AT THE OPTION OF THE TRUST. The Trust
shall have the right, at its option, upon 60 days notice to the affected
Shareholder at any time to redeem any or all of the Shares of any Shareholder
at the net asset value thereof as described in Section 6.01: (i) if at such
time such Shareholder owns Shares of any Series having an aggregate net asset
value of less than a minimum value determined from time to time by the
Trustees; or (ii) to the extent that such Shareholder owns Shares of a Series
equal to or in excess of a maximum percentage of the outstanding Shares of
such Series determined from time to time by the Trustees; or (iii) to the
extent that such Shareholder owns Shares equal to or in excess of a maximum
percentage, determined from time to time by the Trustees, of the outstanding
Shares of the Trust.
<PAGE>
Section 6.04. TRANSFER OF SHARES. The Trust shall transfer shares
held of record by any Person to any other Person upon receipt by the Trust or
a Person designated by the Trust of a written request therefore in such form
and pursuant to such procedures as may be approved by the Trustees.
ARTICLE VII.
Compensation and Limitation of Liability
Section 7.01. COMPENSATION OF TRUSTEES. [The Board of Trustees, by
resolution, may authorize the Trust to compensate each Trustee for his
services as a Trustee of the Trust.] Nothing herein shall in any way prevent
(i) the employment of any Trustee or any Person of whom the Trustee is a
shareholder, director, officer, partner, trustee, employee, or agent to
provide advisory, management, legal, accounting, investment banking or other
services to the Trust or (ii) such Trustee or Person from being specially
compensated for such services by the Trust.
Section 7.02. INDEMNIFICATION AND LIMITATION OF LIABILITY. The
Trustees shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Manager or Principal Underwriter
of the Trust, nor shall any Trustee be responsible for the act or omission of
any other Trustee, and, subject to the provisions of the Bylaws, the Trust
out of its assets may indemnify and hold harmless each and every Trustee and
officer of the Trust from and against any and all claims, demands, costs,
losses, expenses, and damages whatsoever arising out of or related to such
Trustee's performance of his or her duties as a Trustee or officer of the
Trust; provided that nothing herein contained shall indemnify, hold harmless
or protect any Trustee or officer from or against any liability to the Trust
or any Shareholder to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office. Every note, bond,
contract, instrument, certificate or undertaking and every other act or thing
whatsoever issued, executed or done by or on behalf of the Trust or the
Trustees or any of them in connection with the Trust shall be conclusively
deemed to have been issued, executed or done only in or with respect to their
or his or her capacity as Trustees or Trustee, and such Trustees or Trustee
shall not be personally liable thereon.
Section 7.03. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND
OR SURETY. The exercise by the Trustees of their powers hereunder shall be
binding upon everyone interested in or dealing with the Trust. A Trustee
shall be liable to the Trust and to any Shareholder solely for his or her own
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee, and shall not be
liable for errors of judgment or mistakes of fact or law. The Trustees may
take advice of counsel or other experts with respect to the meaning and
operation of this Declaration of Trust, and shall not be under any liability
for any act or omission in accordance with such advice or for failing to
follow such advice. The Trustees shall not be required to give any bond as
such, nor any surety if a bond is required.
Section 7.04. INSURANCE. The Trustees shall be entitled and
empowered to the fullest extent permitted by law to purchase with Trust
assets insurance for liability and for all expenses reasonably incurred or
<PAGE>
paid or expected to be paid by a Trustee or officer in connection with any
claim, action, suit or proceeding in which he or she becomes involved by
virtue of his or her capacity or former capacity with the Trust, whether or
not the Trust would have the power to indemnify him or her against such
liability under the provisions of this Article.
ARTICLE VIII.
Miscellaneous
Section 8.01. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No
Person dealing with the Trustees shall be bound to make any inquiry
concerning the validity of any transaction made or to be made by the Trustees
or to see to the application of any payments made or property transferred to
the Trust or upon its order.
Section 8.02. TERMINATION OF TRUST OR SERIES. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The
Trust may be terminated at any time by the Trustees upon 60 days prior
written notice to the Shareholders. Any Series may be terminated at any time
by the Trustees upon 60 days prior written notice to the Shareholders of that
Series. Upon termination of the Trust (or any Series, as the case may be),
after paying or otherwise providing for all charges, taxes, expenses and
liabilities of each Series, severally (or the applicable Series, as the case
may be), whether due or accrued or anticipated as may be determined by the
Trustees, the Trust shall, in accordance with such procedures as the Trustees
consider appropriate, reduce the remaining assets held, severally, with
respect to each Series (or the applicable Series, as the case may be), to
distributable form in cash or shares or other securities, and any combination
thereof, and distribute the proceeds held with respect to each Series (or the
applicable Series, as the case may be), to the Shareholders of that Series,
as a Series, ratably according to the number of Shares of that Series held by
the several Shareholders on the date of termination.
Section 8.03. MERGER AND CONSOLIDATION. The Trustees may cause (i)
the Trust or one or more of its Series to the extent consistent with
applicable law to be merged into or consolidated with another trust (or
series thereof), Series or Person (or series thereof), (ii) the Shares of the
Trust or any Series to be converted into beneficial interests in another
business trust (or series thereof), (iii) the Shares to be exchanged for
assets or property under or pursuant to any state or federal statute to the
extent permitted by law or (iv) a sale of assets of the Trust or one or more
of its Series. Such merger or consolidation, Share conversion, Share
exchange or sale of assets must be authorized by vote as provided in Sections
3.05(d) and 5.03 herein; provided that in all respects not governed by
statute or applicable law, the Trustees shall have power to prescribe the
procedure necessary or appropriate to accomplish a sale of assets, Share
exchange, merger or consolidation including the power to create one or more
separate business trusts or other Person or Persons to which all or any part
of the assets, liabilities, profits or losses of the Trust may be transferred
and to provide for the conversion of Shares of the Trust or any Series into
beneficial interests in such separate business trust or trusts (or series
thereof).
Section 8.04. AMENDMENTS. This Declaration of Trust may be
restated and/or amended at any time by an instrument in writing signed by a
majority of the Trustees then in office. Any such restatement and/or
<PAGE>
amendment hereto shall be effective immediately upon execution and approval.
The Certificate of Trust of the Trust may be restated and/or amended by a
similar procedure, and any such restatement and/or amendment shall be
effective immediately upon filing with the Office of the Secretary of State
of the State of Delaware or upon such future date as may be stated therein.
Section 8.05. FILING OF COPIES, REFERENCES, HEADINGS. The original
or a copy of this instrument and of each restatement and/or amendment hereto
shall be kept at the office of the Trust where it may be inspected by any
Shareholder. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such restatements and/or
amendments have been made and as to any matters in connection with the Trust
hereunder; and, with the same effect as if it were the original, may rely on
a copy certified by an officer of the Trust to be a copy of this instrument
or of any such restatements and/or amendments. In this instrument and in any
such restatements and/or amendment, references to this instrument, and all
expressions such as "herein," "hereof" and "hereunder," shall be deemed to
refer to this instrument as amended or affected by any such restatements
and/or amendments. Headings are placed herein for convenience of reference
only and shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. Whenever the singular
number is used herein, the same shall include the plural; and the neuter,
masculine and feminine genders shall include each other, as applicable. This
instrument may be executed in any number of counterparts each of which shall
be deemed an original.
Section 8.06. APPLICABLE LAW. This Agreement and Declaration of
Trust is created under and is to be governed by and construed and
administered according to the laws of the State of Delaware and the Delaware
Business Trust Act, as amended from time to time (the "Act"). The Trust
shall be a Delaware business trust pursuant to such Act, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a business trust.
Section 8.07. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of the Declaration of Trust are severable, and
if the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have
constituted a part of the Declaration of Trust; provided, however, that such
determination shall not affect any of the remaining provisions of the
Declaration of Trust or render invalid or improper any action taken or
omitted prior to such determination.
