AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION
ON 11/24/99
FILE NOS: 811-9523
333-84665
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [1]
Post-Effective Amendment No. [ ]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [1]
(Check appropriate box or boxes.)
ELECTRIC CITY FUNDS, INC.
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(Exact name of Registrant as Specified in Charter)
ONE NORTH CHURCH STREET
SCHENECTADY, NY 12305
------------------------
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
518-370-0289
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MR. JAMES W. DENNEY
ONE NORTH CHURCH STREET
SCHENECTADY, NY 12305
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(Name and Address of Agent for Service)
Please send copy of communications to:
DAVID D. JONES, ESQUIRE
799 State Street, PMB 234
Pottstown, Pennsylvania 19464
610-718-5381
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Approximate Date of Proposed Public Offering: As soon as practicable following
effective date.
Registrant declares that it is registering an indefinite number or amount of its
securities by this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall became
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
TOTAL NUMBER OF PAGES _____
EXHIBIT INDEX BEGINS
ON PAGE _____
<PAGE>
The Electric City Value Fund
(the "Fund")
A Series of Electric City Funds, Inc.
(the "Company")
One North Church Street
Schenectady, NY 12305
518-370-0289
Or toll-free at
1-800-___-____
PROSPECTUS
December 27, 1999
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As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
THE FUND
What is the Fund's Primary Investment Objective?................ 3
What are the Fund's Primary Investment Strategies?.............. 3
What are the Principal Risks of Investing in the Fund?.......... 4
How Has the Fund Performed in the Past?......................... 5
What are the Fund's Fees And Expenses?.......................... 6
Shareholder Fees................................................ 6
Annual Operating Expenses....................................... 6
An Example of Fund Expenses Over Time........................... 6
THE FUND'S INVESTMENT ADVISER
The Fund's Adviser.............................................. 7
The Fund's Portfolio Manager.................................... 7
Investment Advisory Agreement................................... 7
Operating Services Agreement.................................... 7
HOW TO BUY AND SELL SHARES
Investing In The Fund........................................... 8
Determination of Share Price.................................... 8
Distribution Fees............................................... 8
Minimum Investment Amounts...................................... 9
Opening and Adding To Your Account.............................. 9
Purchase By Mail................................................ 10
Wire Transfer Purchases......................................... 10
Purchases through Financial Service Organizations............... 10
Automatic Investment Plan....................................... 11
Telephone Purchases............................................. 11
Miscellaneous Purchase Information.............................. 11
Redeeming Your Shares........................................... 12
By Mail......................................................... 12
Signature Guarantees............................................ 13
By Telephone.................................................... 13
By Wire......................................................... 13
Redemption At The Option Of The Fund............................ 14
DIVIDENDS AND DISTRIBUTIONS.............................................. 14
TAX CONSIDERATIONS....................................................... 14
GENERAL INFORMATION...................................................... 15
<PAGE>
THE FUND
What is the Fund's Investment Objective?
The Fund seeks to build shareholder wealth by maximizing the Total Return
of the Fund's portfolio.
Total Return is derived by combining the total changes in the principal
value of all the Fund's investments with the total dividends and interest
paid to the Fund.
What are the Fund's Principal Investment Strategies?
The Fund's Adviser believes that the Fund's objective is best achieved by
investing in companies that exhibit the potential for significant increases
in total return over the long term (3 years or more). Accordingly, the Fund
will generally use a "buy and hold" investment strategy. However, the Fund
may occasionally invest on a short-term basis when the Adviser believes
that such an investment will benefit the Fund.
The Fund's Adviser attempts to build shareholder wealth by:
o investing in common stocks without restrictions regarding market
capitalization;
o normally investing at least 65% of the Fund's total assets in common
stocks or securities convertible into common stocks;
o holding at least 80% of the total value of the common stocks owned by
the Fund in a core position of no more than 40 companies.
To choose the common stocks in which the Fund will invest, the Adviser
seeks to identify companies which exhibit some or all of the following
criteria:
o solid financial condition;
o consistent earnings and/or dividend history;
o company or industry group is temporarily out of favor;
o undervalued or overlooked assets;
o favorable insider ownership trends;
o not widely owned or followed by institutional investors;
o experienced or is likely to experience a triggering event that may
cause an increase in value.
Examples of a trigger for a possible increase in value include:
o a change in corporate structure;
o a change in a company's key management;
o initiating or increasing an authorized buy-back of a company's own
stock;
o apparent corporate efforts to take advantage of business
opportunities;
o increased following by securities analysts and institutional
investors;
o beneficiary of a long term demographic or economic trend;
o beneficiary of change in government policy or regulations.
The Fund will normally invest its remaining assets in a variety of other
securities, such as US government debt instruments, corporate debt
securities, other unaffiliated mutual funds, commercial paper, bankers
acceptances and repurchase agreements.
What are the Principal Risks of Investing in the Fund?
General Risks- Almost all investments are subject to inherent risks, and
the Fund is no exception. Accordingly, you may lose money by investing in
the Fund. When you sell your Fund shares, they may be worth more or less
than what you paid for them because the value of the Fund's investments
will vary from day-to-day, reflecting changes in market conditions,
interest rates and numerous other factors.
Stock Market Risk. The Fund invests primarily in common stock, so the Fund
will be subject to the risks associated with common stocks, including price
volatility and the creditworthiness of the issuing company. The stock
market trades in cyclical price patterns, with prices generally rising or
falling over time. These cyclical periods may last for a significant period
of time.
Small To Medium-Cap Stock Risks- The Fund may invest in companies with
smaller market capitalizations (less than $6 billion in market
capitalization). Because these companies are relatively small compared to
large-cap companies, may be engaged in business mostly within their own
geographic region, and may be less well-known to the investment community,
they can have more volatile share prices. Also, small companies often have
less liquidity, less management depth, narrower market penetrations, less
diverse product lines, and fewer resources than larger companies. As a
result, their stock prices react more strongly to changes in the
marketplace.
Credit Risk- A debt instrument's credit quality depends on the issuer's
ability to pay interest on the security and repay the debt: the lower the
credit rating, the greater the risk that the security's issuer will
default. The credit risk of a security may also depend on the credit
quality of any bank or financial institution that provides credit
enhancement for the security. The Fund may invest in securities that carry
a wide range of credit risk, from US Government debt instruments that carry
almost no credit risk to high-yield corporate securities that carry
considerable credit risk. However, the Fund may not invest more than 35% of
its total assets in such securities
Interest Rate Risk- All debt securities face the risk that their principal
value will decline because of a change in interest rates. Generally,
investments subject to interest rate risk will decrease in value when
interest rates rise and will rise in value when interest rates decline.
Also, the longer a security has until it matures, the more pronounced will
be a change in its value when interest rates change.
Repurchase Agreement Risk- A repurchase agreement is an agreement where one
party sells securities to a buyer with a simultaneous agreement to
repurchase those securities at a future date at a set price. The difference
between the original sales price and the future repurchase price represents
an interest payment to the original buyer. A repurchase agreement exposes
the Fund to the risk that the party that sells the security will default on
its obligation to repurchase those securities. If that happens the Fund can
lose money because:
o it may not be able to sell the securities at the agreed-upon time and
price;
o the securities may lose value before they can be sold.
Market Risk- Although individual securities may outperform the market, the
entire market may decline as a result of rising interest rates, regulatory
developments or deteriorating economic conditions.
Focused Portfolio Risk- The Fund has the ability to concentrate a
relatively high percentage of its investments in the securities of a small
number of companies. Under normal conditions, the Fund will invest in not
more than 40 companies. Investing in this manner makes the Fund more
susceptible to a single economic, political or regulatory event than a more
diversified fund might be. Also, a change in the value of a single company
will have a more pronounced effect on the Fund than such a change would
have on a more diversified fund.
Management Risk- Acting as investment adviser to the Fund is a new position
for the Adviser, and the Fund has no operating history.
Year 2000 Risks: As with other mutual funds, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Adviser and the Fund's other
service providers don't properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known
as the "Year 2000" or "Y2K" problem. The Adviser is taken all steps
necessary to insure that its systems are fully Y2K compliant. The Adviser
has also obtained assurance from the Fund's other major service providers
that each are fully Y2K compliant as to the systems used by each such
service provider. The Adviser has also considered the effect of Y2K risk on
the Fund's portfolio, and is monitoring the companies in which the Fund
invests for evidence of Y2K preparedness and will not invest in any company
unless such company has first published evidence satisfactory to the
Adviser that the company anticipates negligible adverse Y2K effects on its
business. However, there can be no assurance that the Fund's portfolio will
not be adversely affected by the Y2K problem. Because the Fund is
authorized to invest in foreign securities, the Adviser is closely
monitoring the Y2K preparedness of other countries and will not invest in
any foreign company unless such company has first published evidence
satisfactory to the Adviser that the company anticipates negligible adverse
Y2K effects on its business. You should be aware that, although the Adviser
and the Fund's other service providers appear to be fully prepared for the
change in dates, each such provider depends, to varying degrees, on the
services of others, and there is no way to be sure that all such entities
are prepared for Y2K, or to accurately predict the level of risk remaining
to the Fund as a result of Y2K.
How Has the Fund Performed in the Past?
Because this is a new Fund that does not yet have an operating history, a
performance bar chart and table describing the Fund's annual performance
and comparing that performance to appropriate indices is not yet available.
Performance information will be included in the Fund's first semi-annual
and annual reports, which will be issued after the end of the Fund's first
six months of operations and after the end of the Fund's fiscal year.
What are the Fund's Fees And Expenses?
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
Shareholder Fees:
(fees paid directly from your investment)
Maximum Sales Charge (Load)
Imposed on Purchases NONE
Maximum Deferred Sales Charge (Load) NONE
Maximum Sales Charge (Load) NONE
Imposed on Reinvested Dividends
And other Distributions
Redemption Fees 0.75%*
Annual Fund Operating Expenses:
(expenses that are deducted from Fund assets)
Management Fees1 1.65%
Distribution (12b-1) Fees2 0.00%
Other Expenses3 0.00%
-----
Total Annual Fund Operating Expenses 1.65%
* This fee is charged against your redemption proceeds if you redeem shares
within thirteen months of pruchase.
1. Management fees include a fee of 0.95% for investment advisory services and
0.70% for administrative and other services. Both fees are paid to the
Fund's Adviser.
2. Although the Fund's Board of Director's has adopted a Plan of Distribution
under Rule 12b-1 of the Investment Company Act of 1940, the Plan has not
been implemented and the Fund has no intention of implementing the Plan
during the Fund's first fiscal year.
3. The Fund's Adviser is responsible for paying all the Fund's expenses except
taxes, interest, litigation expenses and other extraordinary expenses.
Because the Fund believes in good faith that it will not incur any of these
expenses during its first fiscal year, expenses in this category are not
included.
An Example of Expenses Over Time:
This Example below is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated, reinvest all dividends and distributions, and then redeem all 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:
One Year Three Years
-------- -----------
$ 132 $ 412
THE FUND'S INVESTMENT ADVISER
The Fund's Adviser
- ------------------
The Company has entered into an Investment Advisory Agreement with Mohawk Asset
Management, Inc. (the "Adviser"), One North Church Street, Schenectady, New York
12305. The Adviser is an investment advisory company founded as a sole
proprietorship in 1994 and incorporated in Maryland in 1999. The Adviser'
principal business and occupation is the provision of financial management
services to individuals, corporations, fraternal and non-profit organizations
and other institutions in New York and throughout the United States. The Adviser
has been investment adviser to the Fund since its inception.
Under the terms of the Advisory Agreement, the Adviser manages the investment
operations of the Fund in accordance with the Fund's investment policies and
restrictions. The Adviser furnishes an investment program for the Fund,
determines what investments should be purchased, sold and held, and makes
changes on behalf of the Company in the investments of the Fund.
The Fund's Portfolio Manager
- ----------------------------
Mr. James W. Denney is President of the Adviser and acts as the portfolio
manager for the Fund. Mr. Denney is also President of Electric City Funds, Inc.
(the "Company"). Mr. Denney has been managing investment portfolios for
individuals, corporations, trusts and retirement accounts since 1990. Mr. Denney
holds licenses as a Registered Principal (NASD Series 24), General Securities
Representative (NASD Series 7), and New York State Life, Accident & Health
Insurance Agent. He has also completed the CFP Professional Education Program
through the College for Financial Planning. You should be aware that, although
Mr. Denney has extensive experience in managing investment portfolios for
clients of the Adviser, neither he nor Mohawk Asset Management, Inc. has any
prior experience in managing a portfolio for an investment company, and this may
result in additional risks for the Fund.
For its investment advisory services to the Fund, the Company pays to the
Adviser, on the last day of each month, a fee equal to an annual rate of 0.95%
of average net asset value of the Fund, such fee to be computed daily based upon
the net asset value of the Fund.
HOW TO BUY & SELL SHARES OF THE FUND
Investing in the Fund
Determination of Share Price
- ----------------------------
Shares of the Fund are offered at each share's net asset value ("NAV"). NAV per
share is calculated by adding the value of Fund investments, cash and other
assets, subtracting Fund liabilities, and then dividing the result by the number
of shares outstanding. The Fund generally determines the total value of its
shares by using market prices for the securities comprising its portfolio.
Securities for which quotations are not available and any other assets are
valued at fair market value as determined in good faith by the Adviser, subject
to the review and supervision of the Board of Directors. The Fund's per share
NAV is computed on all days on which the New York Stock Exchange is open for
business at the close of regular trading hours on the Exchange, currently 4:00
p.m. Eastern Standard time.
Distribution Fees
- -----------------
The Fund has adopted a Plan of Distribution Pursuant to Rule 12b-1 under the
1940 Act (the "12b-1 Plan") for its shares, pursuant to which the Fund pays the
Adviser a monthly fee for shareholder servicing expenses of 0.25% per annum of
the Fund's average daily net assets. The Adviser may, in turn, pay such fees to
third parties for eligible services provided by those parties to the Fund.
The Fund has not implemented the 12b-1 Plan and does not foresee doing so during
its first fiscal year. The Board adopted the Plan so that, if and when
necessary, the Fund would have available to it sufficient resources to pay third
parties who provide eligible services to the Fund.
If the 12b-1 Plan is implemented in the future, you should be aware that if you
hold your shares for a substantial period of time afterwards, you may indirectly
pay more than the economic equivalent of the maximum front-end sales charge
allowed by the National Association of Securities Dealers due to the recurring
nature of Distribution (12b-1) fees.
Minimum Investment Amounts
- --------------------------
Payments for Fund shares should be in U.S. dollars, and in order to avoid fees
and delays, should be drawn on a U.S. bank. Fund management may reject any
purchase order for Fund shares and may waive the minimum investment amounts in
its sole discretion.
Your purchase of Fund shares is subject to the following minimum investment
amounts:
MINIMUM MINIMUM
TYPE OF INVESTMENT SUBSEQUENT
ACCOUNT TO OPEN ACCOUNT INVESTMENTS
- --------------------------------------------------------------------------------
REGULAR $1,000 $100
IRAs $1,000 $100
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AUTOMATIC INVESTMENT PLAN MEMBERS
- --------------------------------------------------------------------------------
REGULAR $1,000 $100 per month minimum
IRAs $1,000 $100 per month minimum
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Opening and Adding To Your Account
- ----------------------------------
You can invest in the Fund by mail, wire transfer and through participating
financial service professionals. After you have established your account, you
may also make subsequent purchases by telephone. You may also invest in the Fund
through an automatic payment plan. Any questions you may have can be answered by
calling 1-800-___-____.
Purchasing Shares By Mail
- -------------------------
Complete an Account Registration Form, make a check payable to The Electric City
Value Fund, and mail the Form and check to:
Electric City Funds, Inc.
c/o [Transfer Agent]
123 Main Street, Suite 100
City, State 12345
Your purchase order, if accompanied by payment, will be processed upon receipt
by [Transfer Agent], the Fund's Transfer Agent. If the Transfer Agent receives
your order and payment by the close of regular trading on the Exchange
(currently 4:00 p.m. East Coast time), your shares will be purchased at the
Fund's public offering price calculated at the close of regular trading on that
day. Otherwise, your shares will be purchased at the public offering price
determined as of the close of regular trading on the next business day.
Wire Transfer Purchases
- -----------------------
To purchase shares by wire transfer, ask your bank to wire funds to account of:
Chosen Bank, NA, ABA #: 123456789
Credit: Electric City Funds, Inc., Acct. #:123456789
Further credit: The Electric City Value Fund.
Include your name(s), address and taxpayer identification number or Social
Security number. The wire should state that you are opening a new Fund account.
When you make subsequent purchases by wire, include your account number on the
wire transfer instructions.
Call 1-800-___-____ to inform us that a wire is being sent.
If you purchase Fund shares by wire, you must complete and file an Account
Registration Form with the Transfer Agent before any of the shares purchased can
be redeemed. You should contact your bank (which will need to be a commercial
bank that is a member of the Federal Reserve System) for information on sending
funds by wire, including any charges that your bank may make for these services.
Purchases through Financial Service Organizations
- -------------------------------------------------
You may purchase shares of the Fund through participating brokers, dealers, and
other financial professionals. Simply call your investment professional to make
your purchase. If you are a client of a securities broker or other financial
organization, you should note that such organizations may charge a separate fee
for administrative services in connection with investments in Fund shares and
may impose account minimums and other requirements. These fees and requirements
would be in addition to those imposed by the Fund. If you are investing through
a securities broker or other financial organization, please refer to its program
materials for any additional special provisions or conditions that may be
different from those described in this Prospectus (for example, some or all of
the services and privileges described may not be available to you). Securities
brokers and other financial organizations have the responsibility of
transmitting purchase orders and funds, and of crediting their customers'
accounts following redemptions, in a timely manner in accordance with their
customer agreements and this Prospectus.
Automatic Investment Plan
- -------------------------
You may purchase shares of the Fund through an Automatic Investment Plan. The
Plan provides a convenient way for you to have money deducted directly from your
checking, savings, or other accounts for investment in shares of the Fund. You
can take advantage of the plan by filling out the Automatic Investment Plan
application on page __ of this prospectus. You may only select this option if
you have an account maintained at a domestic financial institution which is an
Automated Clearing House ("ACH") member for automatic withdrawals under the
plan. The Fund may alter, modify, amend or terminate the Plan at any time, but
will notify you if it does so. For more information, call the Transfer Agent at
1-800-___-____.
Telephone Purchases
- -------------------
In order to be able to purchase shares by telephone, your account authorizing
such purchases must have been established prior to your call. Your initial
purchase of shares may not be made by telephone. Shares purchased by telephone
will be purchased at the per share net asset value determined at the close of
business on the day that the transfer agent receives payment through the ACH.
Call the Transfer Agent for details.
You may make purchases by telephone only if you have an account at a bank that
is a member of the ACH. Most transfers are completed within three business days
of your call. To preserve flexibility, the Company may revise or eliminate the
ability to purchase Fund shares by phone, or may charge a fee for such service,
although the Company does not currently expect to charge such a fee.
Mutual Shareholder Services, LLC, the Fund's transfer agent, employs certain
procedures designed to confirm that instructions communicated by telephone are
genuine. Such procedures may include, but are not limited to, requiring some
form of personal identification prior to acting upon telephonic instructions,
providing written confirmations of all such transactions, and/or tape recording
all telephonic instructions. Assuming reasonable procedures such as the above
have been followed, neither the Transfer Agent nor the Fund will be liable for
any loss, cost, or expense for acting upon telephone instructions that are
believed to be genuine. The Company shall have authority, as your agent, to
redeem shares in your account to cover any such loss. As a result of this
policy, you will bear the risk of any loss unless the Fund and/or the Transfer
Agent has failed to follow procedures reasonably designed to prevent losses.
However, if the Fund and/or the Transfer Agent fails to follow such procedures,
it may be liable for such losses.
Miscellaneous Purchase Information
- ----------------------------------
The Fund reserves the right to reject applications for shares under
circumstances or in amounts considered disadvantageous to shareholders.
Applications will not be accepted unless they are accompanied by payment in U.S.
funds. Payment must be made by wire transfer, check or money order drawn on a
U.S. bank, savings & loan or credit union. The Fund's custodian will charge a
$20.00 fee against your account, in addition to any loss sustained by the Fund,
for any payment check returned to the custodian for insufficient funds.
If you place an order for Fund shares through a securities broker, and you place
your order in proper form before 4:00 p.m. East Coast time on any business day
in accordance with their procedures, your purchase will be processed at the
public offering price calculated at 4:00 p.m. on that day, if the securities
broker then transmits your order to the Transfer Agent before the end of its
business day (which is usually 5:00 p.m. East Coast time). The securities broker
must send to the Transfer Agent immediately available funds in the amount of the
purchase price within three business days for the order.
Federal regulations require that you provide a certified taxpayer identification
number whenever you open or reopen an account. Congress has mandated that if any
shareholder fails to provide and certify to the accuracy of the shareholder's
social security number or other taxpayer identification number, the Company will
be required to withhold a percentage, currently 31%, of all dividends,
distributions and payments, including redemption proceeds, to such shareholder
as a backup withholding procedure.
How To Sell (Redeem) Your Shares
You may sell (redeem) your shares at any time. You may request the sale of your
shares either by mail, by telephone or by wire.
By Mail
- -------
Sale requests should be mailed via U.S. mail or overnight courier service to:
Mutual Shareholder Services, LLC
1301 East Ninth Street, Suite 1005
Cleveland, Ohio 44114-1800
The selling price of the shares being redeemed will be the Fund's per share net
asset value next calculated after receipt of all required documents in "Good
Order".
"Good Order" means that the request must include:
1. Your account number.
2. The number of shares to be sold (redeemed) or the dollar value of the
amount to be redeemed.
3. The signatures of all account owners exactly as they are registered on the
account.
4. Any required signature guarantees.
5. Any supporting legal documentation that is required in the case of estates,
trusts, corporations or partnerships and certain other types of accounts.
Payment of redemption proceeds will be made no later than the third business day
after the valuation date unless otherwise expressly agreed by the parties at the
time of the transaction.
Signature Guarantees --
- -----------------------
A signature guarantee of each owner is required to redeem shares in the
following situations, for all size transactions:
(i) if you change the ownership on your account;
(ii) when you want the redemption proceeds sent to a different address than is
registered on the account;
(iii)if the proceeds are to be made payable to someone other than the account's
owner(s);
(iv) any redemption transmitted by federal wire transfer to your bank; and
(v) if a change of address request has been received by the Company or
[Transfer Agent] within 15 days previous to the request for redemption.
In addition, signature guarantees are required for all redemptions of $25,000 or
more from any Fund shareholder account. A redemption will not be processed until
the signature guarantee, if required, is received in "Good Order".
Signature guarantees are designed to protect both you and the Fund from fraud.
To obtain a signature guarantee, you should visit a bank, trust company, member
of a national securities exchange or other broker-dealer, or other eligible
guarantor institution. (Notaries public cannot provide signature guarantees.)
Guarantees must be signed by an authorized person at one of these institutions,
and be accompanied by the words "Signature Guarantee."
By Telephone
- ------------
You may redeem your shares in the Fund by calling the Transfer Agent at
1-800-___-____ if you elected to use telephone redemption on your account
application when you initially purchased shares. Redemption proceeds must be
transmitted directly to you or to your pre-designated account at a domestic
bank. You may not redeem by telephone if a change of address request has been
received by the Company or the Transfer Agent within 15 days previous to the
request for redemption. During periods of substantial economic or market
changes, telephone redemptions may be difficult to implement. If you are unable
to contact the Transfer Agent by telephone, shares may be redeemed by delivering
the redemption request in person or by mail. You should understand that with the
telephone redemption option, you may be giving up a measure of security that you
might otherwise have had were you to redeem your shares in writing. In addition,
interruptions in telephone service may mean that you will be unable to effect a
redemption by telephone if desired.
If you purchase your shares by check and then redeem your shares before your
check has cleared, the Fund may hold your redemption proceeds until your check
clears, or for 15 days, whichever comes first.
By Wire
- -------
You may request the redemption proceeds be wired to your designated bank if it
is a member bank or a correspondent of a member bank of the Federal Reserve
System. The Custodian charges a $10 fee for outgoing wires.
Redemption At The Option Of The Fund
- ------------------------------------
If the value of the shares in your account falls to less than $500, the Company
may notify you that, unless your account is increased to $500 in value, it will
redeem all your shares and close the account by paying you the redemption
proceeds and any dividends and distributions declared and unpaid at the date of
redemption. You will have thirty days after notice to bring the account up to
$500 before any action is taken. This minimum balance requirement does not apply
to IRAs and other tax-sheltered investment accounts. This right of redemption
shall not apply if the value of your account drops below $500 as the result of
market action. The Company reserves this right because of the expense to the
Fund of maintaining very small accounts.
Dividends And Distributions
Dividends paid by the Fund are derived from its net investment income. Net
investment income will be distributed at least annually. The Fund's net
investment income is made up of dividends received from the stocks it holds, as
well as interest accrued and paid on any other obligations that might be held in
its portfolio.
The Fund realizes capital gains when it sells a security for more than it paid
for it. The Fund may make distributions of its net realized capital gains (after
any reductions for capital loss carry forwards), generally, once a year.
Unless you elect to have your distributions paid in cash, your distributions
will be reinvested in additional shares of the Fund. You may change the manner
in which your dividends are paid at any time by writing to the Transfer Agent at
the address shown above.
Tax Considerations
The Fund intends to qualify as a regulated investment company under Sub Chapter
M of the Internal Revenue Code so as to be relieved of federal income tax on its
capital gains and net investment income currently distributed to its
shareholders. To qualify as a regulated investment company, the Fund must, among
other things, derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities, or other income derived with respect to its
business of investing in such stock or securities, and distribute substantially
all of such income to its shareholders at least annually.
The Fund intends to distribute to shareholders, at least annually, usually in
December, substantially all net investment income and any net capital gains
realized from sales of the Fund's portfolio securities. Dividends from net
investment income and distributions from any net realized capital gains are
reinvested in additional shares of the Fund unless the shareholder has requested
in writing to have them paid by check.
Dividends from investment income and net short-term capital gains are generally
taxable to you as ordinary income. Distributions of long-term capital gains are
taxable as long-term capital gains regardless of the length of time shares in
the Fund have been held. Distributions are taxable, whether received in cash or
reinvested in shares of the Fund.
You will be advised annually of the source of distributions for federal income
tax purposes.
If you fail to furnish your social security or other tax identification number
or to certify properly that it is correct, the Fund may be required to withhold
federal income tax at the rate of 31% (backup withholding) from your dividend,
capital gain and redemption payments. Dividend and capital gain payments may
also be subject to backup withholding if you fail to certify properly that you
are not subject to backup withholding due to the under-reporting of certain
income.
Taxable distributions generally are included in your gross income for the
taxable year in which they are received. However, dividends declared in October,
November and December and made payable to shareholders of record in such month
will be deemed to have been received on December 31st if paid by the Fund during
the following January.
Distributions by the Fund will result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below your
cost basis, such distribution would be taxable to you as ordinary income or as a
long-term capital gain, even though, from an investment standpoint, it may
constitute a partial return of capital. In particular, you should be careful to
consider the tax implications of buying shares of the Fund just prior to a
distribution. The price of such shares include the amount of any forthcoming
distribution so that you may receive a return of investment upon distribution
which will, nevertheless, be taxable.
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. You should consult a tax Adviser regarding the effect of
federal, state, local, and foreign taxes on an investment in the Fund.
General Information
The Fund will not issue stock certificates evidencing shares. Instead, your
account will be credited with the number of shares purchased, relieving you of
responsibility for safekeeping of certificates and the need to deliver them upon
redemption. Written confirmations are issued for all purchases of shares.
In reports or other communications to investors, or in advertising material, the
Fund may describe general economic and market conditions affecting the Fund and
may compare its performance with other mutual funds as listed in the rankings
prepared by Lipper Analytical Services, Inc. or similar nationally recognized
rating services and financial publications that monitor mutual fund performance.
The Fund may also, from time to time, compare its performance to the one or more
appropriate indices.
According to the law of Maryland under which the Company is incorporated, and
the Company's bylaws, the Company is not required to hold an annual meeting of
shareholders unless required to do so under the Investment Company Act of 1940.
Accordingly, the Company will not hold annual shareholder meetings unless
required to do so under the Act. Shareholders do have the right to call a
meeting of shareholders for the purpose of voting to remove directors. The Fund
will render assistance to shareholders in connection with their efforts to
arrange a shareholder meeting as required under Section 16(c) of the Investment
Company Act of 1940, as amended.
Please see the SAI for further information on your rights as a shareholder.
<PAGE>
FOR MORE INFORMATION
Additional information about the Fund is available in the Fund's Statement of
Additional Information (SAI). The SAI contains more detailed information on all
aspects of the Fund. A current SAI, dated October 20, 1999, has been filed with
the SEC and is incorporated by reference into this prospectus.
To receive information concerning the Fund, or to request a copy of the SAI or
other documents relating to the Fund, please contact the Fund at:
Electric City Funds, Inc.
c/o Mutual Shareholder Services, Inc.
1301 East Ninth Street, Suite 1005
Cleveland, Ohio 44114-1800
1-800-___-____
A copy of your requested document(s) will be sent to you within three days of
your request.
You may also receive information concerning the Fund, or request a copy of the
SAI or other documents relating to the Fund, by contacting the Securities and
Exchange Commission:
In person: at the SEC's Public Reference Room in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section, Securities and Exchange Commission,
Washington, D.C. 20549-6009 (duplicating fee required)
On the Internet: www.sec.gov
Investment Company Act No.
811-9523
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Dated December 27, 1999
ELECTRIC CITY FUNDS, INC.
One North Church Street
Schenectady, New York 12305
1-800-___-____
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectus of The Electric City Value Fund, dated
December 27, 1999. You may obtain a copy of the Prospectus, free of charge, by
writing to Electric City Funds, Inc. c/o Mutual Shareholder Services, 1301 East
Ninth Street, Suite 1005, Cleveland, Ohio 44114-1800 or by calling
1-800-___-____.
TABLE OF CONTENTS
Management of the Fund
Investment Policies and Restrictions
Investment Adviser
Directors and Officers
Performance Information
Purchasing and Redeeming Shares
Tax Information
Portfolio Transactions
Custodian
Transfer Agent
Administration
Distributor
Legal Counsel
Distribution Plan
Financial Statements
<PAGE>
MANAGEMENT OF THE FUND
Electric City Funds, Inc. (the "Company"), an open-end diversified management
investment company, was incorporated in Maryland on August 6, 1999. The Affairs
of the Company are managed by a Board of Directors which approves all
significant agreements between the Company and the persons and companies that
furnish services to the Fund, including agreements with the Fund's custodian,
transfer agent, investment adviser and administrator. All such agreements are
subject to limitations imposed by state and/or federal securities laws, and to
the extent that any such contract may contradict such statutes, the contract
would be unenforceable. The day-to-day operations of the Fund are delegated to
the Adviser.
The Company's Articles of Incorporation permit the Board of Directors to issue
100,000,000 shares of common stock. The Board of Directors has the power to
designate one or more classes of shares of common stock (each a "series" or
"Fund") and to classify or reclassify any unissued shares with respect to such
series. Currently, the Fund is the only series of shares being offered by the
Company.
Shareholders are entitled:
(i) to one vote per full share;
(ii) to such distributions as may be declared by the Company's Board of
Directors out of funds legally available; and
(iii)upon liquidation, to participate ratably in the assets available for
distribution.
There are no conversion or sinking fund provisions applicable to the shares, and
shareholders have no preemptive rights and may not cumulate their votes in the
election of directors. The shares are redeemable and are fully transferable. All
shares issued and sold by the Fund will be fully paid and nonassessable.
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objectives and the manner in which the Fund pursues its
investment objectives are generally discussed in the prospectus. This Section
provides additional information concerning the Fund's investments and its
investment restrictions.
The Fund is a diversified Fund, meaning that as to 75% of the Fund's assets
(valued at the time of investment), the Fund will not invest more than 5% of its
assets in securities of any one issuer, except in obligations of the United
States Government and its agencies and instrumentalities, thereby reducing the
risk of loss. The Fund normally will invest at least 65% of total assets in
common stock and securities convertible into common stock. The Fund may also
invest in a variety of other securities. The complete list of securities in
which the Fund may ordinarily invest is listed below, along with any
restrictions on such investments, and, where necessary, a brief discussion of
any risks unique to the particular security.
Common Stocks. The Fund will ordinarily invest at least 65% of its total assets
in common stock or securities convertible into common stock. The market value of
common stock can fluctuate significantly, reflecting the business performance of
the issuing company, investor perceptions and general economic or financial
market movements. Smaller companies are especially sensitive to these factors.
Despite the risk of price volatility, however, common stocks historically have
offered the greatest potential for gain on investment, compared to other classes
of financial assets.
Foreign Securities. The Fund may invest in the common stock of foreign issuers,
whether traded on U.S. exchanges or foreign exchanges. The Fund may also invest
in foreign securities in the form of American Depository Receipts (ADRs). The
Fund will only invest in ADRs that are issuer sponsored. Sponsored ADRs
typically are issued by a U.S. bank or trust company and evidence ownership of
underlying securities issued by a foreign corporation. The Fund will not invest
in "emerging market" countries, and investing in foreign securities is not a
principal strategy for the Fund.
Preferred Stock. The Fund may invest, without limitation, in preferred stock.
Preferred stock generally pays dividends at a specified rate and generally has
preference over common stock in the payments of dividends and the liquidation of
the issuer's assets. Dividends on preferred stock are generally payable at the
discretion of the issuer's board of directors. Accordingly, Shareholders may
suffer a loss of value if dividends are not paid. The market prices of preferred
stocks are also sensitive to changes in interest rates and in the issuer's
creditworthiness. Accordingly, shareholders may experience a loss of value due
to adverse interest rate movements or a decline in the issuer's credit rating.
Real Estate Investment Trusts. The Fund may invest in real estate investment
trusts (REITs). Equity REITs invest directly in real property while mortgage
REITs invest in mortgages on real property. REITs may be subject to certain
risks associated with the direct ownership of real estate, including declines in
the value of real estate, risks related to general and local economic
conditions, overbuilding and increased competition, increases in property taxes
and operating expenses, and variations in rental income. REITs pay dividends to
their shareholders based upon available funds from operations. It is quite
common for these dividends to exceed the REITs taxable earnings and profits
resulting in the excess portion of such dividends being designated as a return
of capital. The Fund intends to include the gross dividends from such REITs in
its distribution to its shareholders and, accordingly, a portion of the Fund's
distributions may also be designated as a return of capital. The Fund will not
invest more than 10% of its assets in REITS. Fund shareholders will be subject
to management and other fees charged by the REITS in which the Fund invests.
Options On Equities. The Fund may occasionally invest in options contracts to
decrease its exposure to the effects of changes in security prices, to hedge
securities held, to maintain cash reserves while remaining fully invested, to
facilitate trading, to reduce transaction costs, or to seek higher investment
returns when an options contract is priced more attractively than the underlying
security or index.
The Fund may write (i.e. sell) puts and covered call options, and may purchase
put and call options, on equity securities traded on a United States exchange or
over-the-counter market. The Fund may also enter into such transactions on
Indexes. Options contracts can include long-term options with durations of up to
three years.
The Fund may enter into these transactions so long as the value of the
underlying securities on which options contracts may be written at any one time
does not exceed 100% of the net assets of the Fund, and so long as the initial
margin required to enter into such contracts does not exceed five percent (5%)
of the Fund's total net assets. When writing covered call options or selling
puts, to minimize the risks of entering into these transactions, the Fund will
maintain a segregated account with its Custodian consisting of the underlying
securities upon which the option was written, cash, cash equivalents, U.S.
Government Securities or other high-grade liquid debt securities, denominated in
U.S. dollars or non-U.S. currencies, in an amount equal to the aggregate fair
market value of its commitments to such transactions. Over-the counter options
and the assets used to cover such options are considered to be illiquid.
Risk Factors. The primary risks associated with the use of options are; (1)
imperfect correlation between a change in the value of the underlying security
or index and a change in the price of the option or futures contract, and (2)
the possible lack of a liquid secondary market for an options or futures
contract and the resulting inability of the Fund to close out the position prior
to the maturity date. Investing only in those contracts whose price fluctuations
are expected to resemble those of the Fund's underlying securities will minimize
the risk of imperfect correlation.
Debt Securities. The Fund may invest in corporate or U.S. Government debt
securities including zero coupon bonds. Corporate debt securities may be
convertible into preferred or common stock. In selecting corporate debt
securities for the Fund, the Adviser reviews and monitors the creditworthiness
of each issuer and issue. U.S. Government securities include direct obligations
of the U.S. Government and obligations issued by U.S. Government agencies and
instrumentalities. The market value of such securities fluctuates in response to
interest rates and the creditworthiness of the issuer. In the case of securities
backed by the full faith and credit of the United States Government,
shareholders are only exposed to interest rate risk.
Zero coupon bonds do not provide for cash interest payments but instead are
issued at a discount from face value. Each year, a holder of such bonds must
accrue a portion of the discount as income. Because issuers of zero coupon bonds
do not make periodic interest payments, their prices tend to be more volatile
than other types of debt securities when market interest rates change.
Unaffiliated Mutual Funds. The Fund may invest in securities issued by other
registered investment companies (mutual funds). As a shareholder of another
registered investment company, the Fund would bear its pro rata portion of that
company's advisory fees and other expenses. Such fees and expenses will be borne
indirectly by the Fund's shareholders. The Fund may invest in such instruments
to the extent that such investments do not exceed 3% of any investment company's
outstanding securities.