(b) If any provision of the Declaration of Trust shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or
any other provision of the Declaration of Trust in any jurisdiction.
Section 8.08. BUSINESS TRUST ONLY. It is the intention of the
Trustees to create a business trust pursuant to the Act, and thereby to
create only the relationship of trustee and beneficial owners within the
<PAGE>
meaning of such Act between the Trustees and each Shareholder. It is not the
intention of the Trustees to create a general partnership, limited
partnership, joint stock association, corporation, bailment, joint venture,
or any form of legal relationship other than a business trust pursuant to
such Act. Nothing in this Declaration of Trust shall be construed to make
the Shareholders, either by themselves or with the Trustees, partners or
members of a joint stock association.
IN WITNESS WHEREOF, the Trustees named below do hereby make and enter
into this Declaration of Trust as of the 14th day of July, 1999.
/S/ ROBERT E. BELKNAP
------------------------------------
Robert E. Belknap
61 Broadway
New York, NY 10006
/S/ D. ROGER B. LIDDELL
------------------------------------
D. Roger B. Liddell
61 Broadway
New York, NY 10006
EXHIBIT 23(D)
INVESTMENT ADVISORY AGREEMENT
<PAGE>
INVESTMENT ADVISORY AGREEMENT
This Agreement made and entered into as of December [___], 1999, by and
between THE LEGACY FUNDS, INC., a Delaware business trust (the "Company"),
and INGALLS & SNYDER LLC, a New York limited liability company (the
"Adviser"):
WHEREAS, the Company is an open-end diversified management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company is authorized to create separate series,
each with its own separate investment portfolio; and
WHEREAS, the Company desires to retain the Adviser to render
investment advisory services to the Legacy Growth Fund, which is a separate
series of the Company (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 Company hereby appoints the Adviser to
act as investment adviser to the Fund with respect to the assets belonging to
the Fund, 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 beneficial interest of the Company, par value $.01 per share,
representing interests in the Fund, 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 Company, at its option,
may also appoint the Adviser to act as investment adviser hereunder with
respect to the assets belonging to any other series of the Company 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 Company 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 Company and any resolution, rules or regulations adopted by
the Board of Trustees of the Company. 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 Company from time to time, have no authority to act for or represent the
Company in any way or otherwise be deemed an agent for the Company. The
Company 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.
<PAGE>
It is understood that the Adviser performs investment advisory services
for various clients and that several individuals perform advisory services on
behalf of the Adviser for such clients (the "Advisory Representatives"). It
is understood that the 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 the Adviser,
depending upon each Advisory Representative's opinion with respect to the
investment. The Company agrees that the 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 the 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, the Adviser believes it to be proper
that investment advisers invest their own personal funds in the same
securities that are recommended to clients. The Adviser, and directors and
employees of the 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 the Adviser and directors and employees of the
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 the Adviser shall not have any obligation to purchase or sell, or to
recommend for purchase or sale, for the Fund any security which the 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 Company, the Adviser shall administer the Company's
corporate affairs and, in connection therewith, shall furnish the Company
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(g) of this Agreement), Registration Statement (as
defined in paragraph 3(e) 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
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
<PAGE>
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 Ingalls & Snyder LLC 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 be equitable and
consistent with its fiduciary obligations to the Fund and, if applicable,
to such other customers.
<PAGE>
(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 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.
(g) 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.
(h) The Adviser shall furnish such office and other facilities as may be
required by the Fund.
(i) 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 Company 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").
<PAGE>
(d) Certified resolutions of the Board of Trustees of the Fund and of the
Fund's shareholders, 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".
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
partners, 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
<PAGE>
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. 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,
payable 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
paragraph 8, and the fee for each month will be paid to the Adviser during
the succeeding month.
8. FEE REDUCTION; LIMITATION ON EXPENSES. The following provisions
of this paragraph 8 shall apply for a period of one year following the date
of the first public offering and sale of the shares of The Legacy Growth
Fund, unless the Adviser, in its sole discretion, elects to continue such
provisions in effect thereafter. If such provisions are continued in effect
after such date, such provisions may thereafter be discontinued at any time
at the election and the sole discretion of the Adviser by sending written
notice to the Fund of its election to terminate the effectiveness of such
provisions.
(a) In the event the Expenses (as defined in paragraph 8(e) below) of the
Fund for any fiscal year exceed 1.70% of the Fund's average daily net
assets (the "Expense Cap") (such excess hereinafter called the "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 Excess
Expense of the Fund, and if the 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 reimburse the Fund for the amount of
such excess.
(b) The adjustments and reimbursements provided for in paragraph 8(a) shall
be made as follows:
(i) If the total amount of Expenses accrued by the Fund from
the beginning of the fiscal year through the close of
business on such day exceeds the Applicable Pro Rata
Portion of the Expense Cap (as defined below) through
such day, the compensation payable to the Adviser with
respect to such day shall be reduced by the amount of
such excess.
(ii) If the total amount of Expenses accrued by the Fund from
the beginning of the fiscal year through the close of
business on such day is less than the Applicable Pro
Rata Portion of the Expense Cap through such day, the
compensation payable to the Adviser with respect to such
day shall be increased by the amount of such excess,
except to the extent such increase would cause the
aggregate compensation payable to the Adviser with
respect to the period from the beginning of such fiscal
year through such date to exceed the Applicable Pro Rata
Portion of the Advisory Fee (as defined below).
<PAGE>
In the event any reduction of the Advisory Fee provided for in this paragraph
8(b) would result in an aggregate Advisory Fee of less than zero for any
month in a fiscal year, the Adviser shall make an additional reimbursement
payment to the Fund in such amount.
(c) For purposes of this paragraph 8:
(i) "Applicable Pro Rata Portion of the Expense Cap" as of
any day shall mean the dollar amount computed by
multiplying 1.70% by (A) the ratio computed by dividing
the number of days elapsed since the beginning of the
relevant fiscal year by the number of days in such year
and (B) the average daily net asset value of the Fund
from the beginning of the relevant fiscal year through
such day.
(ii) "Applicable Pro Rata Portion of the Advisory Fee" as of
any day shall mean the dollar amount of the Advisory Fee
that would be payable to the Adviser with respect to the
period from the beginning of the relevant fiscal year
through such day, if such amount were computed without
regard to the limitations set forth in this paragraph 8,
multiplied by the ratio computed by dividing the number
of days elapsed since the beginning of the relevant
fiscal year by the number of days in such fiscal year.
(d) 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 date of such effectiveness and to end on
the last day of such fiscal 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 the first day of such fiscal year
and to end on the date of the termination of this Agreement. In either of
such events, the Applicable Pro Rata Portion of the Expense Cap and the
Applicable Pro Rata Portion of the Advisory Fee shall be reduced by
multiplying such amount by the ratio computed by dividing the number of
days deemed to occur in such fiscal year by 365.
(e) As used herein, the term "Expenses" means all expenses of the Fund,
including without limitation (i) the general expenses of the Fund, (ii) the
fees payable to the Adviser, the Fund's administrator, if any, the Fund's
transfer agent and dividend paying agent, if any, and the Fund's custodian
and (iii) registration fees and the costs and expenses of qualifying the
Fund's shares for offer and sale under the Blue Sky laws of any
jurisdiction where such shares may be qualified from time to time.
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
<PAGE>
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 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 the second
anniversary of the date hereof, 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 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. 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: Edward Oberst,
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.
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 shareholders 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
<PAGE>
of, obligations given, executed or delivered on behalf of or by the Fund,
that the shareholders, 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: ________________________________
Robert E. Belknap
President
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
"Trust"), and INGALLS & SNYDER, LLC, a New York limited liability company
(herein called the "Distributor").