Repurchase Agreements. The Fund may invest a portion of its assets in repurchase
agreements ("Repos") with broker-dealers, banks and other financial
institutions, provided that the Fund's custodian always has possession of the
securities serving as collateral for the Repos or has proper evidence of book
entry receipt of said securities. In a Repo, the Fund purchases securities
subject to the seller's simultaneous agreement to repurchase those securities
from the Fund at a specified time (usually one day) and price. The repurchase
price reflects an agreed-upon interest rate during the time of investment. All
Repos entered into by the Fund must be collateralized by U.S. Government
Securities, the market values of which equal or exceed 102% of the principal
amount of the money invested by the Fund. If an institution with whom the Fund
has entered into a Repo enters insolvency proceedings, the resulting delay, if
any, in the Fund's ability to liquidate the securities serving as collateral
could cause the Fund some loss if the securities declined in value prior to
liquidation. To minimize the risk of such loss, the Fund will enter into Repos
only with institutions and dealers considered creditworthy. You should be aware
that these types of investments are considered "loans" under the Investment
Company Act of 1940, as amended.
Cash Reserves. The Fund may hold up to 10% of its net assets in cash to maintain
liquidity.
Restricted and Illiquid Securities. The Fund will not invest more than 15% of
its net assets in securities that the Adviser determines, under the supervision
of the Board of Directors, to be illiquid and/or restricted. Illiquid securities
are securities that may be difficult to sell promptly at an acceptable price
because of lack of available market and other factors. The sale of some illiquid
and other types of securities may be subject to legal restrictions. Because
illiquid and restricted securities may present a greater risk of loss than other
types of securities, the Fund will not invest in such securities in excess of
the limits set forth above.
When-Issued Securities and Delayed-Delivery Transactions. The Fund may purchase
securities on a when-issued basis, and it may purchase or sell securities for
delayed-delivery. These transactions occur when securities are purchased or sold
by the Fund with payment and delivery taking place at some future date. The Fund
may enter into such transactions when, in the Adviser's opinion, doing so may
secure an advantageous yield and/or price to the Fund that might otherwise be
unavailable. The Fund has not established any limit on the percentage of assets
it may commit to such transactions, but to minimize the risks of entering into
these transactions, the Fund will maintain a segregated account with its
Custodian consisting of cash, cash equivalents, U.S. Government Securities or
other high-grade liquid debt securities, denominated in U.S. dollars, in an
amount equal to the aggregate fair market value of its commitments to such
transactions.
Portfolio Turnover. The Fund has no operating history and therefore has no
annual reportable portfolio turnover. Higher portfolio turnover rates may result
in higher rates of net realized capital gains to the Fund, thus the portion of
the Fund's distributions constituting taxable gains may increase. In addition,
higher portfolio turnover activity can result in higher brokerage costs to the
Fund. The Fund anticipates that its annual portfolio turnover will be not
greater than 100%.
The complete list of the Fund's investment restrictions is as follows:
The Fund will not:
1. To the extent of 75% of its assets (valued at time of investment), invest
more than 5% of its assets in securities of any one issuer, except in
obligations of the United States Government and its agencies and
instrumentalities;
2. Acquire securities of any one issuer that at the time of investment (a)
represent more than 10% of the voting securities of the issuer or (b) have a
value greater than 10% of the value of the outstanding securities of the issuer;
3. Invest more than 25% of its assets (valued at time of investment) in
securities of companies in any one industry;
4. Borrow money, except from banks for temporary or emergency purposes in
amounts not exceeding 20% of the value of the Fund's assets at the time of
borrowing;
5. Underwrite the distribution of securities of other issuers, or acquire
"restricted" securities that, in the event of a resale, might be required to be
registered under the Securities Act of 1933;
6. Make margin purchases;
7. Invest in companies for the purpose of management or the exercise of control;
8. Lend money (but this restriction shall not prevent the Fund from investing in
debt securities or repurchase agreements, or lend its portfolio securities).
9.Invest in oil, gas or other mineral exploration or development programs,
although it may invest in marketable securities of companies engaged in oil, gas
or mineral exploration;
10.Purchase or sell real estate or real estate loans or real estate limited
partnerships, although it may invest in marketable securities of companies that
invest in real estate or interests in real estate.
11. Issue senior securities.
12. Invest in commodities, or invest in futures or options on commodities.
Restrictions 1 through 12 listed above are fundamental policies, and may be
changed only with the approval of a "majority of the outstanding voting
securities" of the Fund as defined in the Investment Company Act of 1940.
The Fund has also adopted the following restrictions that may be changed by the
Board of Directors without shareholder approval:
The Fund may not:
a. Invest more than 25% of its assets (valued at time of investment) in
securities of issuers with less than three years' operation (including
predecessors);
b. Invest more than 15% of its net assets in securities that are not readily
marketable;
c. Acquire securities of other investment companies except (a) by purchase in
the open market, where no commission or profit to a sponsor or dealer
results from such purchase other than the customary broker's commission and
(b) where acquisition results from a dividend or merger, consolidation or
other reorganization.
d. purchase more than 3% of the voting securities of any one investment
company;
e. Pledge, mortgage or hypothecate its assets, except for temporary or
emergency purposes and then to an extent not greater than 20% of its total
assets at cost;
f. Invest more than 10% of the Fund's assets (valued at time of investment) in
initial margin deposits of options contracts;
INVESTMENT ADVISER
Information on the Fund's Investment Adviser, Mohawk Asset Management, Inc., is
set forth in the prospectus. This Section contains additional information
concerning the Adviser.
Mohawk Asset Management was organized as a sole proprietorship in 1994. Mohawk
Asset Management, Inc. (the "Adviser"), its successor, was organized under the
laws of the State of Maryland as an investment advisory corporation in
September1999. The Adviser registered as an Investment Adviser with the
Securities and Exchange Commission in December, 1999. The Adviser's principal
occupation and business is to provides financial management services to
individuals, corporations, non-profit organizations and other institutions
throughout the United States.
The Adviser manages the investment portfolio and the general business affairs of
the Fund pursuant to an investment services agreement with the Fund dated
October 15,1999 (the "Agreement"). Messrs. James W. Denney and Bill R. Werner
are officers of the Adviser and Directors of the Company. Accordingly, each of
those persons is considered an "affiliated person", as that term is defined in
the Investment Company Act of 1940, as amended (the 1940 Act). Mr. James W.
Denney is portfolio manager for the Fund.
The Agreement provides that the Adviser shall not be liable for any loss
suffered by the Fund or its shareholders as a consequence of any act or omission
in connection with services under the Agreement, except by reason of the
Adviser's willful misfeasance, bad faith, gross negligence, or reckless
disregard of its obligations and duties under the Advisory Agreement.
The Agreement has a term of two years, but may be continued from year to year so
long as its continuance is approved at least annually:
(a) by the vote of a majority of the Directors of the Fund who are not
"interested persons" of the Fund or the adviser cast in person at a meeting
called for the purpose of voting on such approval, and
(b) by the Board of Directors as a whole or by the vote of a majority (as
defined in the 1940 Act) of the outstanding shares of the Fund.
The Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
DIRECTORS AND OFFICERS
The Board Of Directors has overall responsibility for conduct of the Company's
affairs. The day-to-day operations of the Fund are managed by the Adviser,
subject to the bylaws of the Company and review by the Board of Directors. The
directors of the Company, including those directors who are also officers, are
listed below. The business address of each director is:
One North Church Street
Schenectady, New York 12305
<TABLE>
<CAPTION>
Position Principal Occupation for
Name, Age with Fund The Last Five Years
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
James W. Denney*; President President of Mohawk Asset Management,
(Age 34) Director Inc., a Registered Investment Adviser
Corporation, since 1994. Registered
Principal of Milestone Financial
Services, Inc., a broker/dealer firm,
from July 1998 to present. Registered
Principal, Linsco/Private Ledger, from
8/92 - 7/98. Investment Executive, Paine
Webber, Inc., from 12/89 - 7/92. Series
7 Registered Representative License
(1990). General Securities Principal
(1992). New York State Insurance
License.
Bill W. Werner* Secretary Partner, General Manager, Dillinger
(Age 36) Director Stairbuilding Company, Fairview, NJ, a
contracting firm, since 1985. Also Vice
President of Mohawk Asset Management since
September, 1999. Formerly an air traffic
controller in the united States Marine Corps.
Michale J. Massey Director Owner and President of AdMania, an
(Age 35) advertising firm.
Joseph D. Condon Director Public Affairs Director, Albany
(Age 53) Broadcasting Company. Employed
with Albany Broadcasting Company since
1969. Bachelor of Arts degree from Siena
College, Loudenville, NY in 1969.
Honorable Albert P. Jurczynski Director Mayor, City of Schenectady, NY since
(Age 43) 1996. City Council member, City of
Schenectady, from 1984 through 1995.
</TABLE>
* Indicates an "interested person" as defined in the Investment Company Act of
1940.
The table below sets forth the compensation anticipated to be paid by the
Corporation to each of the directors of the Corporation during the fiscal year
ending October 31, 2000.
Name of Director Compensation Pension Annual Compensation
from Corp Benefits Benefits Paid to Director
- --------------------------------------------------------------------------------
James W. Denney $0.00 $0.00 $0.00 $0.00
Bill R. Werner $0.00 $0.00 $0.00 $0.00
Michael J. Massey $0.00 $0.00 $0.00 $0.00
Joseph D. Condon $0.00 $0.00 $0.00 $0.00
Albert P. Jurczynski $0.00 $0.00 $0.00 $0.00
Control Persons and Shareholders Owning in Excess of 5% of Fund Shares The
Adviser intends to purchase all of the outstanding shares of the Fund prior to
the Fund's effective date, and will accordingly be deemed to control the Fund.
The Company will call a meeting of shareholders for the purpose of voting upon
the question of removal of a director or directors when requested in writing to
do so by record holders of at least 10% of the Fund's outstanding common shares.
The Corporation's bylaws contain procedures for the removal of directors by its
stockholders. At any meeting of stockholders, duly called and at which a quorum
is present, the stockholders may by the affirmative vote of the holders of a
majority of the votes entitled to be cast thereon, remove any director or
directors from office and may elect a successor or successors to fill any
resulting vacancies for the unexpired terms of the removed directors.
PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures. "Total Return" for a
period is the percentage change in value during the period of an investment in
Fund shares, including the value of shares acquired through reinvestment of all
dividends and capital gains distributions. "Average Annual Total Return" is the
average annual compounded rate of change in value represented by the Total
Return Percentage for the period.
[n]
Average Annual Total Return is computed as follows: P(1+T) = ERV
Where: P = a hypothetical initial investment of $1000]
T = average annual total return
n = number of years
ERV = ending redeemable value of shares at the end of the period
Yield. The Fund may advertise performance in terms of a 30-day yield quotation.
The 30-day yield quotation is computed by dividing the net investment income per
share earned during the period by the maximum offering price per share on the
last day of the period, according to the following formula:
6
Yield = 2[(a-b/cd + 1) - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the period
that they were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
The Fund's performance is a function of conditions in the securities markets,
portfolio management, and operating expenses. Although information such as that
shown above is useful in reviewing the Fund's performance and in providing some
basis for comparison with other investment alternatives, it should not be used
for comparison with other investments using different reinvestment assumptions
or time periods.
In sales literature, the Fund's performance may be compared with that of market
indices and other mutual funds. In addition to the above computations, the Fund
might use comparative performance as computed in a ranking determined by Lipper
Analytical Services, Morningstar, Inc., or that of another service.
PURCHASING AND REDEEMING SHARES
Redemptions will be made at net asset value. The Fund's net asset value is
determined on days on which the New York Stock Exchange is open for trading. For
purposes of computing the net asset value of a share of the Fund, securities
traded on security exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales price at the time
of valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Securities for which quotations are not available and any other
assets are valued at a fair market value as determined in good faith by the
Adviser, subject to the review and supervision of the board of directors. The
price per share for a purchase order or redemption request is the net asset
value next determined after receipt of the order.
The Fund is open for business on each day that the New York Stock Exchange
("NYSE") is open. The Fund's share price or net asset value per share ("NAV") is
normally determined as of 4:00 p.m., New York time. The Fund's share price is
calculated by subtracting its liabilities from the closing fair market value of
its total assets and dividing the result by the total number of shares
outstanding on that day. Fund liabilities include accrued expenses and dividends
payable, and its total assets include the market value of the portfolio
securities as well as income accrued but not yet received. Since the Fund does
not charge sales or redemption fees, the NAV is the offering price for shares of
the Fund.
TAX INFORMATION
The Fund intends to qualify as a regulated investment company under SubChapter M
of the Internal Revenue Code so as to be relieved of federal income tax on its
capital gains and net investment income currently distributed to its
shareholders. To qualify as a regulated investment company, the Fund must, among
other things, derive at least 90% of its gross income from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities, or other income derived with respect to its
business of investing in such stock or securities.
If the Fund qualifies as a regulated investment company and distributes at least
90% of its net investment income, the Fund will not be subject to Federal income
tax on the income so distributed. However, the Fund would be subject to
corporate income tax on any undistributed income other than tax-exempt income
from municipal securities.
The Fund intends to distribute to shareholders, at least annually, substantially
all net investment income and any net capital gains realized from sales of the
Fund's portfolio securities. Dividends from net investment income and
distributions from any net realized capital gains are reinvested in additional
shares of the Fund unless the shareholder has requested in writing to have them
paid by check.
Dividends from investment income and net short-term capital gains are generally
taxable to the shareholder as ordinary income. Distributions of long-term
capital gains are taxable as long-term capital gains regardless of the length of
time shares in the Fund have been held. Distributions are taxable, whether
received in cash or reinvested in shares of the Fund.
Each shareholder is advised annually of the source of distributions for federal
income tax purposes. A shareholder who is not subject to federal income tax will
not be required to pay tax on distributions received.
If shares are purchased shortly before a record date for a distribution, the
shareholder will, in effect, receive a return of a portion of his investment,
but the distribution will be taxable to him even if the net asset value of the
shares is reduced below the shareholder's cost. However, for federal income tax
purposes the original cost would continue as the tax basis.
If a shareholder fails to furnish his social security or other tax
identification number or to certify properly that it is correct, the Fund may be
required to withhold federal income tax at the rate of 31% (backup withholding)
from dividend, capital gain and redemption payments to him. Dividend and capital
gain payments may also be subject to backup withholding if the shareholder fails
to certify properly that he is not subject to backup withholding due to the
under-reporting of certain income.
Taxation of the Shareholder. Taxable distributions generally are included in a
shareholder's gross income for the taxable year in which they are received.
However, dividends declared in October, November and December and made payable
to shareholders of record in such month will be deemed to have been received on
December 31st if paid by the Fund during the following January.
Distributions by the Fund will result in a reduction in the fair market value of
the Fund's shares. Should a distribution reduce the fair market value below a
shareholder's cost basis, such distribution would be taxable to the shareholder
as ordinary income or as a long-term capital gain, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares of the Fund just prior to a distribution. The price of such shares
include the amount of any forthcoming distribution so that those investors may
receive a return of investment upon distribution which will, nevertheless, be
taxable to them.
A redemption of shares is a taxable event and, accordingly, a capital gain or
loss may be recognized. Each investor should consult a tax Adviser regarding the
effect of federal, state, local, and foreign taxes on an investment in the Fund.
Dividends. A portion of the Fund's income may qualify for the dividends-received
deduction available to corporate shareholders to the extent that the Fund's
income is derived from qualifying dividends. Because the Fund may earn other
types of income, such as interest, income from securities loans, non-qualifying
dividends, and short-term capital gains, the percentage of dividends from the
Fund that qualifies for the deduction generally will be less than 100%. The Fund
will notify corporate shareholders annually of the percentage of Fund dividends
that qualifies for the dividend received deductions.
A portion of the Fund's dividends derived from certain U.S. Government
obligations may be exempt from state and local taxation. Short-term capital
gains are distributed as dividend income. The Fund will send each shareholder a
notice in January describing the tax status of dividends and capital gain
distributions for the prior year.
Capital Gain Distribution. Long-term capital gains earned by the Fund from the
sale of securities and distributed to shareholders are federally taxable as
long-term capital gains, regardless of the length of time shareholders have held
their shares. If a shareholder receives a long-term capital gain distribution on
shares of the Fund, and such shares are held six months or less and are sold at
a loss, the portion of the loss equal to the amount of the long-term capital
gain distribution will be considered a long-term loss for tax purposes.
Short-term capital gains distributed by the Fund are taxable to shareholders as
dividends, not as capital gains.
PORTFOLIO TRANSACTIONS
The Fund will generally purchase and sell securities without regard to the
length of time the security has been held. Accordingly, it can be expected that
the rate of portfolio turnover may be substantial. The Fund expects that its
annual portfolio turnover rate will not exceed 50% under normal conditions.
However, there can be no assurance that the Fund will not exceed this rate, and
the portfolio turnover rate may vary from year to year.
High portfolio turnover in any year will result in the payment by the Fund of
above-average transaction costs and could result in the payment by shareholders
of above-average amounts of taxes on realized investment gains. Distributions to
shareholders of such investment gains, to the extent they consist of short-term
capital gains, will be considered ordinary income for federal income tax
purposes.
Decisions to buy and sell securities for the Fund are made by the Adviser
subject to review by the Corporation's Board of Directors. In placing purchase
and sale orders for portfolio securities for the Fund, it is the policy of the
Adviser to seek the best execution of orders at the most favorable price. In
selecting brokers to effect portfolio transactions, the determination of what is
expected to result in the best execution at the most favorable price involves a
number of largely judgmental considerations. Among these are the Adviser's
evaluation of the broker's efficiency in executing and clearing transactions.
Over-the-counter securities are generally purchased and sold directly with
principal market makers who retain the difference in their cost in the security
and its selling price. In some instances, the Adviser feels that better prices
are available from non-principal market makers who are paid commissions
directly.
CUSTODIAN
UMB Bank, N.A., Kansas City, Missouri, acts as custodian for the Fund. As such,
UMB holds all securities and cash of the Fund, delivers and receives payment for
securities sold, receives and pays for securities purchased, collects income
from investments and performs other duties, all as directed by officers of the
Company. UMB does not exercise any supervisory function over management of the
Fund, the purchase and sale of securities or the payment of distributions to
shareholders.
TRANSFER AGENT
Mutual Shareholder Services, LLC, 1301 East Ninth Street, Suite 1005, Cleveland,
Ohio 44114-1800 ("MSS") acts as transfer, dividend disbursing, and shareholder
servicing agent for the Fund pursuant to a written agreement with the Company
and the Adviser. Under the agreement, MSS is responsible for administering and
performing transfer agent functions, dividend distribution, shareholder
administration, and maintaining necessary records in accordance with applicable
rules and regulations.
For the services to be rendered as transfer agent, The Adviser shall pay MSS an
annual fee, paid monthly, based on the average net assets of the Fund, as
determined by valuations made as of the close of each business day of the month.
ADMINISTRATION
MSS also acts as Administrator to the Fund pursuant to a written agreement with
the Company and Adviser. The Administrator supervises all aspects of the
operations of the Fund except those performed by the Fund's investment adviser
under the Fund's investment advisory agreement. The Administrator is responsible
for:
(a) calculating the Fund's net asset value
(b) preparing and maintaining the books and accounts specified in Rule 31a-1
and 31a-2 of the Investment Company Act of 1940
(c) preparing financial statements contained in reports to stockholders of the
Fund
(d) preparing the Fund's federal and state tax returns
(e) preparing reports and filings with the Securities and Exchange Commission
(f) preparing filings with state Blue Sky authorities
(g) maintaining the Fund's financial accounts and records
For the services to be rendered as Administrator, The Adviser shall pay TA an
annual fee, paid monthly, based on the average net assets of the Fund, as
determined by valuations made as of the close of each business day of the month.