WHEREAS, the Trust 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 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 Trust has adopted a Distribution Plan pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the "1940 Act"),
with respect to the Legacy Growth Fund (the "Fund"), which is a separate
series of the Trust, such Distribution Plan as in effect and amended from
time to time being referred to herein as the "Distribution Plan"; 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 shares of beneficial interest of the Fund ("Shares"),
and is also a member of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, pursuant to the Distribution Plan the Trust desires to retain
the Distributor as distributor in connection with the offering and sale of
the Shares of the Fund, and the Distributor is willing to act as principal
underwriter 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 Trust 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 Trust'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 Trust's "Certificate of Trust");
(b) The Trust'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 Trust (such By-Laws, as currently in
effect and as it shall from time to time be amended, herein called the
"By-Laws");
<PAGE>
(d) Resolutions of the Board of Trustees of the Trust
authorizing the execution and delivery of this Agreement;
(e) The Trust's initial Registration Statement under the 1940
Act, on Form N-1A as 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 Trust 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 Trust hereby appoints
Distributor to serve as the 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 Trust 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 Trust 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 Trust'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 Trust 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 Trust 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 Trust of securities to the stockholders of the Fund.
(b) In all matters relating to the sale of Shares, Distributor
will act in conformity with the Trust'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 Trust and will conform to and
<PAGE>
comply with the requirements of the 1933 Act, and the 1940 Act, the
regulations of the 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 Trust. 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 Trust 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 (including any supplement thereto) to persons who
are not either shareholders of, or counsel, independent accountants or other
persons providing similar services to, the Trust, 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
Trust 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 or under the laws of any state
or other jurisdiction.
(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 Trust's Certificate of Trust and the Fund's 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 Trust in connection with the offering or sale of 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 Trust and the
transfer agent of the Fund 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 Trust reserves the right to suspend such repurchase right upon written
notice to the Distributor. The Distributor further agrees to act as agent
for the Trust 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 and the Distribution Plan in accordance with
the Distribution Plan.
<PAGE>
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, and shall also remain a member in good standing of the NASD. The
Distributor shall immediately notify the Trust 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 Trust 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 required to
be borne by the Distributor pursuant to the Distribution Plan and subject to
the requirements of Rule 12b-1 under the 1940 Act.
(b) The Trust shall execute all documents, furnish all
information and otherwise take all actions which may be reasonably necessary
in the discretion of the Trust's officers in connection with the
qualification of the Shares for sale in such states as the Distributor may
designate to the Trust and the Trust 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 Trust shall have the right to suspend the offering and
sale of Shares of the Fund at any time in the absolute discretion of the
Trust 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 Trust.
(e) The Trust reserves the right to reject any order for Shares.
<PAGE>
IIA. COMPENSATION
The Fund shall pay to the Distributor as compensation for its services
under this Agreement and in accordance with the Distribution Plan a
distribution fee of .50 of 1% per annum of the average daily net assets of
the Fund. The distribution fee will be accrued daily and paid monthly in
arrears. For purposes of determining the distribution fee, the net assets of
the Fund shall be determined as set forth from time to time in the Fund's
then current Prospectus. Amounts paid under this Agreement shall comply with
the guidelines concerning asset-based sales charges as set forth in the
Conduct Rules of the NASD, including, without limitation, Rule 2830 thereof.
Amounts paid to the Distributor by the Fund will not be used to pay the
distribution expenses incurred with respect to any other series of the Trust,
except that distribution expenses attributable to the Trust as a whole will
be allocated to each series (including the Fund) according to the ratio of
the sale of shares such series to the total sales of the shares of all series
over the Trust's fiscal year or such other allocation method approved by the
Board of Trustees. The allocation of distribution expenses between series
will be subject to the review of the Board of Trustees.
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 Trust 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 Trust all records and other information relative to the Trust, to the
Trust's prior or present shareholders and to those persons or entities who
respond to Distributor inquiries concerning investment in the Trust, 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 series which may be added to the Trust 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 Trust. 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 Trust.
V. INDEMNIFICATION
1. TRUST REPRESENTATIONS. The Trust 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
<PAGE>
Act and the rules thereunder, that the Registration Statement did not contain
at the 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 Trust 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 Trust 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 Trust in respect of the Fund, or arise out of, or are
based upon, information furnished by or on behalf of the Trust in respect 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 neither the Trust nor the Fund shall 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 Trust in respect of the Fund in reliance upon and in conformity with
written information furnished to the Trust by or on behalf of or otherwise
approved by and with respect to Distributor or its affiliates specifically
for inclusion therein.
Neither the Trust nor the Fund shall be obligated to 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
<PAGE>
disregard of obligations and duties, 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 Trust who are neither "interested persons" of the Trust (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 Trust (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 Trust, the Trust's several officers and
trustees and any person who controls the Trust 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 Trust in
respect 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
Trust 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 Trust, the Trust's
several officers and trustees, and any person who controls the Trust or any
series 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 and the Trust 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 Trust (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
<PAGE>
reasonable likelihood that such person ultimately will be found entitled to
indemnification hereunder.
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 Trust 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 Trust
in which the cancellation takes place to the date of such cancellation, (ii)
reimburse the Fund and the Trust 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 or the Trust 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 by the vote of a majority of the
Board of Trustees of the Trust, including a majority of the Rule 12b-1
Trustees (as defined in the Distribution Plan), cast in person at a meeting
called for the purpose of voting on such approval; PROVIDED, HOWEVER, that
this Agreement shall automatically terminate in the event of its assignment
and may be terminated by the Trust at any time, without the payment of any
penalty, by vote of a majority of the Rule 12b-1 Trustees or by a vote of a
majority of the outstanding voting securities, on 60 days' written notice to
the Distributor, or by the Distributor at any time on 60 days' written notice
to the Trust. 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 Trust, or of a majority of the outstanding voting securities
of the Fund; provided, that in either case, such amendment also shall be
approved by a majority of the Independent Trustees.
VIII. NOTICES
Notice of any kind to be given to the Distributor by the Trust 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 Trust in accordance with this Section
VIII. Notices of any kind to be given to the Trust by the Distributor shall
be in writing and shall be duly given if mailed or delivered to the Trust at
its address set forth in the then-current Prospectus, Attention: President,
or at such other address or to such other individual as shall be specified by
the Trust to the Distributor in accordance with this Section, with copies to
each of the Trust's Trustees at their respective addresses set forth in the
Fund's Registration Statement and to the legal counsel to the Trust.
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
<PAGE>
respective successors and 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: ________________________________
Robert E. Belknap
President
INGALLS & SNYDER, LLC
By: ________________________________
Edward Oberst
Managing Director
EXHIBIT 23(G)(1)
CUSTODIAN SERVICING AGREEMENT
<PAGE>
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT made as of December ___, 1999, between The Legacy Funds,
Inc., a Delaware Business Truss (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 Legacy
Growth 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,
options, 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 the President and
any Vice President of the Company or such other persons who may be designated by
or pursuant to a resolution of the Board Trustees of the Company to give
instructions to the Custodian, such persons to sign singly or in such
combinations as may be designated in such resolution.
The term "instructions" shall mean an officers' certificate, and
"facsimile instructions" shall mean instructions delivered by facsimile
transmission.
The term "oral instructions" shall mean a request or direction delivered
orally by the President or any Vice President of the Company or such other
officers of the Company or such other persons who may be designated by or
pursuant to a resolution of the Board of Trustees of the Company to give oral
instructions to the Custodian, such persons to act singly or in such
combinations as may be designated in such resolution.
The term "authorized person" shall mean the President or any Vice
President of the Company or such other offers of the Company or such other
persons who may be designated by or pursuant to a resolution of the Board of
Trustees of the Company to give officers' certificates, instructions or oral
<PAGE>
instructions, as the case may be, acting singly or in such combinations as may
be designated in such resolution.
The word "Board" shall mean the Board of Trustees of the Company.
2. APPOINTMENT.
A. The Company hereby appoints the Custodian to provide custodian services
to the Legacy Growth Fund and for each additional series of the Company listed
on Exhibit A attached hereto (each a "Fund") on the terms and conditions set
forth in this Agreement, and the Custodian 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.