DISTRIBUTOR
Maxus Securities Corp., 1301 East Ninth Street, Suite 100, Cleveland, Ohio
44114-1800, acts as the principal underwriter of the Fund's shares pursuant to a
written agreement with the Fund and the Adviser.
INDEPENDENT ACCOUNTANTS
McCurdy & Associates, CPA's, Inc., 27995 Clemens Road, Westlake, Ohio 44145 will
serve as the Company's independent auditors for its first fiscal year.
LEGAL COUNSEL
David Jones & Assoc., P.C., 799 State Street, Pottstown, PA 19464, has passed on
certain matters relating to this Registration Statement and acts as counsel to
the Company.
DISTRIBUTION PLAN
As noted in the Fund's Prospectus, the Fund has adopted a plan pursuant to Rule
12b-1 under the 1940 Act (collectively, the "Plan") whereby the Fund may pay a
fee of 0.25% per annum of the Fund's average daily net assets to the Adviser and
others for providing personal service and/or maintaining shareholder accounts
relating to the distribution of the Fund's shares. The fees are paid on a
monthly basis, based on the Fund's average daily net assets.
Pursuant to the Plan, the Adviser receives from the Fund a fee each month equal
to 0.25% per annum of average net assets. The Adviser uses such fees to pay for
expenses incurred in the distribution and promotion of the Fund's shares,
including but not limited to, printing of prospectuses and reports used for
sales purposes, preparation and printing of sales literature and related
expenses, advertisements, and other distribution-related expenses as well as any
distribution or service fees paid to securities dealers or others who have
executed a dealer agreement with the distributor. Any expense of distribution in
excess of 0.25% per annum will be borne by the Adviser without any additional
payments by the Fund. You should be aware that it is possible that Plan accruals
will exceed the actual expenditures by the Adviser for eligible services.
Accordingly, such fees are not strictly tied to the provision of such services.
The Plan also provides that to the extent that the Fund, the Adviser, or other
parties on behalf of the Fund, or the Adviser make payments that are deemed to
be payments for the financing of any activity primarily intended to result in
the sale of shares issued by the Fund within the context of Rule 12b-1, such
payments shall be deemed to be made pursuant to the Plans. In no event shall the
payments made under the Plan, plus any other payments deemed to be made pursuant
to the Plan, exceed the amount permitted to be paid pursuant to the Conduct
Rules of the National Association of Securities Dealers, Inc.
The Board of Directors has determined that a consistent cash flow resulting from
the sale of new shares is necessary and appropriate to meet redemptions and to
take advantage of buying opportunities without having to make unwarranted
liquidations of portfolio securities. The Board therefore believes that it will
likely benefit the Fund to have monies available for the direct distribution
activities of the Adviser in promoting the sale of the Fund's shares, and to
avoid any uncertainties as to whether other payments constitute distribution
expenses on behalf of the Fund. The Board of Directors, including the non-
interested Directors, has concluded that in the exercise of their reasonable
business judgment and in light of their fiduciary duties, there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders.
The Plan has been approved by the Funds' Board of Directors, including all of
the Directors who are non-interested persons as defined in the 1940 Act. The
Plan must be renewed annually by the Board of Directors, including a majority of
the Directors who are non-interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan. The votes must be
cast in person at a meeting called for that purpose. It is also required that,
during the period in which the Plan is in effect, the selection and nomination
of non-interested Directors be done only by the non-interested Directors. The
Plan and any related agreements may be terminated at any time, without any
penalty:
(1) by vote of a majority of the non-interested Directors on not more than 60
days' written notice, (2) by the Adviser on not more than 60 days' written
notice, (3) by vote of a majority of the Fund's outstanding shares, on 60 days'
written notice, and (4) automatically by any act that terminates the Advisory
Agreement with the Adviser.
The Adviser or any dealer or other firm may also terminate their respective
agreements at any time upon written notice.
The Plan and any related agreement may not be amended to increase materially the
amounts to be spent for distribution expenses without approval by a majority of
the Fund's outstanding shares, and all material amendments to the Plan or any
related agreements shall be approved by a vote of the non-interested Directors,
cast in person at a meeting called for the purpose of voting on any such
amendment.
The Adviser is required to report in writing to the Board of Directors of the
Fund, at least quarterly, on the amounts and purposes of any payment made under
the Plans, as well as to furnish the Board with such other information as may
reasonably be requested in order to enable the Board to make an informed
determination of whether the Plans should be continued.
Although the Plan has been adopted by the Board of Directors, the Board has
decided not to implement the Plan for at least the Fund's first fiscal year, in
order to minimize the ongoing expenses of the Fund during the Fund's start-up
phase. The Board will implement the Plan when and if circumstances so warrant.
FINANCIAL STATEMENTS
Audited financial statements of the Company are included as an exhibit to this
registration statement.
<PAGE>
PART C
------
OTHER INFORMATION
Item 23. Financial Statements and Exhibits
(a) Articles of Incorporation---Attached as Exhibit 23A
(b) By-Laws--- Attached as Exhibit 23B
(c) Instruments defining rights of Shareholders---None, See Articles of
Incorporation
(d) Investment Advisory Contracts--- included as Exhibit 23D in Original
Registration Statement filed on October 6, 1999.
(e) Underwriting Contracts--- *
(f) Bonus or Profit Sharing Contracts--- None
(g) Custodian Agreements--- Attached as Exhibit 23G
(h) Other Material Contracts---
(i) (h)(1) Operating Services Agreement--- included as Exhibit 23H(1)
in Original Registration Statement filed on October 6, 1999.
(h)(2) Transfer Agency Agreement--- Attached as Exhibit 23H(2)
(j) Legal Opinion--- included as Exhibit 23I in Original Registration
Statement filed on October 6, 1999.
(k) Other opinions--- *
(l) Omitted Financial statements--- None
(m) Initial Capital Agreements--- *
(n) Rule 12b-1 Plan--- Attached as Exhibit 23N
(o) Financial Data Schedule--- Not Applicable
- ----------------------
* To be filed by amendment
Item 24. Persons Controlled by or Under Common Control With Registrant
-------------------------------------------------------------
See Caption "Principal Holders of Securities" in the Statement of
Additional Information
Item 25. Indemnification
---------------
(a) General. The Articles of Amendment and Restatement of Charter
(the "Articles") of the Corporation provide that to the fullest
extent permitted by Maryland and federal statutory and decisional
law, as amended or interpreted, no director or officer of this
Corporation shall be personally liable to the Corporation or the
holders of Shares for money damages for breach of fiduciary duty
as a director and each director and officer shall be indemnified
by the Corporation; provided, however, that nothing herein shall
be deemed to protect any director or officer of the Corporation
against any liability to the Corporation or the holders of Shares
to which such director or officer would otherwise be subject by
reason of breach of the director's or officer's duty of loyalty
to the Corporation or its stockholders, for acts or omissions not
in good faith or which involved intentional misconduct or a
knowing violation of law or for any transaction from which the
director derived any improper personal benefit.
The By-Laws of the Corporation provide that the Corporation shall
indemnify any individual who is a present or former director or
officer of the Corporation and who, by reason of his or her
position was, is or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(hereinafter collectively referred to as a "Proceeding") against
judgments, penalties, fines, settlements and reasonable expenses
actually incurred by such director or officer in connection with
such Proceeding, to the fullest extent that such indemnification
may be lawful under Maryland law.
(b) Disabling Conduct. The By-Laws provide that nothing therein shall
be deemed to protect any director or officer against any
liability to the Corporation or its shareholders to which such
director or officer 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 (such conduct hereinafter referred to as "Disabling
Conduct").
The By-Laws provide that no indemnification of a director or
officer may be made unless: (1) there is a final decision on the
merits by a court or other body before whom the Proceeding was
brought that the director or officer to be indemnified was not
liable by reason of Disabling Conduct; or (2) in the absence of
such a decision, there is a reasonable determination, based upon
a review of the facts, that the director or officer to be
indemnified was not liable by reason of Disabling Conduct, which
determination shall be made by: (i) the vote of a majority of a
quorum of directors who are neither "interested persons" of the
Corporation as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the Proceeding; or (ii) an
independent legal counsel in a written opinion.
(c) Standard of Conduct. Under Maryland law, the Corporation may not
indemnify any director if it is proved that: (1) the act or
omission of the director was material to the cause of action
adjudicated in the Proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty; or
(2) the director actually received an improper personal benefit;
or (3) in the case of a criminal proceeding, the director had
reasonable cause to believe that the act or omission was
unlawful. No indemnification may be made under Maryland law
unless authorized for a specific proceeding after a determination
has been made, in accordance with Maryland law, that
indemnification is permissible in the circumstances because the
requisite standard of conduct has been met.
(d) Required Indemnification. Maryland law requires that a director
or officer who is successful, on the merits or otherwise, in the
defense of any Proceeding shall be indemnified against reasonable
expenses incurred by the director or officer in connection with
the Proceeding. In addition, under Maryland law, a court of
appropriate jurisdiction may order indemnification under certain
circumstances.
(e) Advance Payment. The By-Laws provide that the Corporation may pay
any reasonable expenses so incurred by any director or officer in
defending a Proceeding in advance of the final disposition
thereof to the fullest extent permissible under Maryland law. In
accordance with the By-Laws, such advance payment of expenses
shall be made only upon the undertaking by such director or
officer to repay the advance unless it is ultimately determined
that such director or officer is entitled to indemnification, and
only if one of the following conditions is met: (1) the director
or officer to be indemnified provides a security for his
undertaking; (2) the Corporation shall be insured against losses
arising by reason of any lawful advances; or (3) there is a
determination, based on a review of readily available facts, that
there is reason to believe that the director or officer to be
indemnified ultimately will be entitled to indemnification, which
determination shall be made by: (i) a majority of a quorum of
directors who are neither "interested persons" of the
Corporation, as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the Proceeding; or (ii) an
independent legal counsel in a written opinion.
(f) Insurance. The By-Laws provide that, to the fullest extent
permitted by Maryland law and Section 17(h) of the Investment
Company Act of 1940, the Corporation may purchase and maintain
insurance on behalf of any officer or director of the
Corporation, against any liability asserted against him or her
and incurred by him or her in and arising out of his or her
position, whether or not the Corporation would have the power to
indemnify him or her against such liability.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
None
Item 27. Principal Underwriter
---------------------
Maxus Securities Corp.
1301 East Ninth Street, Suite 100
Cleveland, Ohio 44114-1800
Item 28. Location of Accounts and Records
--------------------------------
The books and records of the Fund, other than the accounting and transfer agency
(including dividend disbursing) records, are maintained by the Fund at One North
Church Street, Schenectady, NY 12305; the Fund's accounting and transfer agency
records are maintained at [Transfer Agent], 123 Main Street, City, State 12345.
Item 29. Management Services
-------------------
There are no management service contracts not described in Part A or Part B of
Form N-1A.
Item 30. Undertakings
------------
The Registrant undertakes to file an amendment to the registration statement
with certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons in the event the Fund chooses
to raise its initial capital under Section 14(a)(3) of the Securities Act.
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized in Schenectady, New York on the 24th day of November, 1999.
ELECTRIC CITY FUNDS, INC.
/s/ James W. Denny
By: JAMES W. DENNEY
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:
ELECTRIC CITY FUNDS, INC.
NAME TITLE DATE
- ---- ----- ----
/s/ James W. Denney President & November 24, 1999
- ----------------------------------- Treasurer, Director
JAMES W. DENNEY
/s/ Bill W. Werner Secretary & November 24, 1999
- ----------------------------------- Director
BILL W. WERNER
/s/ Michael J. Massey Director November 24, 1999
- -----------------------------------
MICHAEL J. MASSEY
/s/ Joseph D. Condon Director November 24, 1999
- -----------------------------------
JOSEPH D. CONDON
/s/ Honorable Albert P. Jurczynski Director November 24, 1999
- -----------------------------------
HONORABLE ALBERT P. JURCZYNSKI
<PAGE>
EXHIBIT INDEX
Exhibit 23A Articles of Incorporation of Registrant
Exhibit 23B By-Laws of Registrant
Exhibit 23G Custodian Agreeement
Exhibit 23H(2) Investment Company Services Agreement
Exhibit 23N Plan of Distribution Pursuant to Rule 12b-1
Exhibit 23A Articles of Incorporation of Registrant
ARTICLES OF INCORPORATION
OF
ELECTRIC CITY FUNDS, INC.
FIRST: The undersigned, Jacqueline M. Giles, whose post office address is 1013
Centre Road, Wilmington, DE 19805 being at least eighteen years of age, does
hereby form a corporation under the General Laws of the State of Maryland.
SECOND: The name of the corporation (which is hereinafter called the
Corporation) is:
ELECTRIC CITY FUNDS, INC.
THIRD: The purpose or purposes of the corporation shall be to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation law of the State of Maryland, including to be a registered
investment company
FOURTH: The post office address of the principal office of the Corporation in
Maryland is 11 East Chase Street, Baltimore, MD 21202. The name and post office
address of the resident agent is CSC-Lawyers Incorporating Service Company, 11
East Chase Street, Baltimore, MD 21202. Said resident agent is a domestic
corporation of the State of Maryland.
FIFTH: The total number of shares of stock that the Corporation has authority to
issue is
One Hundred Million (100,000,000) at 0.0001 par value
SIXTH: The number of directors of the Corporation shall be 1 which number may be
increased or decreased pursuant to the by-laws of the Corporation, and so long
as there are less than three (3) stockholders, the number of directors may be
less than three (3) but not less than the number of stockholders, and the name
(s) of the director (s) who shall act until their successors are duly chosen and
qualified is (are):
James W. Denney
1 North Church Street
Schenectady, NY 112305
SEVENTH: the duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation on September
9, 1999, and severally acknowledged the same to be my act.
/s/ Jacqueline M. Giles
Jacqueline M. Giles
Incorporator
<PAGE>
ACTION OF SOLE INCORPORATOR
ELECTRIC CITY FUNDS, INC.
-------------------------------------
The undersigned, without a meeting, being the sole incorporator of the
Corporation, does hereby elect the persons listed below to serve as director(s)
of the corporation until the first annual meeting of shareholders and until
their successors are elected and qualify:
JAMES W. DENNEY
/s/ Jacqueline M. Giles
Jacqueline M. Giles
Incorporator
Dated: September 9, 1999
Exhibit 23B By-Laws of Registrant
- --------------------------------------------------------------------------------
BY-LAWS
OF
ELECTRIC CITY FUNDS, INC.
- --------------------------------------------------------------------------------
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the Corporation in the
State of Maryland shall be in the City of Baltimore.
Section 2. Other Offices. The Corporation may have such other offices in such
places as the Board of Directors may from time to time determine.
ARTICLE II
Meetings of Shareholders
Section 1. Annual Meeting. Subject to this Article II, an annual meeting of
Shareholders for the election of Directors and the transaction of such other
business as may properly come before the meeting shall be held at such time and
place as the Board of Directors shall select. The Corporation shall not be
required to hold an annual meeting of its Shareholders in any year in which the
election of directors is not required to be acted upon under the Investment
Company Act of 1940.
Section 2. Special Meetings. Special meetings of Shareholders may be called at
any time by the President, the Secretary or by a majority of the Board of
Directors and shall be held at such time and place as may be stated in the
notice of the meeting.
Special meetings of the Shareholders shall be called by the Secretary upon
receipt of written request of the holders of shares entitled to cast not less
than 10% of the votes entitled to be cast at such meeting, provided that (1)
such request shall state the purposes of such meeting and the matters proposed
to be acted on, and (2) the Shareholders requesting such meeting shall have paid
to the Corporation the reasonably estimated cost of preparing and mailing the
notice thereof, which the Secretary shall determine and specify to such
Shareholders. No special meeting shall be called upon the request of
Shareholders to consider any matter which is substantially the same as a matter
voted upon at any special meeting of the Shareholders held during the preceding
12 months, unless requested by the holders of a majority of all shares entitled
to be voted at such meeting.
Section 3. Place of Meetings. Meetings of Shareholders shall be held at a
location within the Continental United States as the Board of Directors may from
time to time determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the place, date and
time of the holding of each Shareholders' meeting and, if the meeting is a
special meeting, the purpose or purposes of the meeting, shall be given
personally or by mail, not less that ten (10) nor more that ninety (90) days
before the date of such meeting, to each Shareholder entitled to vote at such
meeting and to each other shareholder entitled to notice of the meeting. Notice
by mail shall be deemed to be duly given when deposited in the United States
mail addressed to the shareholder at his or her address as it appears on the
records of the Corporation, with postage thereon prepaid.
Notice of any meeting of Shareholders shall be deemed waived by any shareholder
who shall attend such meeting in person or by proxy, or who shall, either before
or after the meeting, submit a signed waiver of notice which is filed with the
records of the meeting.
Section 5. Quorum, Adjournment of Meetings. The presence at any Shareholders'
meeting, in person or by proxy, of Shareholders of one third (1/3RD ) of the
shares of the stock of the Corporation thereat shall be necessary and sufficient
to constitute a quorum for the transaction of business, except for any matter
which, under applicable statutes or regulatory requirements, requires approval
by a separate vote of one or more classes of stock, in which case the presence
in person or by proxy of Shareholders of one third (1/3RD ) of the shares of
stock of each class required to vote as a class on the matter shall constitute a
quorum. The holders of a majority of shares entitled to vote at the meeting and
present in person or by proxy, whether or not sufficient to constitute a quorum,
or, any officer present entitled to preside or act as Secretary of such meeting,
may adjourn the meeting without determining the date of a new meeting, or
without notice to a date not more than 120 days after the original record date.
Any business that might have been transacted at the meeting originally called
and so adjourned may be transacted at any such subsequent meeting at which a
quorum is present.
<PAGE>
Section 6. Organization. At each meeting of the Shareholders, the Chairman of
the Board (if one has been designated by the Board), or in his or her absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, the Vice President, shall act as
chairman of the meeting; provided, however, that if no such officer is present
or able to act, a chairman of the meeting shall be elected by a majority of the
Shareholders, present in person or by proxy, at the meeting. The Secretary, or
in his or her absence or inability to act, any person appointed by the chairman
of the meeting, shall act as secretary of the meeting and keep the minutes
thereof.
Section 7. Order of Business. The order of business at all meetings of the
Shareholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the Articles of
Incorporation, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the Shareholders to one
vote for every full share of such stock, with a fractional vote for any
fractional shares, standing in his or her name on the records of Shareholders of
the Corporation as of the record date determined pursuant to Section 9 of this
Article, or if such record date shall not have been so fixed, then at the later
of (i) the close of business on the day on which notice of the meeting is mailed
or (ii) the thirtieth day before the meeting.