B. The Custodian shall receive and keep safe the securities, investments,
cash and other assets of the Fund in accordance with this Agreement.
C. In performing its duties hereunder, the Custodian will comply with all
applicable requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the Investment Company Act of
1940, as amended, and the applicable rules and regulations thereunder and any
laws, rules and regulations of governmental authorities having jurisdiction and
will act in conformity with the instructions and directions of the Board of
Trustees of the Company and such other authorized persons of the Company as may
be designated for such purpose by the Board of Trustees.
3. 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 and
instructions described in Section 1 hereof, together with any changes which may
occur from time to time.
4. 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 beneficial
interest of the Fund upon delivery thereof to Custodian, or
upon proper instructions from the Company;
<PAGE>
(c) for the payment of interest, dividends, distributions, 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 in accordance with a
resolution of the Board of Trustees of the Company or an
officers' certificate.
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, 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 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.
C. Custodian shall make federal funds available to the Company as of
specified times agreed upon from time to time by the Company and the Custodian,
which times shall not be in excess of the times required under banking
regulations, 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.
5. SEGREGATED ACCOUNTS
The Custodian shall hold in a separate account, and physically segregate
at all times from those of the Custodian and any other persons, all securities,
investments, cash and other assets received by it from or for the account of the
Fund. All such securities, investments, cash and assets shall be held for the
benefit of the Fund and shall be delivered or disposed of by the Custodian only
for the account of, and in accordance with, the instructions of the Company
pursuant to the terms of this Agreement.
<PAGE>
6. 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 release,
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 therefor;
(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 beneficial interest
of the Fund upon delivery thereof to Custodian;
(i) upon receipt of payment in connection with any repurchase agreement
related to securities held hereunder;
(j) for delivery in connection with any loans of securities made by the
Fund, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Company, which may be in
the form of cash;
(k) for delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;
(l) for delivery in accordance with the provisions of any agreement
between the Company and a broker-dealer registered under the
Securities Exchange Act of 1934, as amended, and a member of The
National Association of Securities Dealers, Inc., relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connections with transactions by the Fund;
<PAGE>
(m) for release of securities to designated brokers under covered call
options; provided, however, that such securities shall be released
only upon payment to the Custodian of monies for the premium due and
a receipt for the securities which are to be held in escrow and upon
expiration of the option the Custodian will receive from brokers the
securities previously deposited; or
(n) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a), (b), (d),
(e), (f), and (g), securities or cash receivable in exchange therefor shall be
deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian shall
receive (and may rely upon) an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a purpose permitted under the
terms of each item of this Section 5 (other than item (n)) and, in respect of
item (n), 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 an authorized person or persons of the Company issue
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
In no event may any member of the Company's Board of Trustees or any
officer, employee or agent of the Company withdraw any securities.
7. 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.
8. 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
<PAGE>
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. Such nominee shall hold only assets belonging to customers of the
Custodian and shall not hold any assets in which the Custodian has any
beneficial interest. All securities held by Custodian hereunder shall be at all
times identified 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
may hold for the account of the Company and which may from time to time be
registered in the name of the Company.
9. 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 execute in blank and deliver, or cause to be so executed and
delivered, to the Company promptly 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. The Custodian shall transmit or cause to be transmitted promptly to
the Company all other written information (including, without limitation,
information concerning calls and maturities of securities, the availability and
expiration of rights and notices of exercise of call and put options written by
the Fund) received by the Custodian from issuers of the securities and other
investments held hereunder and, in the case of tender or exchange offers, all
written information received from the party (or its agent) making the tender or
exchange offer.
10. 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.
11. 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
<PAGE>
as set forth in Exhibit A attached hereto. Such fees shall become effective and
begin to accrue upon the first public offering and sale of the shares of the
Fund.
Custodian shall not be liable for any action taken for a proper corporate
purpose in good faith upon any certificate provided to the custodian by a duly
authorized officer or agent of the Company or a 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 (other than income and similar 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 or
refusal or failure to comply with the terms of this Agreement. 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 (other than income and similar 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 misconduct or
refusal or failure to comply with the terms of this Agreement, 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, each
controlling person of the Company and their respective directors, trustees and
officers (each a "Firstar Indemnitee") from all charges, expenses, assessments,
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 such Firstar Indemnitee may sustain or incur or which may be asserted
against such Firstar Indemnitee by any person as a result of the bad faith,
negligence or willful misconduct of the Custodian (or any nominee of the
Custodian or any subcustodian) or any refusal or failure of the Custodian (or
any such nominee or subcustodian) to comply with the terms of this Agreement in
connection with the performance of the Custodian's duties under this Agreement.
The trustees and shareholders of the Company shall not be personally liable for
any of the obligations of the Fund or the Company under this Agreement or in
connection with any matter arising under or in connection with this Agreement.
12. SUBCUSTODIANS
Custodian is hereby authorized to engage at its own expense 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 to act as a
custodian 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. Such
<PAGE>
subcustodian shall agree to comply with the relevant provisions of the 1940 Act
and other applicable rules and regulations. No subcustodian shall be employed
without prior written notice to the Company.
Such a subcustodian may be a foreign subcustodian in accordance with Rule
17f-5 under the 1940 Act, provided that the assets held by such foreign
subcustodian shall be limited to "foreign securities" (as defined in Rule 17f-5
under the 1940 Act) and cash and cash equivalents in such amounts as the
Custodian or the Company may determine to be reasonably necessary to effect the
Fund's foreign securities transactions.
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.
13. 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 and adjusted
average cost of each issue and the market value thereof at the end of such month
and stating the cash account of the Fund. 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.
14. PROPRIETARY AND CONFIDENTIAL INFORMATION
The Custodian agrees on behalf of itself and its directors, officers and
employees to treat confidentially and as proprietary information of the 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 the Custodian 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.
15. DATA NECESSARY TO PERFORM SERVICES
The Custodian shall provide to the Company's transfer agent, fund
accountant, administrator, investment adviser and distributor such information
and data produced or maintained by it under this Agreement as may be necessary
for such other persons to perform their duties and obligations under their
respective agreements with the Company and in such form as may be required by
such persons.
<PAGE>
16. 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.
17. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Company, or by Custodian, on
ninety (90) days notice prior to the other party, given in writing and sent by
registered mail or overnight courier to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
Attn: [_______________]
or to the Company at:
The Legacy Funds, Inc.
61 Broadway
New York, NY 10006-2802
Attn: President
as the case may be, or such other address of a party as may be specified by such
party by written notice hereunder. 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.
18. 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 to the addresses
set forth or provided for in Section 16.
19. ASSIGNMENT
This Agreement may not be assigned by the Custodian, nor may the Custodian
delegate its duties hereunder, without the prior written consent of the Company
<PAGE>
approved by a resolution of its Board of Trustees, and any assignment not in
compliance with this Section shall be void. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
20. 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 Trustees of the Company approves by resolution the
use of such central securities clearing agency or securities depository. With
respect to securities of the Fund which are maintained in any such clearing
agency or securities depository, the records of the Custodian shall identify by
book entry or otherwise those securities belonging to the Fund. Any securities
deposited with any such clearing agency or securities depository shall at all
times be segregated from any assets controlled by the Custodian in other than a
fiduciary or custodian capacity. All books and records maintained by the
Custodian which relate to the Fund's participation in any such clearing agency
or securities depository shall at all times during regular business hours be
open to the inspection of authorized persons of the Company, including without
limitation its independent public accountants.
21. 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.
22. AMENDMENT; WAIVER
This Agreement may not be amended or changed except by a written
instrument signed by the parties hereto. No omission or delay on the part of
either party in requiring the due and punctual fulfillment by the other party of
any of its obligations hereunder shall constitute a waiver by the omitting or
delaying party of any of its rights to require such due and punctual fulfillment
of any obligation hereunder, whether similar or otherwise, or a waiver of any
remedy it may have hereunder or otherwise.