Each shareholder entitled to vote at any meeting of Shareholders may authorize
another person or persons to act for him or her by a proxy signed by such
shareholder or his or her attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the shareholder
executing it, except in those cases where such proxy states that it is
irrevocable and where law permits an irrevocable proxy. Except as otherwise
provided by statute, the Articles of Incorporation or these By-Laws, any
corporate action to be taken by vote of the Shareholders shall be authorized by
a majority of the total votes validly cast at a meeting of Shareholders at which
a quorum is present.
If a vote shall be taken on any question other than the election of directors,
which shall be by written ballot, then unless required by statute or these
By-Laws, or determined by the chairman of the meeting to be advisable, any such
vote need not be by ballot. On a vote by ballot, each ballot shall be signed by
the shareholder voting, or by his or her proxy, if there be such proxy, and
shall state the number of shares voted.
<PAGE>
Section 9. Fixing of Record Date. The Board of Directors may fix a time not less
that 10 nor more than 90 days prior to the date of any meeting of Shareholders
or prior to the last day on which the consent or dissent of Shareholders may be
effectively expressed for any purpose without a meeting, as the time as of which
Shareholders entitled to notice of and to vote at such a meeting or whose
consent or dissent is required or may be expressed for any purpose, as the case
may be, shall be determined; and all persons who were holders of record of
voting stock at such time and no other shall be entitled to notice of and to
vote at such meeting or to express their consent or dissent, as the case may be.
If no record date has been fixed, the record date for the determination of
Shareholders entitled to notice of or to vote at a meeting of Shareholders shall
be the later of the close of business on the day on which notice of the meeting
is mailed or the thirtieth day before the meeting, or, if notice is waived by
all Shareholders, at the close of business on the tenth day next preceding the
day on which the meeting is held. The Board of Directors may fix a record date
for determining Shareholders entitled to receive payment of a dividend or
distribution, but such date shall be not more that 90 days before the date on
which such payment is made. If no record date has been fixed, the record date
for determining Shareholders entitled to receive dividends or distributions
shall be the close of business on the day on which the resolution of the Board
of Directors declaring the dividend or distribution is adopted, but the payment
shall not be made more than 60 days after the date on which the resolution is
adopted.
Section 10. Consent of Shareholders in Lieu of Meeting. Except as otherwise
provided by statute or the Articles of Incorporation, any action required to be
taken at any meeting of Shareholders, or any action which may be taken at any
meeting of such Shareholders, may be taken without a meeting, without prior
notice and without a vote, if the following are filed with the records of
Shareholders meetings: (i) a unanimous written consent which sets forth the
action and is signed by each shareholder entitled to vote on the matter, and
(ii) a written waiver of any right to dissent signed by each shareholder
entitled to notice of the meeting but not entitled to vote thereat.
ARTICLE III
Board of Directors
Section 1. General Powers. The business and affairs of the Corporation shall be
managed under the direction of the Board of Directors and all powers of the
Corporation may be exercised by or under the authority of the Board of
Directors.
Section 2. Number of Directors. The number of directors shall be fixed from time
to time by resolution of the Board of Directors adopted by a majority of the
Directors then in office; provided, however, that the number of Directors shall
in no event be less that three (3) nor more than fifteen (15) except that the
Corporation may have less than three (3) but not less than one (1) Director if
there is no stock outstanding, and may have a number of Directors no fewer than
the number of Shareholders so long as there are fewer than three (3)
Shareholders. Any vacancy created by an increase in Directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number of
Directors shall have the effect of removing any Director from office prior to
the expiration of his or her term unless such Director is specifically removed
pursuant to Section 5 of this Article III at the time of such decrease.
Directors need not be Shareholders.
Section 3. Election and Term of Directors. Directors shall be elected annually,
by written ballot at the annual meeting of Shareholders or a special meeting
held for that purpose; provided, however, that if no annual meeting of the
Shareholders of the Corporation is required to be held in a particular year
pursuant to Section 1 of Article II of these By-Laws, Directors shall be elected
at the next annual meeting held. The term of office of each Director shall be
from the time of his or her election and qualification until the election of
Directors next succeeding his or her election and until his or her successor
shall have been elected and shall have qualified.
Section 4. Resignation. A director of the Corporation may resign at any time by
giving written notice of his or her resignation to the Board, or the Chairman of
the Board, or the President, or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 5. Removal of Directors. Any Director of the Corporation may be removed
by the Shareholders by a vote of a majority of the shares entitled to be cast
for the election of Directors.
Section 6. Vacancies. If any vacancies shall occur in the Board of Directors (i)
by reason of death, resignation, removal or otherwise, the remaining directors
shall continue to act, and, subject to the provisions of the Investment Company
Act of 1940, such vacancies (if not previously filled by the Shareholders) may
be filled by a majority of the remaining Directors, although less than a quorum,
and (ii) by reason of an increase in the authorized number of Directors, such
vacancies (if not previously filled by the Shareholders) may be filled only by a
majority vote of the entire Board of Directors.
Section 7. Offices, Records, Places of Meetings. The Directors may have one or
more offices and may keep the books of the Corporation outside the State of
Maryland, and within or without the United States of America, at any office or
offices of the Corporation or at any other place as they may from time to time
by resolution determine; and in the case of meetings of the Board of Directors,
such meetings may be held at any place, within or without the United States of
America, as the Board may from time to time by resolution determine, or as shall
be specified or fixed in the respective notices or waivers of notice thereof.
Section 8. Regular Meetings. The Board of Directors from time to time may
provide by resolution for the holding of regular meetings and fix their time and
place as the Board of Directors may determine. Notice of such regular meetings
need not be in writing, provided that notice of any change in the time or place
of such fixed regular meetings shall be communicated promptly to each Director
not present at the meeting at which such change was made, in the manner provided
in Section 9 of this Article III for notice of special meetings. Members of the
Board of Directors or any committee designated thereby may participate in a
meeting of such Board or committee by telephone conference or other
communications method by means of which all persons participating in the meeting
can hear each other at the same time, and participation by such means shall
constitute presence in person at a meeting, subject to the requirements of the
Investment Company Act of 1940.
Section 9. Special Meetings. Special meetings of the Board of Directors may be
held at any time or place and for any purpose when called by the President, the
Secretary or two or more of the Directors. Notice of special meetings, stating
the time and place, shall be communicated to each Director personally by
telephone or transmitted to him or her by mail, telegraph, telefax, telex,
cable, e-mail or wireless at least one day before the meeting.
Section 10. Waiver of Notice. No notice of any meeting of the Board of Directors
or a committee of the Board need be given to any Director who is present at the
meeting or who waives notice of such meeting in writing (which waiver shall be
filed with the records of such meeting), either before or after the time of the
meeting.
Section 11. Quorum and Voting. At all meetings of the Board of Directors, the
presence of one third of the entire Board of Directors shall constitute a quorum
unless there are only two or three Directors, in which case two Directors shall
constitute a quorum. If there is only one Director, the sole Director shall
constitute a quorum. At any adjourned meeting at which a quorum was present, any
business may be transacted at a subsequent meeting, at which a quorum is
present, which might have been transacted at the meeting as originally called.
Section 12. Organization. The Board may, by resolution adopted by a majority of
the entire Board, designate a Chairman of the Board, who shall preside at each
meeting of the Board. In the absence or inability of the Chairman of the Board
to preside at a meeting, the President, or, in his or her absence or inability
to act, another Director chosen by a majority of the Directors present, shall
act as chairman of the meeting and preside thereat. The Secretary (or, in his or
her absence or inability to act, any person appointed by the Chairman) shall act
as secretary of the meeting and keep the minutes thereof.
Section 13. Written Consent of Directors in Lieu of a Meeting. Subject to the
provisions of the Investment Company Act of 1940, as amended, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting if all members of the Board
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 or
committee.
Section 14. Compensation. Directors may receive compensation for services to the
Corporation in their capacities as directors or otherwise in such manner and in
such amounts as may be fixed from time to time by the Board, subject to any
limitations on such compensation as provided in the Investment Company Act of
1940.
ARTICLE IV
Committees
Section 1. Organization. By resolution adopted by the Board of Directors, the
Board may designate one or more committees, including an Executive Committee,
composed of two or more Directors. The Board of Directors shall elect the
Chairmen of such committees. The Board of Directors shall have the power at any
time to change the members of such committees and to fill vacancies in the
committees. The Board may delegate to these committees any of its powers, except
the power to authorize the issuance of stock, declare a dividend or distribution
on stock, recommend to Shareholders any action requiring shareholder approval,
amend these By-Laws, or approve any merger or share exchange which does not
require shareholder approval. If the Board of Directors has given general
authorization for the issuance of stock, a committee of the Board, in accordance
with a general formula or method specified by the Board by resolution or by
adoption of a stock option or other plan, may fix the terms of stock subject to
classification or reclassification and the terms on which any stock may be
issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Directors.
Section 2. Proceedings and Quorum. In the absence of an appropriate resolution
of the Board of Directors, each committee may adopt such rules and regulations
governing its proceedings, quorum and manner of acting as it shall deem proper
and desirable. In the event any member of any committee is absent from any
meeting, the members thereof present at the meeting, whether or not they
constitute a quorum, may appoint a member of the Board of Directors to act in
the place of such absent member.
ARTICLE V
Officers, Agents and Employees
Section 1. General. The officers of the Corporation shall be a President, a
Secretary and a Treasurer, and may include one or more Vice Presidents,
Assistant Secretaries or Assistant Treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 8 of this Article.
Section 2. Election, Tenure and Qualifications. The officers of the Corporation,
except those appointed as provided in Section 8 of this Article V, shall be
elected by the Board of Directors at its first meeting and thereafter annually
at an annual meeting. If any officers are not chosen at any annual meeting, such
officers may be chosen at any subsequent regular or special meeting of the
Board. Except as otherwise provided in this Article V, each officer chosen by
the Board of Directors shall hold office until the next annual meeting of the
Board of Directors and until his or her successor shall have been elected and
qualified. Any person may hold one or more offices of the Corporation except
that a single person may not simultaneously hold the offices of President and
Vice President.
Section 3. Removal and Resignation. Whenever in the judgment of the Board of
Directors the best interest of the Corporation will be served thereby, any
officer may be removed from office by the vote of a majority of the members of
the Board of Directors at any regular meeting or at a special meeting called for
such purpose. Any officer may resign his office at any time by delivering a
written resignation to the Board of Directors, the President, the Secretary, or
any Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
<PAGE>
Section 4. President. The president shall be the chief executive officer of the
Corporation. Subject to the supervision of the Board of Directors, he or she
shall have general charge of the business, affairs and property of the
Corporation, and general supervision over its officers, employees and agents.
Except as the Board of Directors may otherwise order, he or she may sign in the
name and on behalf of the Corporation all deeds, bonds, contracts, or
agreements. He or she shall exercise such other powers and perform such other
duties as from time to time may be assigned to him or her by the Board of
Directors.
Section 5. Vice President. The Board of Directors may from time to time elect
one or more Vice Presidents who shall have such powers and perform such duties
as from time may be assigned to them by the Board of Directors or the President.
At the request or in the absence or disability of the President, the Vice
President (or, if there are two or more Vice Presidents then the more senior of
such officers present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Any Vice President may perform such
duties as the Board of Directors may assign.
Section 6. Treasurer and Assistant Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he or she shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. He or she shall render to
the Board of Directors whenever directed by the Board, an account of the
financial condition of the Corporation and of all his or her transactions as
Treasurer; and as soon as possible after the close of each fiscal year, he or
she shall make and submit to the Board of Directors a like report for such
fiscal year. He or she shall perform all acts incidental to the Office of
Treasurer, subject to the control of the Board of Directors.
Any Assistant Treasurer may perform such duties of the Treasurer as the
Treasurer or the Board of Directors may assign, and, in the absence of the
Treasurer, the Assistant Treasurer (or if there are two or more Assistant
Treasurers, then the more senior of such officers present and able to act) may
perform all the duties of the Treasurer.
Section 7. Secretary and Assistant Secretaries. The Secretary shall attend to
the giving and serving of all notices of the Corporation and shall record all
proceedings of the meetings of the Shareholders and Directors in books to be
kept for that purpose. He or she shall keep in safe custody the seal of the
corporation, and shall have charge of the records for the Corporation, including
the stock books and such other books and papers as the Board of Directors may
direct and such books, reports, certificates and other documents required by law
to be kept, all of which shall at all reasonable times be open to inspection by
any Director. He or she shall perform such other duties as appertain to his or
her office or as may be required by the Board of Directors.
Any Assistant Secretary may perform such duties of the Secretary as the
Secretary of the Board of Directors may assign, and, in the absence of the
Secretary, he or she (or if there are two or more Assistant Secretaries, then
the more senior of such officers present and able to act) may perform all the
duties of the Secretary.
Section 8. Subordinate Officers. The Board of Directors from time to time may
appoint such other officers or agents as it may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Board of Directors may determine. The Board of
Directors may from time to time delegate to one or more officers or agents the
power to appoint any such subordinate officers or agents and to prescribe their
rights, terms of office, authorities and duties.
Section 9. Remuneration. The salaries or other compensation of the officers of
the Corporation shall be fixed from time to time by resolution of the Board of
Directors, except that the Board of Directors may by resolution delegate to any
person or group of persons the power to fix the salaries or other compensation
of any subordinate officers or agents appointed in accordance with the
provisions of Section 8 of this Article V.
Section 10. Surety Bonds. The Board of Directors may require any officer or
agent of the Corporation to execute a bond (including, without limitation, any
bond required by the Investment Company Act of 1940, as amended, and the rules
and regulations of the Securities and Exchange Commission) to the Corporation in
such sum and with such surety or sureties as the Board of Directors may
determine, conditioned upon the faithful performance of his or her duties to the
Corporation, including responsibility for negligence and for the accounting of
any of the Corporation's property, funds or securities that may come into his or
her hands.
ARTICLE VI
Indemnification
The Corporation shall indemnify (a) its Directors and officers, whether serving
the Corporation or, at its request, any other entity, to the full extent
required or permitted by (i) Maryland law now or hereafter in force, including
the advance of expenses under the procedures and to the full extent permitted by
law, and (ii) the Investment Company Act of 1940, as amended, and (b) other
employees and agents to such extent as shall be authorized by the Board of
Directors and as permitted by law. The foregoing rights of indemnification shall
not be exclusive of any other rights to which those seeking indemnification may
be entitled. The Board of Directors may take such action as is necessary to
carry out these indemnification provisions and is expressly empowered to adopt,
approve and amend from time to time such resolutions or contracts implementing
such provisions or such further indemnification arrangements as may be permitted
by law.
ARTICLE VII
Capital Stock
Section 1. Stock Certificates. The interest of each shareholder of the
Corporation may be evidenced by certificates for shares of stock in such form as
the Board of Directors may from time to time prescribe. The Board of Directors
is expressly empowered to direct that stock certificates not be issued to
evidence such shareholder ownership, and in such a case, the Board of Directors
prescribe such other method or arrangement for the recording of such interests
as they deem reasonable and proper.
In the event that the Board of Directors elects to issue stock certificates, the
certificates representing shares of stock shall be signed by or in the name of
the Corporation by the President or a Vice President and countersigned by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.
Certificates may be sealed with the actual corporate seal or a facsimile of it
or in any other form. Any or all of the signatures of the seal on the
certificate may be manual or facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were still
in office at the date of issue unless written instructions of the Corporation to
the contrary are delivered to such officer, transfer agent or registrar.
Section 2. Stock Ledgers. The stock ledgers of the Corporation, containing the
names and addresses of the Shareholders and the number of shares held by them
respectively, shall be kept at the principal offices of the Corporation or, if
the Corporation employs a transfer agent, at the offices of the transfer agent
of the Corporation.
<PAGE>
Section 3. Transfers of Shares. Transfers of shares of stock of the Corporation
shall be made on the stock records of the Corporation only by the registered
holder thereof, or by his or her attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent or
transfer clerk, and on surrender of the certificate or certificates, if issued,
for such shares properly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, with such proof of the
authenticity of the signature as the Corporation or its agents may reasonably
require and the payment of all taxes thereon. Except as otherwise provided by
law, the Corporation shall be entitled to recognize the exclusive right of a
person in whose name any share or shares stand on the record of Shareholders as
the owner of such share or shares for all purposes, including, without
limitation, the rights to receive dividends or other distributions, and to vote
as such owner, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in any such share or shares on the part of any
other person. The Board may make such additional rules and regulations, not
inconsistent with these By-Laws, as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of stock of the
Corporation.
Section 4. Transfer Agents and Registrars. The Board of Directors may from time
to time appoint or remove transfer agents and/or registrars of transfers of
shares of stock of the Corporation, and it may appoint the same person as both
transfer agent and registrar. Upon any such appointment being made all
certificates representing shares of capital stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars of
transfers or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only one countersignature by
such person shall be required.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it which the owner thereof shall
allege to have been lost or destroyed or which shall have been mutilated, and
the Board may, in its discretion, require such owner or his or her legal
representatives to give to the Corporation a bond in such sum, limited or
unlimited, and in such form and with such surety or sureties, as the Board in
its absolute discretion shall determine, to indemnify the Corporation against
any claim that may be made against it on account of the alleged loss or
destruction of any certificate, or issuance of a new certificate. Anything
herein to the contrary notwithstanding, the Board, in its absolute discretion,
may refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
ARTICLE VIII
Seal
The seal of the Corporation shall be circular in form and shall bear, in
addition to any other emblem or device approved by the Board of Directors, the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Maryland." The Board of Directors may otherwise alter the form of the
seal. Said seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced. Any Officer or Director of the
Corporation shall have the authority to affix the corporate seal of the
Corporation to any document requiring the same.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be determined by resolution of the
Board of Directors.
ARTICLE X
Depositories and Custodians
Section 1. Depositories. The funds of the Corporation shall be deposited with
such banks or other depositories as the Board of Directors of the Corporation
may from time to time determine.
Section 2. Custodians. All securities and other investments shall be deposited
in the safe keeping of such banks or other companies as the Board of Directors
of the Corporation may from time to time determine. Every arrangement entered
into with any bank or other company for the safe keeping of the securities and
investments of the Corporation shall contain provisions complying with the
Investment Company Act of 1940, as amended, and the general rules and
regulations thereunder.
ARTICLE XI
Execution of Instruments
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts, acceptances, bills
of exchange and other orders or obligations for the payment of money shall be
signed by such officer or officers or person or persons as the Board or these
By-Laws provide.
Section 2. Sale or Transfer of Securities. Stock certificates, bonds or other
securities owned by the Corporation may be held on behalf of the Corporation by
a Custodian selected by the Board of Directors, and may be transferred or
otherwise disposed of only as allowed pursuant to these By-Laws and pursuant to
authorization by the Board; and when so authorized to be held on behalf of the
Corporation or sold, transferred or otherwise disposed of, may be transferred
from the name of the Corporation by the signature of the President, any Vice
President or the Treasurer, or pursuant to any procedure approved by the Board
of Directors, subject to applicable law.
ARTICLE XII
Independent Public Accountants
The Corporation shall employ an independent public accountant or a firm of
independent public accountants as its accountants to examine the accounts of the
Corporation and to sign and certify financial statements filed by the
Corporation.