23. REPORTS BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide to the Company, at such times as the Company
may reasonably request, reports by the independent certified public accountants
of the Custodian on the accounting system, internal accounting control and
procedures for safeguarding securities, relating to the securities services
provided by the Custodian under this Agreement. Such reports shall be of
<PAGE>
sufficient scope and in sufficient detail as may reasonably be required by the
Company, and shall provide reasonable assurance that any material inadequacies
would be disclosed by such examination, and, if there are no such inadequacies,
shall so state.
24. 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.
THE LEGACY 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 The Legacy Funds, Inc.
NAME OF SERIES DATE ADDED
Legacy Growth Fund December ___, 1999
Annual fee based upon market value
1 basis point (.0001) on assets of the fund
Minimum annual fee per fund - $3,000
Investment transactions (purchase, sale, exchange, tender, redemption, maturity,
receipt, delivery):
$12.00 per book entry security (depository or Federal Reserve system)
$25.00 per definitive security (physical)
$25.00 per mutual fund trade
$75.00 per Euroclear
$ 8.00 per principal reduction on pass-through certificates
$35.00 per option/futures contract
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.
Extraordinary expenses: Based on time and complexity involved.
Plus out-of-pocket expenses. Charged to the account, including but not
limited to:
$10.00 per variation margin transaction
$10.00 per Fed wire deposit or withdrawal 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 ____ day of
December, 1999, by and between The Legacy Funds, Inc., a Delaware business
trust (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 Legacy Growth 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. In performing its duties hereunder, Firstar will comply with all
applicable requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the Investment Company Act
of 1940, as amended, and the applicable rules and regulations thereunder and
any laws, rules and regulations of governmental authorities having
jurisdiction and will act in conformity with the instructions and directions
of the Board of Trustees of the Company and such officers of the Company as
may be designated for such purpose by the Board of Trustees from time to time
which are timely delivered to Firstar.
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 reports to the Board of Trustees based on
financial and administrative data
c. Evaluating independent auditors
<PAGE>
d. Securing and monitoring fidelity bond and trustee and
officers liability coverage, and making the necessary
Securities and Exchange Commission ("SEC") filings
relating thereto
e. Preparing minutes of meetings of the Board of
Trustees (and its committees) and shareholders
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to the 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 trustees
of the Fund (if requested by the Fund)
b. Monitor the 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 (including initial filings)
relating to the Company or 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
b. Prepare and file on a timely basis so as to incur the
minimum filing fee Rule 24f-2 notices and Form N-SAR
c. Prepare annual and semiannual reports
<PAGE>
d. Coordinate the printing of publicly disseminated
Prospectuses, proxy statements and reports
e. File fidelity bond under Rule 17g-1
f. File shareholder reports under Rule 30b2-1
4. IRS Compliance
a. Monitor Company's status as a regulated investment
company under Subchapter M of the Internal Revenue
Code through review of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
4) All other applicable 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 and registration statement
2. Prepare financial reports for shareholders, the Board of
Trustees, 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 for execution and file on a timely basis appropriate
federal and state tax returns and other required tax filings
and tax reports including, without limitation, Forms 1120/8610
with any necessary schedules and reports with respect to the
payment of dividends and capital gains distributions to
shareholders of the Fund
2. Prepare state income breakdowns where relevant
3. File Form 1099 Miscellaneous for payments to trustees and
other service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
<PAGE>
E. Other
1. Provide monthly purchase and sales journal;
2. Supply various normal and customary Fund statistical data as
requested on an ongoing basis;
3. Prepare and file with the SEC the Fund's annual, semi-annual,
and quarterly shareholder reports;
4. Assist in the preparation of registration statements and other
filings relating to the registration of Shares;
5. Coordinate contractual relationships and communications
between the Fund and its contractual service providers;
6. Upon the approval of the Fund, assist any regulatory body in
any requested review of the Fund's books and records
maintained by Firstar;
7. With the approval of the Fund, provide information typically
supplied in the investment company industry to companies that
publish, track or report the price, performance or other
information with respect to investment companies;
8. Prepare and provide to the Board of Trustees of the Fund such
reports and other written materials and documents as may be
reasonably requested by the Board of Trustees;
9. Calculate various contractual expenses (e.g. investment
advisory and custody fees);
10. Calculate dividends and capital gains distributions, if any,
as required by the Fund and recommend the required amount of
distributions from ordinary income and capital gains to avoid
Federal income tax and Federal excise tax;
11. Prepare such quarterly, annual and semi-annual financial
statements as may be required under the 1940 Act or as may
otherwise be requested by the Fund;
12. As appropriate, compute yields, total return, expense ratios,
portfolio turnover rate, and, if required, portfolio average
dollar-weighted maturity and such other measures of
performance and statistics as may be requested by the Fund;
and
13. Perform such other duties as the Fund's Board of Trustees may
reasonably request from time to time.
<PAGE>
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. Such fees
shall become effective and begin to accrue upon the first public offering and
sale of the shares of the Fund.
These fees may be changed from time to time, by 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) except as provided in the first two
sentences of this paragraph, or (ii) in reliance upon any written or oral
instruction for a proper corporate purpose provided to Firstar by any duly
authorized officer of the Company not employed by Firstar or any of its
affiliates, 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 Trustees of the Company.
Firstar shall indemnify and hold the Company, each controlling person of
the Company and their respective directors, trustees and officers (each a
"Firstar Indemnitee") 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 such
Firstar Indemnitee may sustain or incur or which may be asserted against such
Firstar Indemnitee 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 and tested contingency plans with appropriate parties, making
<PAGE>
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.
The trustees and shareholders of the Company shall not be personally
liable for any of the obligations of the Fund or the Company under this
Agreement or in connection with any matter arising under or in connection with
this Agreement.
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 if it acknowledges its
responsibility for such claim. 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 (i)
initiate no further legal or other expenses for which it shall seek
indemnification under this section and (ii) not 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, after being
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. Firstar shall provide to the Company's transfer
agent, fund accountant, custodian, investment adviser and distributor such
information and data produced or maintained by it under this Agreement as may be
necessary for such other persons to perform their duties and obligations under
their respective agreements with the Company and in such form as may be required
by such persons.
<PAGE>
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. This Agreement may be terminated by the Company
upon giving ninety (90) days prior written notice to the other party.
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:
The Legacy Funds, Inc.
61 Broadway
New York, NY 10006-2802
Attn: President
or such other address of a party as may be specified by such party by written
notice hereunder.
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 SEC thereunder.
<PAGE>
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.
12. ASSIGNMENT
This Agreement may not be assigned by Firstar, nor may Firstar delegate
its duties hereunder, without the prior written consent of the Company, and
any assignment not in compliance with this Section shall be void. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
13. AMENDMENT; WAIVER
This Agreement may not be amended or changed except by a written
instrument signed by the parties hereto. No omission or delay on the part of
either party in requiring the due and punctual fulfillment by the other party
of any of its obligations hereunder shall constitute a waiver by the omitting
or delaying party of any of its rights to require such due and punctual
fulfillment of any obligation hereunder, whether similar or otherwise, or a
waiver of any remedy it may have hereunder or otherwise.
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.
THE LEGACY FUNDS, INC. FIRSTAR MUTUAL FUND SERVICES, LLC
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 The Legacy Funds, Inc.
NAME OF SERIES DATE ADDED
Legacy Growth Fund December __, 1999
Class A
Annual fee based upon average assets per Fund
6 basis points (.0006) on the first $200 million of average daily net assets
5 basis points (.0005) on the next $500 million of average daily net assets
3 basis points (.0003) 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 Trustees 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 ___ day of December,
1999, by and between The Legacy Funds, Inc., a Delaware business trust
(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 Legacy Growth 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. In performing its duties hereunder, Firstar will (i) comply with all
applicable requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the Investment Company Act
of 1940, as amended, and the applicable rules and regulations thereunder and
any laws, rules and regulations of governmental authorities having
jurisdiction, (ii) with respect to accounting matters, comply with generally
accepted accounting principles as from time to time in effect and (iii) act
in conformity with the instructions and directions of the Board of Trustees
of the Company and such officers of the Company as may be designated for such
purpose by the Board of Trustees from time to time which are timely delivered
to Firstar.
2. DUTIES AND RESPONSIBILITIES OF FIRSTAR
A. Portfolio Accounting Services. Firstar shall:
(1) Maintain portfolio records on a trade date +1 basis using
security trade information communicated from the investment manager.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Trustees of the Company and apply those
<PAGE>
prices to the portfolio positions in a manner consistent with the
Company's registration statement. For those securities where market
quotations are not readily available, the Board of Trustees of the Company
shall approve, in good faith, the method for determining the fair value
for such securities, and Firstar shall value such securities in accordance
with such method.
(3) Identify interest and dividend accrual balances as of each
valuation date and calculate gross earnings on investments for the
accounting period.
(4) Determine gain/loss on security sales and identify them
as, short-term or long-term; account for periodic distributions of gains
or losses to shareholders and maintain undistributed gain or loss balances
as of each valuation date.
B. Expense Accrual and Payment Services. Firstar shall:
(1) For each valuation date, calculate the expense accrual
amounts as directed or approved 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. Firstar shall:
(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 accordance with good accounting
practices and the accounting and regulatory requirements applicable to the
Fund.
(5) Determine the net asset value of the Fund on the days and
according to the accounting policies and procedures set forth in the
Fund's registration statement.
(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.
<PAGE>
(7) Communicate, at an agreed upon time, the per share price
for each valuation date to parties as agreed upon from time to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services. Firstar shall:
(1) Maintain accounting records for the investment portfolio
of the Fund to support the tax reporting required by Subchapter M of the
Internal Revenue Code.
(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. Firstar shall:
(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 (the
"SEC"), and the outside auditors of the Company.
(2) Maintain accounting records according to the 1940 Act and
regulations provided thereunder.
F. Other. Firstar shall:
(1) Record and journalize investment, capital share and income
and expense activities;
(2) Enter into the fund accounting system investment buy/sell
trade tickets when received from the investment adviser for the Fund;
(3) Maintain individual ledgers for investment securities;
(4) Reconcile cash and investment balances of the Fund with
the Custodian;
(5) Provide the General Ledger and the Statement of
Operations;
<PAGE>
(6) Calculate capital gains and losses and foreign exchange
gains and losses;
(7) Transmit or mail a copy of the daily portfolio valuation
to the investment adviser;
3. PRICING OF SECURITIES
For each valuation date, obtain prices from a pricing source approved by
the Company's Board of Trustees and apply those prices to the portfolio
positions of the Fund. For those securities where market quotations are not
readily available, the Company's Board of Trustees shall approve, in good faith,
the method for determining the fair value for such securities, and Firstar shall
value such securities in accordance with such method.
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 Trustees of the Company that affects
accounting practices and procedures under this Agreement shall be effective upon
receipt and written acceptance by Firstar.
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 systems, programs, rules, operating schedules and
equipment, so long as such changes do not adversely affect the services 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. Such fees shall be
effective and begin to accrue upon the first public offering and sale of shares
of the Fund. 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
<PAGE>
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) except as provided in
the first two sentences of this paragraph, or (ii) in reliance upon any
written or oral instruction for a proper corporate purpose provided to
Firstar by any duly authorized officer of the Company not employed by
Firstar or any of its affiliates, 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
Trustees of the Company.
Firstar shall indemnify and hold the Company, each controlling
person of the Company and their respective directors, trustees and
officers (each a "Firstar Indemnitee") 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 such Firstar Indemnitee may sustain or
incur or which may be asserted against such Firstar Indemnitee 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 and tested 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.
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 if it acknowledges such responsibility for such claim.
<PAGE>
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 (i) initiate no
further legal or other expenses for which it shall seek indemnification
under this section and (ii) not 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.
The trustees and shareholders of the Company shall not be personally
liable for any of the obligations of the Fund or the Company under this
Agreement or in connection with any matter arising under or in connection
with this Agreement.
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
agent for the Company, nothing herein shall be deemed to relieve Firstar of any
of its obligations under the Transfer Agent Servicing Agreement. Firstar shall
provide to the Company's transfer agent, administrator, custodian, investment
adviser and distributor such information and data produced or maintained by it
under this Agreement as may be necessary for such other persons to perform their
duties and obligations under their respective agreements with the Company and in
such form as may be required by such persons.
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.
<PAGE>
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, after being
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 the Company
upon giving ninety (90) days prior written notice to the other party.
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
and notice to the Company shall be sent to:
The Legacy Funds, Inc.
61 Broadway
New York, N.Y. 10006-2802
Attn: President
or such other address of a party as may be specified by such party by written
notice hereunder.
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
<PAGE>
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.
17. ASSIGNMENT
This Agreement may not be assigned by Firstar, nor may Firstar delegate
its duties hereunder, without the prior written consent of the Company, and any
assignment not in compliance with this Section shall be void. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
18. AMENDMENT; WAIVER
This Agreement may not be amended or changed except by a written
instrument signed by the parties hereto. No omission or delay on the part of
either party in requiring the due and punctual fulfillment by the other party of
any of its obligations hereunder shall constitute a waiver by the omitting or
delaying party of any of its rights to require such due and punctual fulfillment
of any obligation hereunder, whether similar or otherwise, or a waiver of any
remedy it may have hereunder or otherwise.
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.
THE LEGACY 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 The Legacy Funds, Inc.
NAME OF SERIES DATE ADDED
Legacy Growth Fund December __, 1999
Domestic Equity Funds
$23,000 for the first $40 million
1.5 basis points on the next $200 million
1 basis point on the balance
Out-of-pocket expenses, including daily pricing service
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 ___ day of December,
1999, by and between The Legacy Funds, Inc., a Delaware business trust
(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 Legacy Growth 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. In performing its duties hereunder, Firstar will act in conformity
with the instructions and directions of the Board of Trustees of the Company
and such officers of the Company as may be designated for such purpose by the
Board of Trustees from time to time which are timely delivered to Firstar.
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 certificated or
<PAGE>
uncertificated shares with such shares being held in the
appropriate shareholder account;
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 and the Fund's prospectus and statement of
additional information;
E. Process transfers of shares in accordance with the shareholder's
instructions and the Fund's prospectus and statement of
additional information;
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. Issue and/or cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Company with respect to the Fund;
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant
to Rule 17Ad-10(e) promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), a record of the total
number of shares of the Fund which are authorized, issued and
outstanding and maintain such other records as are required to be
maintained by a transfer agent for open-end registered investment
companies by the rules under the 1934 Act;;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current shareholders;
M. Prepare and file U.S. Treasury Department Forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable transactions
as agreed upon with the Company;
<PAGE>
O. 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.
P. 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.
Q. Prepare such reports as may be reasonably requested from time to
time by the Company or its Board of Trustees 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. Such fees shall become
effective and begin to accrue upon the first public offering and sale of
shares of the Fund.
These fees and reimbursable expenses may be changed from time to time
by 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;
<PAGE>
D. It is empowered under applicable laws and by its charter and
bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement;
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement; and
G. It will comply with all applicable requirements of the Securities
Act of 1933, as amended (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 business trust organized, existing, and in good
standing under the laws of Delaware;
C. The Company is empowered under applicable laws and by its
Agreement and Declaration of Trust and Bylaws to enter into and
perform this Agreement;
D. All necessary proceedings required by the Agreement and
Declaration of Trust 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 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 Trustees of the Fund authorizing the appointment of Firstar and
the execution of this Agreement. The Company shall provide to Firstar a copy
of its Agreement and Declaration of Trust 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 or under 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
<PAGE>
property of the Company and will be preserved, maintained and made available
in 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)
except as provided in the first two sentences of this paragraph, or (ii) in
reliance upon any written or oral instruction for a proper corporate purpose
provided to Firstar by any duly authorized officer of the Company not
employed by Firstar or any of its affiliates, 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 Trustees
of the Company.