ARTICLE XIII
Record Keeping Pursuant to Statutory Requirements
Any and all books, records, documents and other writings and memoranda, of any
nature whatever, that are or may be subject to record keeping requirements under
federal or state statutes shall be kept and maintained in the manner and for the
time periods prescribed under the Investment Company Act of 1940, as amended. It
shall be the duty of the Secretary of the Corporation, under the supervision of
the Board of Directors, to identify documents subject to regulatory
recordkeeping requirements and to maintain such documents in conformity with
such requirements.
ARTICLE XIV
Amendments
These By-Laws or any of them may be amended, altered or repealed at any regular
meeting of the Shareholders or at any special meeting of the Shareholders at
which a quorum is present or represented, provided that notice of the proposed
amendment, alteration or repeal be contained in the notice of such special
meeting. These By-Laws may also be amended, altered or repealed by the
affirmative vote of a majority of the Board of Directors, except any particular
By-Law which is specified as not subject to alteration or repeal by the Board of
Directors, subject to the requirements of the Investment Company Act of 1940, as
amended.
Exhibit 23G Custodian Agreement
CUSTODY AGREEMENT
Dated December 15, 1999
Between
UMB BANK, N.A.
and
ELECTRIC CITY FUNDS, INC
And
MOHAWK ASSET MANAGEMENT, INC.
<PAGE>
Table of Contents
SECTION PAGE
1. Appointment of Custodian 1
2. Definitions 1
(a) Securities 1
(b) Assets 1
(c) Instructions and Special Instructions 1
3. Delivery of Corporate Documents 2
4. Powers and Duties of Custodian and Domestic Subcustodian 2
(a) Safekeeping 3
(b) Manner of Holding Securities 3
(c) Free Delivery of Assets 4
(d) Exchange of Securities 4
(e) Purchases of Assets 4
(f) Sales of Assets 5
(g) Options 5
(h) Futures Contracts 6
(i) Segregated Accounts 6
(j) Depositary Receipts 6
(k) Corporate Actions, Put Bonds, Called Bonds, Etc. 6
(l) Interest Bearing Deposits 7
(m) Foreign Exchange Transactions 7
(n) Pledges or Loans of Securities 8
(o) Stock Dividends, Rights, Etc. 8
(p) Routine Dealings 8
(q) Collections 8
(r) Bank Accounts 9
(s) Dividends, Distributions and Redemptions 9
(t) Proceeds from Shares Sold 9
(u) Proxies and Notices; Compliance with the Shareholders
Communication Act of 1985 9
(v) Books and Records 9
(w) Opinion of Fund's Independent Certified Public Accountants 10
(x) Reports by Independent Certified Public Accountants 10
(y) Bills and Others Disbursements 10
5. Subcustodians 10
(a) Domestic Subcustodians 10
(b) Foreign Subcustodians 10
(c) Interim Subcustodians 11
(d) Special Subcustodians 11
(e) Termination of a Subcustodian 11
(f) Certification Regarding Foreign Subcustodians 11
6. Standard of Care 12
(a) General Standard of Care 12
(b) Actions Prohibited by Applicable Law, Events Beyond
Custodian's Control, Armed Conflict, Sovereign Risk, etc. 12
(c) Liability for Past Records 12
(d) Advice of Counsel 12
(e) Advice of the Fund and Others 12
(f) Instructions Appearing to be Genuine 13
(g) Exceptions from Liability 13
7. Liability of the Custodian for Actions of Others 13
(a) Domestic Subcustodians 13
(b) Liability for Acts and Omissions of Foreign Subcustodians 13
(c) Securities Systems, Interim Subcustodians, Special Subcustodians,
Securities Depositories and Clearing Agencies 13
(d) Defaults or Insolvency's of Brokers, Banks, Etc. 14
(e) Reimbursement of Expenses 14
8. Indemnification 14
(a) Indemnification by Fund 14
(b) Indemnification by Custodian 14
9. Advances 14
10. Liens 15
11. Compensation 15
12. Powers of Attorney 15
13. Termination and Assignment 15
14. Additional Funds 15
15. Notices 16
16. Miscellaneous 16
<PAGE>
CUSTODY AGREEMENT
This agreement made as of this 15TH day of December, 1999, between UMB
Bank, n.a., a national banking association with its principal place of business
located at Kansas City, Missouri (hereinafter "Custodian"), Mohawk Asset
Management, Inc., a Delaware corporation operating as an investment adviser and
registered as such with the Securities and Exchange Commission (hereinafter
"Adviser"), and Electric City Funds, Inc., a Maryland corporation (hereinafter
the "Fund").
WITNESSETH:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, the Adviser has registered with the Securities and Exchange
Commission as an investment adviser under the Investment Advisers Act of 1940,
as amended; and
WHEREAS, the Fund is authorized by its Articles of Incorporation and
by-laws to issue separate series of shares representing interests in separate
investment portfolios (the "Portfolios"), and
WHEREAS, The Fund has authorized the issuance of the Portfolios which are
identified on Appendix B attached hereto, which Appendix B may be amended from
time to time by mutual agreement of the Fund, Adviser and Custodian, and;
WHEREAS, Adviser and the Fund have entered into a previous contract wherein
Adviser is responsible for providing certain services to the Fund, a copy of
which is attached hereto as Exhibit 1 and incorporated herein by reference, and;
WHEREAS, Adviser is authorized, pursuant to the contract described above
with the Fund, to enter into contracts with third parties and engage such
parties to provide services to the Fund, and;
WHEREAS, Adviser, with the consent of the Fund, desires to appoint
Custodian as custodian for the custody of Assets (as hereinafter defined) owned
by each of the Portfolios listed on Appendix B hereof, together with such
additional Portfolios as may later be added by the Fund and which shall be made
parties to this Agreement by the amendment of Appendix B hereto, which Assets
are to be held in such accounts as Custodian may establish from time to time for
each Portfolio; and
WHEREAS, Custodian is willing to accept such appointment on the terms and
conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the parties hereto, intending to be legally bound, mutually covenant and agree
as follows:
1. APPOINTMENT OF CUSTODIAN.
The Adviser and the Fund hereby constitutes and appoints the Custodian as
custodian of Assets belonging to each Portfolio which have been or may be from
time to time deposited with the Custodian. Custodian accepts such appointment as
a custodian and agrees to perform the duties and responsibilities of Custodian
as set forth herein on the conditions set forth herein.
<PAGE>
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the meanings
so indicated:
(a) "Security" or "Securities" shall mean stocks, bonds, bills, rights,
script, warrants, interim certificates and all negotiable or nonnegotiable paper
commonly known as Securities and other instruments or obligations.
(b) "Assets" shall mean Securities, monies and other property held by the
Custodian for the benefit of a Fund.
(c)(1) "Instructions", as used herein, shall mean: (i) a tested telex, a
written (including, without limitation, facsimile transmission) request,
direction, instruction or certification signed or initialed by or on behalf of a
Fund by an Authorized Person; (ii) a telephonic or other oral communication from
a person the Custodian reasonably believes to be an Authorized Person; or (iii)
a communication effected directly between an electro-mechanical or electronic
device or system (including, without limitation, computers) on behalf of a Fund.
Instructions in the form of oral communications shall be confirmed by the
appropriate Fund by tested telex or in writing in the manner set forth in clause
(i) above, but the lack of such confirmation shall in no way affect any action
taken by the Custodian in reliance upon such oral Instructions prior to the
Custodian's receipt of such confirmation. Each Fund authorizes the Custodian to
record any and all telephonic or other oral Instructions communicated to the
Custodian.
(c)(2) "Special Instructions", as used herein, shall mean Instructions
countersigned or confirmed in writing by the Treasurer or any Assistant
Treasurer of a Fund or any other person designated by the Treasurer of such Fund
in writing, which countersignature or confirmation shall be included on the same
instrument containing the Instructions or on a separate instrument relating
thereto.
(c)(3) Instructions and Special Instructions shall be delivered to the
Custodian at the address and/or telephone, facsimile transmission or telex
number agreed upon from time to time by the Custodian and each Fund.
(c)(4) Where appropriate, Instructions and Special Instructions shall be
continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its execution does
not violate any of the provisions of its respective charter, articles of
incorporation, articles of association or bylaws and all required corporate
actions to authorize the execution and delivery of this Agreement have been
taken.
The Fund has furnished the Custodian with copies, properly certified or
authenticated, with all amendments or supplements thereto, of the following
documents:
(a) Certificate of Incorporation (or equivalent document) of the Fund as in
effect on the date hereof;
(b) By-Laws of the Fund as in effect on the date hereof;
(c) Resolutions of the Board of Directors of the Fund appointing the
Custodian and approving the form of this Agreement; and
(d) The Fund's current prospectus and statement of additional information.
The Fund shall promptly furnish the Custodian with copies of any updates,
amendments or supplements to the foregoing documents.
In addition, the Fund has delivered or will promptly deliver to the
Custodian, copies of the Resolution(s) of its Board of Directors or Trustees and
all amendments or supplements thereto, properly certified or authenticated,
designating certain officers or employees of the Fund who will have continuing
authority to certify to the Custodian: (a) the names, titles, signatures and
scope of authority of all persons authorized to give Instructions or any other
notice, request, direction, instruction, certificate or instrument on behalf of
the Fund, and (b) the names, titles and signatures of those persons authorized
to countersign or confirm Special Instructions on behalf of the Fund (in both
cases collectively, the "Authorized Persons" and individually, an "Authorized
Person"). Such Resolutions and certificates may be accepted and relied upon by
the Custodian as conclusive evidence of the facts set forth therein and shall be
considered to be in full force and effect until delivery to the Custodian of a
similar Resolution or certificate to the contrary. Upon delivery of a
certificate which deletes or does not include the name(s) of a person previously
authorized to give Instructions or to countersign or confirm Special
Instructions, such persons shall no longer be considered Authorized Persons
authorized to give Instructions or to countersign or confirm Special
Instructions. Unless the certificate specifically requires that the approval of
anyone else will first have been obtained, the Custodian will be under no
obligation to inquire into the right of the person giving such Instructions or
Special Instructions to do so. Notwithstanding any of the foregoing, no
Instructions or Special Instructions received by the Custodian from the Fund
will be deemed to authorize or permit any director, trustee, officer, employee,
or agent of the Fund to withdraw any of the Assets of the Fund upon the mere
receipt of such authorization, Special Instructions or Instructions from such
director, trustee, officer, employee or agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC SUBCUSTODIAN.
Except for Assets held by any Subcustodian appointed pursuant to Sections
5(b), (c), or (d) of this Agreement, the Custodian shall have and perform the
powers and duties hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian" shall also
refer to any Domestic Subcustodian appointed pursuant to Section 5(a).
(a) Safekeeping.
The Custodian will keep safely the Assets of each Portfolio which are
delivered to it from time to time. The Custodian shall not be responsible for
any property of a Portfolio held or received by such Portfolio and not delivered
to the Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold Securities of each Portfolio
either: (i) by physical possession of the share certificates or other
instruments representing such Securities in registered or bearer form; or (ii)
in book-entry form by a Securities System (as hereinafter defined) in accordance
with the provisions of sub-paragraph (3) below.
(2) The Custodian may hold registerable portfolio Securities which have
been delivered to it in physical form, by registering the same in the name of
the appropriate Portfolio or its nominee, or in the name of the Custodian or its
nominee, for whose actions such Portfolio and Custodian, respectively, shall be
fully responsible. Upon the receipt of Instructions, the Custodian shall hold
such Securities in street certificate form, so called, with or without any
indication of fiduciary capacity. However, unless it receives Instructions to
the contrary, the Custodian will register all such portfolio Securities in the
name of the Custodian's authorized nominee. All such Securities shall be held in
an account of the Custodian containing only assets of the appropriate Portfolio
or only assets held by the Custodian as a fiduciary, provided that the records
of the Custodian shall indicate at all times the Portfolio or other customer for
which such Securities are held in such accounts and the respective interests
therein.
<PAGE>
(3) The Custodian may deposit and/or maintain domestic Securities owned by
a Portfolio in, and the Fund hereby approves use of: (a) The Depository Trust
Company; (b) The Participants Trust Company; and (c) any book-entry system as
provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR 306.115, (ii)
Subpart B of Treasury Circular Public Debt Series No. 27-76, 31 CFR 350.2, or
(iii) the book-entry regulations of federal agencies substantially in the form
of 31 CFR 306.115. Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by a Portfolio in any other
domestic clearing agency registered with the Securities and Exchange Commission
("SEC") under Section 17A of the Securities Exchange Act of 1934 (or as may
otherwise be authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment companies) which
acts as a Securities depository. Each of the foregoing shall be referred to in
this Agreement as a "Securities System", and all such Securities Systems shall
be listed on the attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules and regulations,
if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities directly or through one or
more agents or Subcustodians which are also qualified to act as custodians for
investment companies.
(ii) The Custodian shall deposit and/or maintain the Securities in a
Securities System, provided that such Securities are represented in an account
("Account") of the Custodian in the Securities System that includes only assets
held by the Custodian as a fiduciary, custodian or otherwise for customers.
(iii) The books and records of the Custodian shall at all times identify
those Securities belonging to any one or more Portfolios which are maintained in
a Securities System.
(iv) The Custodian shall pay for Securities purchased for the account of a
Portfolio only upon (a) receipt of advice from the Securities System that such
Securities have been transferred to the Account of the Custodian in accordance
with the rules of the Securities System, and (b) the making of an entry on the
records of the Custodian to reflect such payment and transfer for the account of
such Portfolio. The Custodian shall transfer Securities sold for the account of
a Portfolio only upon (a) receipt of advice from the Securities System that
payment for such Securities has been transferred to the Account of the Custodian
in accordance with the rules of the Securities System, and (b) the making of an
entry on the records of the Custodian to reflect such transfer and payment for
the account of such Portfolio. Copies of all advices from the Securities System
relating to transfers of Securities for the account of a Portfolio shall be
maintained for such Portfolio by the Custodian. The Custodian shall deliver to a
Portfolio on the next succeeding business day daily transaction reports that
shall include each day's transactions in the Securities System for the account
of such Portfolio. Such transaction reports shall be delivered to such Portfolio
or any agent designated by the Fund pursuant to Instructions, by computer or in
such other manner as the Fund and Custodian may agree.
(v) The Custodian shall, if requested by the Fund pursuant to Instructions,
provide a Portfolio with reports obtained by the Custodian or any Subcustodian
with respect to a Securities System's accounting system, internal accounting
control and procedures for safeguarding Securities deposited in the Securities
System.
(vi) Upon receipt of Special Instructions, the Custodian shall terminate
the use of any Securities System on behalf of a Portfolio as promptly as
practicable and shall take all actions reasonably practicable to safeguard the
Securities of such Portfolio maintained with such Securities System.
(c) Free Delivery of Assets.
Notwithstanding any other provision of this Agreement, and except as
provided in Section 3 hereof, the Custodian, upon receipt of Special
Instructions, will undertake to make free delivery of Assets, provided such
Assets are on hand and available, in connection with a Portfolio 's transactions
and to transfer such Assets to such broker, dealer, Subcustodian, bank, agent,
Securities System or otherwise as specified in such Special Instructions.
<PAGE>
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will exchange portfolio
Securities held by it for a Portfolio for other Securities or cash paid in
connection with any reorganization, recapitalization, merger, consolidation, or
conversion of convertible Securities, and will deposit any such Securities in
accordance with the terms of any reorganization or protective plan.
Without Instructions, the Custodian is authorized to exchange Securities
held by it in temporary form for Securities in definitive form, to surrender
Securities for transfer into a name or nominee name as permitted in Section
4(b)(2), to effect an exchange of shares in a stock split or when the par value
of the stock is changed, to sell any fractional shares, and, upon receiving
payment therefor, to surrender bonds or other Securities held by it at maturity
or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with Instructions, the Custodian
shall, with respect to a purchase of Securities, pay for such Securities out of
monies held for a Portfolio 's account for which the purchase was made, but only
insofar as monies are available therein for such purpose, and receive the
portfolio Securities so purchased. Unless the Custodian has received Special
Instructions to the contrary, such payment will be made only upon receipt of
Securities by the Custodian, a clearing corporation of a national Securities
exchange of which the Custodian is a member, or a Securities System in
accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the
foregoing, upon receipt of Instructions: (i) in connection with a repurchase
agreement, the Custodian may release funds to a Securities System prior to the
receipt of advice from the Securities System that the Securities underlying such
repurchase agreement have been transferred by book-entry into the Account
maintained with such Securities System by the Custodian, provided that the
Custodian's instructions to the Securities System require that the Securities
System may make payment of such funds to the other party to the repurchase
agreement only upon transfer by book-entry of the Securities underlying the
repurchase agreement into such Account; (ii) in the case of Interest Bearing
Deposits, currency deposits, and other deposits, foreign exchange transactions,
futures contracts or options, pursuant to Sections 4(g), 4(h), 4(l), and 4(m)
hereof, the Custodian may make payment therefor before receipt of an advice of
transaction; and (iii) in the case of Securities as to which payment for the
Security and receipt of the instrument evidencing the Security are under
generally accepted trade practice or the terms of the instrument representing
the Security expected to take place in different locations or through separate
parties, such as commercial paper which is indexed to foreign currency exchange
rates, derivatives and similar Securities, the Custodian may make payment for
such Securities prior to delivery thereof in accordance with such generally
accepted trade practice or the terms of the instrument representing such
Security.
(2) Other Assets Purchased. Upon receipt of Instructions and except as
otherwise provided herein, the Custodian shall pay for and receive other Assets
for the account of a Portfolio as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with Instructions, the Custodian will,
with respect to a sale, deliver or cause to be delivered the Securities thus
designated as sold to the broker or other person specified in the Instructions
relating to such sale. Unless the Custodian has received Special Instructions to
the contrary, such delivery shall be made only upon receipt of payment therefor
in the form of: (a) cash, certified check, bank cashier's check, bank credit, or
bank wire transfer; (b) credit to the account of the Custodian with a clearing
corporation of a national Securities exchange of which the Custodian is a
member; or (c) credit to the Account of the Custodian with a Securities System,
in accordance with the provisions of Section 4(b)(3) hereof. Notwithstanding the
foregoing, Securities held in physical form may be delivered and paid for in
accordance with "street delivery custom" to a broker or its clearing agent,
against delivery to the Custodian of a receipt for such Securities, provided
that the Custodian shall have taken reasonable steps to ensure prompt collection
of the payment for, or return of, such Securities by the broker or its clearing
agent, and provided further that the Custodian shall not be responsible for the
selection of or the failure or inability to perform of such broker or its
clearing agent or for any related loss arising from delivery or custody of such
Securities prior to receiving payment therefor.
(2) Other Assets Sold. Upon receipt of Instructions and except as otherwise
provided herein, the Custodian shall receive payment for and deliver other
Assets for the account of a Portfolio as provided in Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the purchase of an option or
sale of a covered call option, the Custodian shall: (a) receive and retain
confirmations or other documents, if any, evidencing the purchase or writing of
the option by a Portfolio; (b) if the transaction involves the sale of a covered
call option, deposit and maintain in a segregated account the Securities (either
physically or by book-entry in a Securities System) subject to the covered call
option written on behalf of a Portfolio; and (c) pay, release and/or transfer
such Securities, cash or other Assets in accordance with any notices or other
communications evidencing the expiration, termination or exercise of such
options which are furnished to the Custodian by the Options Clearing Corporation
(the "OCC"), the securities or options exchanges on which such options were
traded, or such other organization as may be responsible for handling such
option transactions.