Firstar shall indemnify and hold the Company, each controlling person
of the Company and their respective directors, trustees and officers (each a
"Firstar Indemnitee") 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
such Firstar Indemnitee may sustain or incur or which may be asserted against
such Firstar Indemnitee 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 and tested 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>
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
if it acknowledges its responsibility for such claim. 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 (i) initiate no further legal or other expenses for
which it shall seek indemnification under this section and (ii) not 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.
The trustees and shareholders of the Company shall not be personally
liable for any of the obligations of the Fund or the Company under this
Agreement or in connection with any matter arising under or in connection
with this Agreement.
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. Data Necessary to Perform Services
Firstar shall provide to the Company's fund accountant, administrator,
custodian, investment adviser and distributor such information and data
produced or maintained by it under this Agreement as may be necessary for
such other persons to perform their duties and obligations under their
respective agreements with the Company and in such form as may be required by
such persons.
10. 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 the
Company upon giving ninety (90) days prior written notice to the other party.
<PAGE>
11. 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:
The Legacy Funds, Inc.
61 Broadway
New York, NY 10006-2802
Attention: President
or such other address of a party as may be specified by such party by written
notice hereunder.
12. 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 such data, 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.
13. 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
Securities and Exchange Commission thereunder.
14. Assignment
This Agreement may not be assigned by Firstar, nor may Firstar delegate
its duties hereunder, without the prior written consent of the Company, and
any assignment not in compliance with this Section shall be void. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
<PAGE>
15. Amendment; Waiver
This Agreement may not be amended or changed except by a written
instrument signed by the parties hereto. No omission or delay on the part of
either party in requiring the due and punctual fulfillment by the other party
of any of its obligations hereunder shall constitute a waiver by the omitting
or delaying party of any of its rights to require such due and punctual
fulfillment of any obligation hereunder, whether similar or otherwise, or a
waiver of any remedy it may have hereunder or otherwise.
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.
THE LEGACY FUNDS, INC. FIRSTAR MUTUAL FUND
SERVICES, LLC
By:_________________________________ By:_________________________________
Print:______________________________ Print:______________________________
Title:______________________________ Title:______________________________
Date:_______________________________ Date:_______________________________
Attest:_____________________________ Attest:_____________________________
<PAGE>
TRANSFER AGENT AND SHAREHOLDER SERVICING
ANNUAL FEE SCHEDULE
EXHIBIT A
Separate Series of The Legacy Funds, Inc.
Name of Series Date Added
Legacy Growth Fund December [__], 1999
* The fee structure will an annual minimum of the greater of $15,000 or 1/2
of one basis point on assets of the fund, for an omnibus type fund, plus
an additional charge of $15.00 per no-load shareholder account outside of
the omnibus account. Additional funds or classes which are not an omnibus
arrangement will be charged at the greater of an annual minimum of $15,000
or a per account charge of $15.00 for a no-load shareholder account.
* Plus out-of-pocket expenses, including, but not limited to:
o Telephone - toll free lines
o Postage, Stationery, Envelopes
o Programming, Special Reports
o Insurance, Record Retention
o Microfilm/fiche of Records
o Proxies, ACH fees, NSCC charges
o Mailings
o All other out-of-pocket expenses
* Activity Charges
o Draft Check Processing - $1.00 per draft
o Daily Valuation Trades - $6.75 per trade
o Telephone Calls - $1.00 per call
o ACH Shareholder Service
o $125.00 per month per fund group
o $.50 per ACH item, setup and/or change
o $5.00 per correction, reversal, return item
* Other Charges (Interfaces)
Separate fee schedules will be provided upon request for such functions as
NSCC and Internet interfaces.
EXHIBIT 23(M)
DISTRIBUTION PLAN
<PAGE>
THE LEGACY FUNDS, INC.
DISTRIBUTION PLAN
PURSUANT TO RULE 12B-1
INTRODUCTION
The following Distribution Plan (the "Plan") set forth below has been
adopted pursuant to Rule 12b-1 ("Rule 12b-1") under the Investment Company
Act of 1940 (the "Investment Company Act") by The Legacy Funds, Inc. (the
"Trust") for the use of the Legacy Growth Fund series of the Trust and each
other series of the Trust that may hereafter be established by the Trust for
which this Plan is adopted as its plan of distribution pursuant to Rule 12b-1
(each a "Fund").
The Plan has been approved by the vote of a majority of the Board of
Trustees of the Trust, including a majority of the trustees who are not
"interested persons" of the Trust (as defined in the Investment Company Act)
and who have no direct or indirect financial interest in the operation of the
Plan or any agreement related to the Plan (the "Rule 12b-1 Trustees"), cast
in person at a meeting called for the purpose of voting on the Plan. Such
approval included a determination that the adoption of the Plan would be
prudent, that, in the exercise of the Rule 12b-1 Trustees' reasonable
business judgment and in light of their fiduciary duties, there is a
reasonable likelihood that adoption and continuation of the Plan will benefit
the Fund and its shareholders and that the Plan is otherwise in the best
interests of the Fund and its shareholders. Expenditures under the Plan are
primarily intended to result in the sale of shares of the Fund within the
meaning of paragraph (a)(2) of Rule 12b-1.
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.
<PAGE>
PLAN OF DISTRIBUTION
THE PROVISIONS OF THE PLAN ARE AS FOLLOWS:
1. DISTRIBUTION AGREEMENT AND DISTRIBUTION FEE
The Trust, on behalf of the Fund, will enter into a Distribution
Agreement (the "Distribution Agreement") with Ingalls & Snyder, LLC (the
"Distributor") pursuant to which the Trust will engage the Distributor to
distribute shares representing beneficial interests in the Fund. The Fund
shall pay to the Distributor as compensation for its services a distribution
fee of .50 of 1% per annum of the average daily net assets of the Fund. The
distribution fee will be accrued daily and paid monthly in arrears or shall
be accrued and paid at such other intervals as the Trustees shall determine.
For purposes of determining the distribution fee, the net assets of the Fund
shall be determined as set forth from time to time in the Fund's then current
prospectus and statement of additional information. Amounts paid under this
Plan shall comply with the guidelines concerning asset-based sales charges as
set forth in the Conduct Rules of the National Association of Securities
Dealers, Inc., including, without limitation, Rule 2830 thereof.
Amounts paid to the Distributor by any Fund will not be used to pay the
distribution expenses incurred with respect to any other Fund, except that
distribution expenses attributable to the Trust as a whole will be allocated
to each Fund according to the ratio of the sale of shares such Fund to the
total sales of the shares of all Funds over the Trust's fiscal year or such
other allocation method approved by the Board of Trustees. The allocation of
distribution expenses between Funds will be subject to the review of the
Board of Trustees.
2. EXPENSES
The Distributor shall be solely responsible for all expenses and other
fees ("Expenses") incurred by the Distributor in connection with the
distribution of the Fund's shares and the provision of its services under the
Distribution Agreement. Such Expenses may include, without limitation:
(a) sales commissions (including trailer commissions) and other
compensation paid to, or on account of, account executives of the Distributor;
(b) sales commissions (including trailer commissions) and other
compensation paid to, or on account of, broker-dealers and other financial
institutions (other than the Distributor) in connection with the sale of
shares;
(c) compensation to securities brokers and dealers, accountants
attorneys, investment advisors, pension actuaries, non-profit entities not
advised by the Trust's investment adviser or its affiliates and service
organizations for services rendered by them to their clients in reviewing,
explaining or interpreting the Fund's prospectus and other selling materials;
(d) indirect and overhead costs of the Distributor associated with
performance of its services under this Plan or the Distribution Agreement;
<PAGE>
(e) advertising costs;
(f) costs 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
(g) reimbursement of travel, entertainment and like expenditures made
in connection with the promotion of the Fund.