(2) Upon receipt of Instructions relating to the sale of a naked option
(including stock index and commodity options), the Custodian, the Fund and the
broker-dealer shall enter into an agreement to comply with the rules of the OCC
or of any registered national securities exchange or similar organizations(s).
Pursuant to that agreement and the Fund's Instructions, the Custodian shall: (a)
receive and retain confirmations or other documents, if any, evidencing the
writing of the option; (b) deposit and maintain in a segregated account,
Securities (either physically or by book-entry in a Securities System), cash
and/or other Assets; and (c) pay, release and/or transfer such Securities, cash
or other Assets in accordance with any such agreement and with any notices or
other communications evidencing the expiration, termination or exercise of such
option which are furnished to the Custodian by the OCC, the securities or
options exchanges on which such options were traded, or such other organization
as may be responsible for handling such option transactions. The Fund and the
broker-dealer shall be responsible for determining the quality and quantity of
assets held in any segregated account established in compliance with applicable
margin maintenance requirements and the performance of other terms of any option
contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter into a futures
margin procedural agreement among the Fund, the Custodian and the designated
futures commission merchant (a "Procedural Agreement"). Under the Procedural
Agreement the Custodian shall: (a) receive and retain confirmations, if any,
evidencing the purchase or sale of a futures contract or an option on a futures
contract by a Portfolio; (b) deposit and maintain in a segregated account cash,
Securities and/or other Assets designated as initial, maintenance or variation
"margin" deposits intended to secure such Portfolio 's performance of its
obligations under any futures contracts purchased or sold, or any options on
futures contracts written by such Portfolio, in accordance with the provisions
of any Procedural Agreement designed to comply with the provisions of the
Commodity Futures Trading Commission and/or any commodity exchange or contract
market (such as the Chicago Board of Trade), or any similar organization(s),
regarding such margin deposits; and (c) release Assets from and/or transfer
Assets into such margin accounts only in accordance with any such Procedural
Agreements. The Fund and such futures commission merchant shall be responsible
for determining the type and amount of Assets held in the segregated account or
paid to the broker-dealer in compliance with applicable margin maintenance
requirements and the performance of any futures contract or option on a futures
contract in accordance with its terms.
<PAGE>
(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall establish and maintain on
its books a segregated account or accounts for and on behalf of a Portfolio,
into which account or accounts may be transferred Assets of such Portfolio,
including Securities maintained by the Custodian in a Securities System pursuant
to Paragraph (b)(3) of this Section 4, said account or accounts to be maintained
(i) for the purposes set forth in Sections 4(g), 4(h) and 4(n) and (ii) for the
purpose of compliance by such Portfolio with the procedures required by the SEC
Investment Company Act Release Number 10666 or any subsequent release or
releases relating to the maintenance of segregated accounts by registered
investment companies, or (iii) for such other purposes as may be set forth, from
time to time, in Special Instructions. The Custodian shall not be responsible
for the determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for compliance by the Fund
with required procedures noted in (ii) above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered Securities to the depositary used for such Securities by an issuer
of American Depositary Receipts or International Depositary Receipts
(hereinafter referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written evidence satisfactory
to the organization surrendering the same that the depositary has acknowledged
receipt of instructions to issue ADRs with respect to such Securities in the
name of the Custodian or a nominee of the Custodian, for delivery in accordance
with such instructions.
Upon receipt of Instructions, the Custodian shall surrender or cause to be
surrendered ADRs to the issuer thereof, against a written receipt therefor
adequately describing the ADRs surrendered and written evidence satisfactory to
the organization surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to deliver the
Securities underlying such ADRs in accordance with such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a) deliver warrants,
puts, calls, rights or similar Securities to the issuer or trustee thereof (or
to the agent of such issuer or trustee) for the purpose of exercise or sale,
provided that the new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and (b) deposit
Securities upon invitations for tenders thereof, provided that the consideration
for such Securities is to be paid or delivered to the Custodian, or the tendered
Securities are to be returned to the Custodian.
Notwithstanding any provision of this Agreement to the contrary, the
Custodian shall take all necessary action, unless otherwise directed to the
contrary in Instructions, to comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions, or similar rights of security
ownership, and shall notify the Fund of such action in writing by facsimile
transmission or in such other manner as the Fund and Custodian may agree in
writing.
The Fund agrees that if it gives an Instruction for the performance of an
act for a Portfolio on the last permissible date of a period established by any
optional offer or on the last permissible date for the performance of such act,
the Fund shall hold the Bank harmless from any adverse consequences in
connection with acting upon or failing to act upon such Instructions.
(l) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to purchase interest
bearing fixed term and call deposits (hereinafter referred to, collectively, as
"Interest Bearing Deposits") for the account of a Portfolio, the Custodian shall
purchase such Interest Bearing Deposits in the name of such Portfolio with such
banks or trust companies, including the Custodian, any Subcustodian or any
subsidiary or affiliate of the Custodian (hereinafter referred to as "Banking
Institutions"), and in such amounts as the Fund may direct pursuant to
Instructions. Such Interest Bearing Deposits may be denominated in U.S. dollars
or other currencies, as such Portfolio may determine and direct pursuant to
Instructions. The responsibilities of the Custodian to the Fund for Interest
Bearing Deposits issued by the Custodian shall be that of a U.S. bank for a
similar deposit. With respect to Interest Bearing Deposits other than those
issued by the Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from such accounts; and
(b) the Custodian shall have no duty with respect to the selection of the
Banking Institution or for the failure of such Banking Institution to pay upon
demand.
(m) Foreign Exchange Transactions.
(l) The Fund hereby appoints the Custodian as its agent in the execution of
all currency exchange transactions. The Custodian agrees to provide exchange
rate and U.S. Dollar information, in writing, to the Fund. Such information
shall be supplied by the Custodian at least by the business day prior to the
value date of the foreign exchange transaction, provided that the Custodian
receives the request for such information at least two business days prior to
the value date of the transaction.
(2) Upon receipt of Instructions, the Custodian shall settle foreign
exchange contracts or options to purchase and sell foreign currencies for spot
and future delivery on behalf of and for the account of a Portfolio with such
currency brokers or Banking Institutions as such Portfolio may determine and
direct pursuant to Instructions. If, in its Instructions, a Portfolio does not
direct the Custodian to utilize a particular currency broker or Banking
Institution, the Custodian is authorized to select such currency broker or
Banking Institution as it deems appropriate to execute the Portfolio 's foreign
currency transaction.
(3) The Fund accepts full responsibility for its use of third party foreign
exchange brokers and for execution of said foreign exchange contracts and
understands that the Fund shall be responsible for any and all costs and
interest charges which may be incurred as a result of the failure or delay of
its third party broker to deliver foreign exchange. The Custodian shall have no
responsibility or liability with respect to the selection of the currency
brokers or Banking Institutions with which a Portfolio deals or the performance
of such brokers or Banking Institutions.
(4) Notwithstanding anything to the contrary contained herein, upon receipt
of Instructions the Custodian may, in connection with a foreign exchange
contract, make free outgoing payments of cash in the form of U.S. Dollars or
foreign currency prior to receipt of confirmation of such foreign exchange
contract or confirmation that the countervalue currency completing such contract
has been delivered or received.
(5) The Custodian shall not be obligated to enter into foreign exchange
transactions as principal. However, if the Custodian has made available to a
Portfolio its services as a principal in foreign exchange transactions and
subject to any separate agreement between the parties relating to such
transactions, the Custodian shall enter into foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery on
behalf of and for the account of the Portfolio, with the Custodian as principal.
(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from the Fund, the Custodian will release
or cause to be released Securities held in custody to the pledgees designated in
such Instructions by way of pledge or hypothecation to secure loans incurred by
a Portfolio with various lenders including but not limited to UMB Bank, n.a.;
provided, however, that the Securities shall be released only upon payment to
the Custodian of the monies borrowed, except that in cases where additional
collateral is required to secure existing borrowings, further Securities may be
released or delivered, or caused to be released or delivered for that purpose
upon receipt of Instructions. Upon receipt of Instructions, the Custodian will
pay, but only from funds available for such purpose, any such loan upon
re-delivery to it of the Securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan. In lieu of delivering
collateral to a pledgee, the Custodian, on the receipt of Instructions, shall
transfer the pledged Securities to a segregated account for the benefit of the
pledgee.
(2) Upon receipt of Special Instructions, and execution of a separate
Securities Lending Agreement, the Custodian will release Securities held in
custody to the borrower designated in such Instructions and may, except as
otherwise provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of loans of
Securities held by a Securities System that are secured by cash collateral, the
Custodian's instructions to the Securities System shall require that the
Securities System deliver the Securities of the appropriate Portfolio to the
borrower thereof only upon receipt of the collateral for such borrowing. The
Custodian shall have no responsibility or liability for any loss arising from
the delivery of Securities prior to the receipt of collateral. Upon receipt of
Instructions and the loaned Securities, the Custodian will release the
collateral to the borrower.
(o) Stock Dividends, Rights, Etc.
The Custodian shall receive and collect all stock dividends, rights, and
other items of like nature and, upon receipt of Instructions, take action with
respect to the same as directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine and mechanical
matters in accordance with industry standards in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with Securities or
other property of each Portfolio except as may be otherwise provided in this
Agreement or directed from time to time by Instructions from the Fund. The
Custodian may also make payments to itself or others from the Assets for
disbursements and out-of-pocket expenses incidental to handling Securities or
other similar items relating to its duties under this Agreement, provided that
all such payments shall be accounted for to the appropriate Portfolio.
(q) Collections.
The Custodian shall (a) collect amounts due and payable to each Portfolio
with respect to portfolio Securities and other Assets; (b) promptly credit to
the account of each Portfolio all income and other payments relating to
portfolio Securities and other Assets held by the Custodian hereunder upon
Custodian's receipt of such income or payments or as otherwise agreed in writing
by the Custodian and any particular Portfolio; (c) promptly endorse and deliver
any instruments required to effect such collection; and (d) promptly execute
ownership and other certificates and affidavits for all federal, state, local
and foreign tax purposes in connection with receipt of income or other payments
with respect to portfolio Securities and other Assets, or in connection with the
transfer of such Securities or other Assets; provided, however, that with
respect to portfolio Securities registered in so-called street name, or physical
Securities with variable interest rates, the Custodian shall use its best
efforts to collect amounts due and payable to any such Portfolio. The Custodian
shall notify the Fund in writing by facsimile transmission or in such other
manner as the Fund and Custodian may agree in writing if any amount payable with
respect to portfolio Securities or other Assets owed to a Portfolio is not
received by the Custodian when due. The Custodian shall not be responsible for
the collection of amounts due and payable with respect to portfolio Securities
or other Assets that are in default.
(r) Bank Accounts.
Upon Instructions, the Custodian shall open and operate a bank account or
accounts on the books of the Custodian; provided that such bank account(s) shall
be in the name of the Custodian or a nominee thereof, for the account of one or
more Portfolio s, and shall be subject only to draft or order of the Custodian.
The responsibilities of the Custodian to any one or more such Portfolios for
deposits accepted on the Custodian's books shall be that of a U.S. bank for a
similar deposit.
<PAGE>
(s) Dividends, Distributions and Redemptions.
To enable each Portfolio to pay dividends or other distributions to
shareholders of each such Portfolio and to make payment to shareholders who have
requested repurchase or redemption of their shares of each such Portfolio
(collectively, the "Shares"), the Custodian shall release cash or Securities
insofar as available. In the case of cash, the Custodian shall, upon the receipt
of Instructions, transfer such funds by check or wire transfer to any account at
any bank or trust company designated by each such Portfolio in such
Instructions. In the case of Securities, the Custodian shall, upon the receipt
of Special Instructions, make such transfer to any entity or account designated
by each such Portfolio in such Special Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash payments received for
shares issued or sold from time to time by each Portfolio, and shall credit such
funds to the account of the appropriate Portfolio. The Custodian shall notify
the appropriate Portfolio of Custodian's receipt of cash in payment for shares
issued by such Portfolio by facsimile transmission or in such other manner as
the Fund and the Custodian shall agree. Upon receipt of Instructions, the
Custodian shall: (a) deliver all federal funds received by the Custodian in
payment for shares as may be set forth in such Instructions and at a time agreed
upon between the Custodian and such Portfolio; and (b) make federal funds
available to a Portfolio as of specified times agreed upon from time to time by
the Fund and the Custodian, in the amount of checks received in payment for
shares which are deposited to the accounts of such Fund.
(u) Proxies and Notices; Compliance with the Shareholders Communication Act
of 1985.
The Custodian shall deliver or cause to be delivered to the Fund all forms
of proxies, all notices of meetings, and any other notices or announcements
affecting or relating to Securities owned by a Portfolio that are received by
the Custodian, any Subcustodian, or any nominee of either of them, and, upon
receipt of Instructions, the Custodian shall execute and deliver, or cause such
Subcustodian or nominee to execute and deliver, such proxies or other
authorizations as may be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote upon any such
Securities, or execute any proxy to vote thereon, or give any consent or take
any other action with respect thereto.
The Custodian will not release the identity of any Portfolio to an issuer
which requests such information pursuant to the Shareholder Communications Act
of 1985 for the specific purpose of direct communications between such issuer
and any such Portfolio unless the Fund directs the Custodian otherwise in
writing.
(v) Books and Records.
The Custodian shall maintain such records relating to its activities under
this Agreement as are required to be maintained by Rule 31a-1 under the
Investment Company Act of 1940 ("the 1940 Act") and to preserve them for the
periods prescribed in Rule 31a-2 under the 1940 Act. These records shall be open
for inspection by duly authorized officers, employees or agents (including
independent public accountants) of the Fund during normal business hours of the
Custodian.
The Custodian shall provide accountings relating to its activities under
this Agreement as shall be agreed upon by the Fund and the Custodian.
(w) Opinion of Fund's Independent Certified Public Accountants.
The Custodian shall take all reasonable action as the Fund may request to
obtain from year to year favorable opinions from the Fund's independent
certified public accountants with respect to the Custodian's activities
hereunder and in connection with the preparation of the Fund's periodic reports
to the SEC and with respect to any other requirements of the SEC.
(x) Reports by Independent Certified Public Accountants.
At the request of the Fund, the Custodian shall deliver to the Fund a
written report prepared by the Custodian's independent certified public
accountants with respect to the services provided by the Custodian under this
Agreement, including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash, Securities and
other Assets, including cash, Securities and other Assets deposited and/or
maintained in a Securities System or with a Subcustodian. Such report shall be
of sufficient scope and in sufficient detail as may reasonably be required by
the Fund and as may reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay, or cause to be paid,
all bills, statements, or other obligations of a Portfolio.
5. SUBCUSTODIANS.
From time to time, in accordance with the relevant provisions of this
Agreement, the Custodian may appoint one or more Domestic Subcustodians, Foreign
Subcustodians, Special Subcustodians, or Interim Subcustodians (as each are
hereinafter defined) to act on behalf of any one or more Portfolios. A Domestic
Subcustodian, in accordance with the provisions of this Agreement, may also
appoint a Foreign Subcustodian, Special Subcustodian, or Interim Subcustodian to
act on behalf of any one or more Portfolios. For purposes of this Agreement, all
Domestic Subcustodians, Foreign Subcustodians, Special Subcustodians and Interim
Subcustodians shall be referred to collectively as "Subcustodians".
(a) Domestic Subcustodians.
The Custodian may, at any time and from time to time, appoint any bank as
defined in Section 2(a)(5) of the 1940 Act or any trust company or other entity,
any of which meet the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act for the Custodian on
behalf of any one or more Portfolios as a subcustodian for purposes of holding
Assets of such Portfolio(s) and performing other functions of the Custodian
within the United States (a "Domestic Subcustodian"). The Fund shall approve in
writing the appointment of the proposed Domestic Subcustodian; and the
Custodian's appointment of any such Domestic Subcustodian shall not be effective
without such prior written approval of the Fund. Each such duly approved
Domestic Subcustodian shall be listed on Appendix A attached hereto, as it may
be amended, from time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic Subcustodian to
appoint, any bank, trust company or other entity meeting the requirements of an
"eligible foreign custodian" under Section 17(f) of the 1940 Act and the rules
and regulations thereunder to act for the Custodian on behalf of any one or more
Portfolios as a subcustodian or sub-subcustodian (if appointed by a Domestic
Subcustodian) for purposes of holding Assets of the Portfolio(s) and performing
other functions of the Custodian in countries other than the United States of
America (hereinafter referred to as a "Foreign Subcustodian" in the context of
either a subcustodian or a sub-subcustodian); provided that the Custodian shall
have obtained written confirmation from the Fund of the approval of the Board of
Directors or other governing body of the Fund (which approval may be withheld in
the sole discretion of such Board of Directors or other governing body or
entity) with respect to (i) the identity of any proposed Foreign Subcustodian
(including branch designation), (ii) the country or countries in which, and the
securities depositories or clearing agencies (hereinafter "Securities
Depositories and Clearing Agencies"), if any, through which, the Custodian or
any proposed Foreign Subcustodian is authorized to hold Securities and other
Assets of a Portfolio, and (iii) the form and terms of the subcustodian
agreement to be entered into with such proposed Foreign Subcustodian. Each such
duly approved Foreign Subcustodian and the countries where and the Securities
Depositories and Clearing Agencies through which they may hold Securities and
other Assets of the Portfolio(s) shall be listed on Appendix A attached hereto,
as it may be amended, from time to time. The Fund shall be responsible for
informing the Custodian sufficiently in advance of a proposed investment which
is to be held in a country in which no Foreign Subcustodian is authorized to
act, in order that there shall be sufficient time for the Custodian, or any
Domestic Subcustodian, to effect the appropriate arrangements with a proposed
Foreign Subcustodian, including obtaining approval as provided in this Section
5(b). In connection with the appointment of any Foreign Subcustodian, the
Custodian shall, or shall cause the Domestic Subcustodian to, enter into a
subcustodian agreement with the Foreign Subcustodian in form and substance
approved by the Fund. The Custodian shall not consent to the amendment of, and
shall cause any Domestic Subcustodian not to consent to the amendment of, any
agreement entered into with a Foreign Subcustodian, which materially affects any
Portfolio's rights under such agreement, except upon prior written approval of
the Fund pursuant to Special Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that a Portfolio shall invest
in an Asset to be held in a country in which no Foreign Subcustodian is
authorized to act, the Custodian shall notify the Fund in writing by facsimile
transmission or in such other manner as the Fund and the Custodian shall agree
in writing of the unavailability of an approved Foreign Subcustodian in such
country; and upon the receipt of Special Instructions from the Fund, the
Custodian shall, or shall cause its Domestic Subcustodian to, appoint or approve
an entity (referred to herein as an "Interim Subcustodian") designated in such
Special Instructions to hold such Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian shall, on behalf of a
Portfolio, appoint one or more banks, trust companies or other entities
designated in such Special Instructions to act for the Custodian on behalf of
such Portfolio as a subcustodian for purposes of: (i) effecting third-party
repurchase transactions with banks, brokers, dealers or other entities through
the use of a common custodian or subcustodian; (ii) providing depository and
clearing agency services with respect to certain variable rate demand note
Securities, (iii) providing depository and clearing agency services with respect
to dollar denominated Securities, and (iv) effecting any other transactions
designated by such Portfolio in such Special Instructions. Each such designated
subcustodian (hereinafter referred to as a "Special Subcustodian") shall be
listed on Appendix A attached hereto, as it may be amended from time to time. In
connection with the appointment of any Special Subcustodian, the Custodian shall
enter into a subcustodian agreement with the Special Subcustodian in form and
substance approved by the Fund in Special Instructions. The Custodian shall not
amend any subcustodian agreement entered into with a Special Subcustodian, or
waive any rights under such agreement, except upon prior approval pursuant to
Special Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon notification to the
Fund, terminate any Subcustodian of a Portfolio in accordance with the
termination provisions under the applicable subcustodian agreement, and upon the
receipt of Special Instructions, the Custodian will terminate any Subcustodian
in accordance with the termination provisions under the applicable subcustodian
agreement.