Notwithstanding the foregoing, the Distributor shall not be required to
bear the expenses incurred by the Fund in connection with the preparation or
printing of any amendment to the Fund's registration statement or prospectus
necessary for the continued effective registration of the Fund's shares under
the Securities Act of 1933, as amended, or under the laws of any state or
other jurisdiction.
3. QUARTERLY REPORTS; ADDITIONAL INFORMATION
The Distributor will provide to the Board of Trustees of the Trust for
review, at least quarterly, a written report specifying in reasonable detail
the amounts expended pursuant to this Plan and pursuant to Paragraph 2 above
and the purposes for which such expenditures were made. Such reports shall
be reviewed by the Board of Trustees. The Distributor will provide to the
Board of Trustees of the Fund such additional information as they shall from
time to time reasonably request in connection with the activities of the
Distributor or the amounts expended under this Plan.
4. EFFECTIVENESS; CONTINUATION
This Plan shall become effective upon approval by at least a majority
of the outstanding voting securities (as defined in the Investment Company
Act) of the Fund, which approval may be given by the sole shareholder of the
Fund, if such approval is given prior to any public offering of the voting
securities of the Fund or the sale of such securities to persons other than
Ingalls & Snyder, LLC or other persons who are affiliated persons of Ingalls
& Snyder, LLC. Unless earlier terminated as provided herein, this Plan shall
continue in effect for a period of more than one year from the date of
adoption only so long as such continuance is specifically approved at least
annually by the vote of a majority of the Board of Trustees of the Trust,
including a majority of the Rule 12b-1 Trustees, cast in person at a meeting
called for the purpose of voting on the continuation of the Plan.
5. TERMINATION
This Plan and any agreement related to this Plan, including the
Distribution Agreement, may be terminated (a) by the Trust at any time
without penalty on sixty (60) days' written notice by the vote of a majority
of the Rule 12b-1 Trustees or the vote of a majority of the outstanding
voting securities (as defined in the Investment Company Act) of the Fund or
(b) by the Distributor at any time on sixty (60) days' written notice. This
Plan and any agreement related to this Plan, including the Distribution
Agreement, shall terminate automatically in the event of its assignment (as
defined in the Investment Company Act).
<PAGE>
6. AMENDMENTS
This Plan may not be amended 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 Fund. All material amendments of this Plan shall be
approved by the vote of a majority of the Board of Trustees of the Trust,
including a majority of the Rule 12b-1 Trustees, cast in person at a meeting
called for the purpose of voting on the Plan.
7. RULE 12B-1 TRUSTEES
While the Plan is in effect, the selection and nomination of the
trustees of the Trust who are not interested persons (as defined in the
Investment Company Act) shall be committed to the discretion of such trustees.
8. RECORDS
The Trust shall preserve copies of this Plan and any related agreement
and all reports made pursuant to Paragraph 3 hereof, for a period of not less
than six years from the date of effectiveness of the Plan, such agreement or
report, as the case may be, the first two years in an easily accessible place.
Date Adopted: ________________, 1999.
EXHIBIT 23(P)
POWERS OF ATTORNEY AND AUTHORIZING RESOLUTION
<PAGE>
THE LEGACY FUNDS, INC.
SECRETARY'S CERTIFICATE
The undersigned Elizabeth Larson, Assistant Secretary of The Legacy Funds,
Inc., a Delaware business trust (the "Fund") hereby certifies that:
Attached hereto is a true and correct copy of a resolution duly adopted by
the Board of Trustees of the Fund at the November 1, 1999 meeting of the Board
of Trustees which was duly called and held, and at which a quorum was present
and acting throughout, which resolution has not been modified, amended or
rescinded and is in full force and effect on the date hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
delivered this certificate this 23rd day of December, 1999.
/S/ ELIZABETH LARSON
______________________________
Elizabeth Larson
Assistant Secretary
<PAGE>
RESOLUTION
Adopted by the Board of Trustees of The Legacy Funds, Inc.
on November 1, 1999
RESOLVED, that each officer or trustee who executes the Registration
Statement or any amendment thereto (whether on behalf of the Trust or as an
officer or trustee thereof or by attesting the seal of the Trust or
otherwise) be, and each such officer or trustee hereby is, authorized to
execute a power of attorney appointing Robert E. Belknap, D. Roger B. Liddell
and Elizabeth Larson, and each them, severally, his true and lawful
attorney-in-fact and agent to execute and sign in his name, place and stead,
in any and all capacities, the Registration Statement and any and all
amendments thereto (including both pre-effective and post-effective
amendments) and other documents in connection therewith, and to file the same
with the Securities and Exchange Commission, each of said attorneys (acting
with or without the others) to have full power and authority to do and
perform in the name and on behalf of each of said officers and trustees
(whether on behalf of the Trust or as an officer or trustee thereof or by
attesting the seal of the Trust or otherwise) each and every act whatsoever
which such attorney or agent may deem necessary, appropriate or desirable to
be done in connection with the Registration Statement (or any amendment
thereto) as fully as any such officer or trustee might or could do in person.
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Legacy Funds, Inc., a Delaware business trust (the "Trust"),
does hereby constitute Robert E. Belknap, Steven M. Foote and Elizabeth
Larson, and each them, severally, his true and lawful attorney or agent to
execute and sign in his name, place and stead (whether on behalf of the Trust
or as a trustee or officer thereof or by attesting the seal of the Trust, or
otherwise) a Registration Statement on Form N-1A for the purpose of
registering shares of beneficial interest representing interests in the
Legacy Growth Fund portfolio of the Trust, par value $0.001, and any and all
amendments to such Registration Statement (including both pre-effective and
post-effective amendments) and other documents in connection therewith, and
to file the same with the Securities and Exchange Commission, each of said
attorneys or agents (acting with or without the others) to have full power
and authority to do and perform in the name of the undersigned (whether on
behalf of the Trust or as a trustee or officer thereof or by attesting the
seal of the Trust, or otherwise) each and every act whatsoever which such
attorney or agent may deem necessary, appropriate or desirable to be done in
connection with the Registration Statement (or any amendment thereto), as
fully as the undersigned might or could do in person.
Dated: November 22, 1999 /S/ ROBERT E. BELKNAP
--------------------------------------
Robert E. Belknap
Trustee and President (Principal
Executive Officer)
Dated: November 22, 1999 /S/ BARNABAS B. B. BREED
--------------------------------------
Barnabas B. B. Breed
Trustee
Dated: November 22, 1999 /S/ THEODORE F. ELLS
--------------------------------------
Theodore F. Ells
Trustee
Dated: November 22, 1999 /S/ STEVEN M. FOOTE
--------------------------------------
Steven M. Foote
Trustee and Vice President
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned trustee and/or
officer of The Legacy Funds, Inc., a Delaware business trust (the "Trust"),
does hereby constitute Robert E. Belknap, Steven M. Foote and Elizabeth
Larson, and each them, severally, his true and lawful attorney or agent to
execute and sign in his name, place and stead (whether on behalf of the Trust
or as a trustee or officer thereof or by attesting the seal of the Trust, or
otherwise) a Registration Statement on Form N-1A for the purpose of
registering shares of beneficial interest representing interests in the
Legacy Growth Fund portfolio of the Trust, par value $0.001, and any and all
amendments to such Registration Statement (including both pre-effective and
post-effective amendments) and other documents in connection therewith, and
to file the same with the Securities and Exchange Commission, each of said
attorneys or agents (acting with or without the others) to have full power
and authority to do and perform in the name of the undersigned (whether on
behalf of the Trust or as a trustee or officer thereof or by attesting the
seal of the Trust, or otherwise) each and every act whatsoever which such
attorney or agent may deem necessary, appropriate or desirable to be done in
connection with the Registration Statement (or any amendment thereto), as
fully as the undersigned might or could do in person.
Dated: November 23, 1999 /S/ JOSEPH NEUBERGER
-----------------------------------------
Joseph Neuberger
Treasurer (Principal Financial
Officer)