(f) Certification Regarding Foreign Subcustodians.
Upon request of the Fund, the Custodian shall deliver to the Fund a
certificate stating: (i) the identity of each Foreign Subcustodian then acting
on behalf of the Custodian; (ii) the countries in which and the Securities
Depositories and Clearing Agencies through which each such Foreign Subcustodian
is then holding cash, Securities and other Assets of a Portfolio; and (iii) such
other information as may be requested by the Fund, and as the Custodian shall be
reasonably able to obtain, to evidence compliance with rules and regulations
under the 1940 Act.
<PAGE>
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to the Fund for all losses, damages and
reasonable costs and expenses suffered or incurred by a Portfolio resulting from
the negligence or willful misfeasance of the Custodian; provided, however, in no
event shall the Custodian be liable for special, indirect or consequential
damages arising under or in connection with this Agreement.
(b) Actions Prohibited by Applicable Law, Events Beyond Custodian's
Control, Sovereign Risk, Etc.
In no event shall the Custodian or any Domestic Subcustodian incur
liability hereunder (i) if the Custodian or any Subcustodian or Securities
System, or any subcustodian, Securities System, Securities Depository or
Clearing Agency utilized by the Custodian or any such Subcustodian, or any
nominee of the Custodian or any Subcustodian (individually, a "Person") is
prevented, forbidden or delayed from performing, or omits to perform, any act or
thing which this Agreement provides shall be performed or omitted to be
performed, by reason of: (a) any provision of any present or future law or
regulation or order of the United States of America, or any state thereof, or of
any foreign country, or political subdivision thereof or of any court of
competent jurisdiction (and neither the Custodian nor any other Person shall be
obligated to take any action contrary thereto); or (b) any event beyond the
control of the Custodian or other Person such as armed conflict, riots, strikes,
lockouts, labor disputes, equipment or transmission failures, natural disasters,
or failure of the mails, transportation, communications or power supply; or (ii)
for any loss, damage, cost or expense resulting from "Sovereign Risk." A
"Sovereign Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting a Portfolio's Assets; or acts of armed
conflict, terrorism, insurrection or revolution; or any other act or event
beyond the Custodian's or such other Person's control.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian shall have any
liability in respect of any loss, damage or expense suffered by a Portfolio,
insofar as such loss, damage or expense arises from the performance of the
Custodian or any Domestic Subcustodian in reliance upon records that were
maintained for such Portfolio by entities other than the Custodian or any
Domestic Subcustodian prior to the Custodian's employment hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be entitled to receive
and act upon advice of counsel of its own choosing on all matters. The Custodian
and all Domestic Subcustodians shall be without liability for any actions taken
or omitted in good faith pursuant to the advice of counsel.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely upon the advice of the
Fund and upon statements of the Fund's accountants and other persons believed by
it in good faith to be expert in matters upon which they are consulted, and
neither the Custodian nor any Domestic Subcustodian shall be liable for any
actions taken or omitted, in good faith, pursuant to such advice or statements.
<PAGE>
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be fully protected and
indemnified in acting as a custodian hereunder upon any Resolutions of the Board
of Directors or Trustees, Instructions, Special Instructions, advice, notice,
request, consent, certificate, instrument or paper appearing to it to be genuine
and to have been properly executed and shall, unless otherwise specifically
provided herein, be entitled to receive as conclusive proof of any fact or
matter required to be ascertained from the Fund hereunder a certificate signed
by any officer of the Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liability.
Without limiting the generality of any other provisions hereof, neither the
Custodian nor any Domestic Subcustodian shall be under any duty or obligation to
inquire into, nor be liable for:
(i) the validity of the issue of any Securities purchased by or for any
Portfolio, the legality of the purchase thereof or evidence of ownership
required to be received by any such Portfolio, or the propriety of the decision
to purchase or amount paid therefor;
(ii) the legality of the sale of any Securities by or for any Portfolio, or
the propriety of the amount for which the same were sold; or
(iii) any other expenditures, encumbrances of Securities, borrowings or
similar actions with respect to any Portfolio's Assets;
and may, until notified to the contrary, presume that all Instructions or
Special Instructions received by it are not in conflict with or in any way
contrary to any provisions of the Fund's Articles of Incorporation or By-Laws or
votes or proceedings of the shareholders, trustees, partners or directors of the
Fund, or the Fund's currently effective Registration Statement on file with the
SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians
The Custodian shall be liable for the acts or omissions of any Domestic
Subcustodian to the same extent as if such actions or omissions were performed
by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign Subcustodians.
The Custodian shall be liable to the Fund for any loss or damage to a
Portfolio caused by or resulting from the acts or omissions of any Foreign
Subcustodian to the extent that, under the terms set forth in the subcustodian
agreement between the Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in accordance with
the standard of conduct imposed under such subcustodian agreement and the
Custodian or Domestic Subcustodian recovers from the Foreign Subcustodian under
the applicable subcustodian agreement.
(c) Securities Systems, Interim Subcustodians, Special Subcustodians,
Securities Depositories and Clearing Agencies.
The Custodian shall not be liable to the Fund for any loss, damage or
expense suffered or incurred by a Portfolio resulting from or occasioned by the
actions or omissions of a Securities System, Interim Subcustodian, Special
Subcustodian, or Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the negligence or willful
misfeasance of the Custodian.
<PAGE>
(d) Defaults or Insolvency's of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage or expense suffered
or incurred by the Fund resulting from or occasioned by the actions, omissions,
neglects, defaults or insolvency of any broker, bank, trust company or any other
person with whom the Custodian may deal (other than any of such entities acting
as a Subcustodian, Securities System or Securities Depository and Clearing
Agency, for whose actions the liability of the Custodian is set out elsewhere in
this Agreement) unless such loss, damage or expense is caused by, or results
from, the negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
The Adviser agrees to reimburse the Custodian for all out-of-pocket
expenses incurred by the Custodian in connection with this Agreement, but
excluding salaries and usual overhead expenses.
8. INDEMNIFICATION.
(a) Indemnification by Fund.
Subject to the limitations set forth in this Agreement, the Fund agrees to
indemnify and hold harmless the Custodian and its nominees from all losses,
damages and expenses (including attorneys' fees) suffered or incurred by the
Custodian or its nominee caused by or arising from actions taken by the
Custodian, its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to, any
indemnification obligations undertaken by the Custodian under any relevant
subcustodian agreement; provided, however, that such indemnity shall not apply
to the extent the Custodian is liable under Sections 6 or 7 hereof.
If the Fund requires the Custodian to take any action with respect to
Securities of a portfolio, which action involves the payment of money or which
may, in the opinion of the Custodian, result in the Custodian or its nominee
assigned to the Portfolio being liable for the payment of money or incurring
liability of some other form, the Fund, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement and in addition to
the obligations provided in Sections 6 and 7, the Custodian agrees to indemnify
and hold harmless the Fund from all losses, damages and expenses suffered or
incurred by any Portfolio caused by the negligence or willful misfeasance of the
Custodian.
9. ADVANCES.
In the event that, pursuant to Instructions, the Custodian or any
Subcustodian, Securities System, or Securities Depository or Clearing Agency
acting either directly or indirectly under agreement with the Custodian (each of
which for purposes of this Section 9 shall be referred to as "Custodian"), makes
any payment or transfer of funds on behalf of any Portfolio as to which there
would be, at the close of business on the date of such payment or transfer,
insufficient funds held by the Custodian on behalf of any such Portfolio, the
Custodian may, in its discretion without further Instructions, provide an
advance ("Advance") to any such Portfolio in an amount sufficient to allow the
completion of the transaction by reason of which such payment or transfer of
funds is to be made. In addition, in the event the Custodian is directed by
Instructions to make any payment or transfer of funds on behalf of any Portfolio
as to which it is subsequently determined that such Portfolio has overdrawn its
cash account with the Custodian as of the close of business on the date of such
payment or transfer, said overdraft shall constitute an Advance. Any Advance
shall be payable by the Portfolio on behalf of which the Advance was made on
demand by Custodian, unless otherwise agreed by the Fund and the Custodian, and
shall accrue interest from the date of the Advance to the date of payment by
such Portfolio to the Custodian at a rate agreed upon in writing from time to
time by the Custodian and the Fund. It is understood that any transaction in
respect of which the Custodian shall have made an Advance, including but not
limited to a foreign exchange contract or transaction in respect of which the
Custodian is not acting as a principal, is for the account of and at the risk of
the Portfolio on behalf of which the Advance was made, and not, by reason of
such Advance, deemed to be a transaction undertaken by the Custodian for its own
account and risk. The Custodian and the Fund acknowledge that the purpose of
Advances is to finance temporarily the purchase or sale of Securities for prompt
delivery in accordance with the settlement terms of such transactions or to meet
emergency expenses not reasonably foreseeable by a Portfolio. The Custodian
shall promptly notify the Fund of any Advance. Such notification shall be sent
by facsimile transmission or in such other manner as the Fund and the Custodian
may agree.
10. LIENS.
The Bank shall have a lien on the Property in the Custody Account to secure
payment of fees and expenses for the services rendered under this Agreement. If
the Bank advances cash or securities to the Fund for any purpose or in the event
that the Bank or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the performance
of its duties hereunder, except such as may arise from its or its nominee's
negligent action, negligent failure to act or willful misconduct, any Property
at any time held for the Custody Account shall be security therefor and the Fund
hereby grants a security interest therein to the Bank. The Fund shall promptly
reimburse the Bank for any such advance of cash or securities or any such taxes,
charges, expenses, assessments, claims or liabilities upon request for payment,
but should the Fund fail to so reimburse the Bank, the Bank shall be entitled to
dispose of such Property to the extent necessary to obtain reimbursement. The
Bank shall be entitled to debit any account of the Fund with the Bank including,
without limitation, the Custody Account, in connection with any such advance and
any interest on such advance as the Bank deems reasonable.
11. COMPENSATION.
The Adviser will pay to the Custodian such compensation as is agreed to in
writing by the Custodian, the Adviser and the Fund from time to time. Such
compensation, together with all amounts for which the Custodian is to be
reimbursed in accordance with Section 7(e), shall be billed to the Adviser and
paid in cash to the Custodian. In the event that the Adviser shall be more than
30 days delinquent in the payment of compensation to the Custodian, the
Custodian shall be entitled to deduct such compensation, on a pro rata basis,
from the assets of each Portfolio.
12. POWERS OF ATTORNEY.
Upon request, the Fund shall deliver to the Custodian such proxies, powers
of attorney or other instruments as may be reasonable and necessary or desirable
in connection with the performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable subcustodian
agreement.
13. TERMINATION AND ASSIGNMENT.
The Fund or the Custodian may terminate this Agreement by notice in
writing, delivered or mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date upon which such
termination shall take effect. Upon termination of this Agreement, the Adviser
shall pay to the Custodian such fees as may be due the Custodian hereunder as
well as its reimbursable disbursements, costs and expenses paid or incurred. In
the event that the Adviser shall be more than 30 days delinquent in the payment
of such fees to the Custodian, the Custodian shall be entitled to deduct such
fees, on a pro rata basis, from the assets of each Portfolio. Upon termination
of this Agreement, the Custodian shall deliver, at the terminating party's
expense, all Assets held by it hereunder to the Fund or as otherwise designated
by the Fund by Special Instructions. Upon such delivery, the Custodian shall
have no further obligations or liabilities under this Agreement except as to the
final resolution of matters relating to activity occurring prior to the
effective date of termination.
This Agreement may not be assigned by the Custodian, the Adviser or the
Fund without the respective consent of the other, duly authorized by a
resolution by its Board of Directors or Trustees.
14. ADDITIONAL PORTFOLIOS.
Additional Portfolios may become subject to this Agreement, or existing
Portfolios may be deleted from this Agreement, after the date hereof by an
instrument in writing to such effect signed by the Fund and the Custodian. If a
Portfolio or Portfolios shall become subject to or deleted from this Agreement,
there shall be delivered to each party an Appendix B or an amended Appendix B,
signed by the Fund and the Custodian, deleting or adding such Portfolio or
Portfolios, as the case may be. The termination of this Agreement as to less
than all of the Portfolios shall not affect the obligations of the Custodian and
the Fund hereunder as set forth on the signature page hereto and in Appendix B
as revised from time to time.
15. NOTICES.
As to the Fund, notices, requests, instructions and other writings
delivered to Electric City Funds, Inc., One North Church Street, Schenectady, NY
12305, Attn: James W, Denney, postage prepaid, or to such other address as the
Fund may have designated to the Custodian in writing, shall be deemed to have
been properly delivered or given to the Fund.
Notices, requests, instructions and other writings delivered to the
Securities Administration department of the Custodian at its office at 928 Grand
Blvd., 10th Floor, Attn: Bonnie Johnson, Kansas City, Missouri 64106, or mailed
postage prepaid, to the Custodian's Securities Administration department, Post
Office Box 226, Attn: Bonnie Johnson, Kansas City, Missouri 64141, or to such
other addresses as the Custodian may have designated to each Fund in writing,
shall be deemed to have been properly delivered or given to the Custodian
hereunder; provided, however, that procedures for the delivery of Instructions
and Special Instructions shall be governed by Section 2(c) hereof.
16. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the State of Missouri and
shall be governed by the laws of such state.
(b) All of the terms and provisions of this Agreement shall be binding
upon, and inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto.
(c) No provisions of this Agreement may be amended, modified or waived, in
any manner except in writing, properly executed by both parties hereto;
provided, however, Appendix A may be amended from time to time as Domestic
Subcustodians, Foreign Subcustodians, Special Subcustodians, and Securities
Depositories and Clearing Agencies are approved or terminated according to the
terms of this Agreement.
(d) 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.
(e) This Agreement shall be effective as of the date of execution hereof.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
(g) The following terms are defined terms within the meaning of this
Agreement, and the definitions thereof are found in the following sections of
the Agreement:
Term Section
- ---- -------
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2(b)
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2(c)(1)
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liens 10
OCC 4(g)(1)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2(a)
Securities Depositories and Clearing Agencies 5(b)
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2(c)(2)
Special Subcustodian 5(d)
Subcustodian 5
1940 Act 4(v)
(h) If any part, term or provision of this Agreement is held to be illegal,
in conflict with any law or otherwise invalid by any court of competent
jurisdiction, the remaining portion or portions shall be considered severable
and shall not be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
(i) This Agreement constitutes the entire understanding and agreement of
the parties hereto with respect to the subject matter hereof, and accordingly
supersedes, as of the effective date of this Agreement, any custodian agreement
heretofore in effect between the Fund and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this Custody Agreement
to be executed by their respective duly authorized officers.
ELECTRIC CITY FUNDS, INC.
Attest: By:
- ---------------------------------
----------------------------------------
Name: James W. Denney
----------------------------------------
Title: President
----------------------------------------
Date:
----------------------------------------
UMB BANK, N.A.
Attest: By:
- ---------------------------------
----------------------------------------
Name: Ralph R. Santoro
----------------------------------------
Title: Senior Vice President
----------------------------------------
Date:
----------------------------------------
MOHAWK ASSET MANAGEMENT, INC.
Attest: By:
- ---------------------------------
----------------------------------------
Name: James W. Denney
----------------------------------------
Title: President
----------------------------------------
Date:
----------------------------------------
<PAGE>
APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
Brown Brothers Harriman & Co. (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
Euroclear
ELECTRIC CITY FUNDS, INC. UMB BANK, N.A.
By: By:
- ----------------------------------- ----------------------------------------
Name: James W. Denney Name: Ralph R. Santoro
- ----------------------------------- ----------------------------------------
Title: President Title: Senior Vice President
- ----------------------------------- ----------------------------------------
Date: Date:
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<PAGE>
APPENDIX B
CUSTODY AGREEMENT
The following Portfolios are hereby madesubject to the Custody Agreement
dated December 15th , 1999 , with UMB Bank, n.a. ("Custodian"), Mohawk Asset
Management, Inc. and Electric City Funds, Inc., and agree to be bound by all the
terms and conditions contained in said Agreement:
The Electric City Value Fund
ELECTRIC CITY FUNDS, INC.
ELECTRIC CITY FUNDS, INC.
Attest: By:
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Name: James W. Denney
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Title: President
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Date:
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UMB BANK, N.A.
Attest: By:
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Name: Ralph R. Santoro
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Title: Senior Vice President
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Date:
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Exhibit 23H(2) Investment Company Services Agreement
INVESTMENT COMPANY SERVICES AGREEMENT
FOR
ELECTRIC CITY FUNDS, INC.
THIS AGREEMENT, dated as of the 15th day of December, 1999, is made by and
between Mohawk Asset Management, Inc., a Delaware corporation ("Adviser"),
Electric City Funds, Inc. (the "Fund"), a corporation duly organized and
existing under the laws of the State of Maryland and operating as an open-end,
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"), and Mutual Shareholder Services, LLC ("MSS") a
limited liability company duly organized under the laws of the State of Ohio
(collectively, the "Parties").
Recitals:
WHEREAS, The Fund is authorized by its Articles of Incorporation and
by-laws to issue separate series of shares representing interests in separate
investment portfolios (the "Portfolios"), and
WHEREAS, The Fund has authorized the issuance of the Portfolios which are
identified on Schedule "C" attached hereto, which Schedule "C" may be amended
from time to time by mutual agreement of the Fund, Adviser and MSS, and;
WHEREAS, Adviser and the Fund have entered into a previous contract wherein
Adviser is responsible for providing certain services to the Fund, and;
WHEREAS, Adviser is authorized, pursuant to its agreement with the Fund, to
enter into contracts with third parties and engage such parties to provide
services to the Fund on Adviser's behalf, and;
WHEREAS, the Parties desire to enter into an agreement whereby MSS will
provide the services to the Fund as specified herein and set forth in particular
in Schedule "A", which is attached hereto and made a part hereof;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange for good and valuable consideration, the
sufficiency and receipt of which is hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
<PAGE>
GENERAL PROVISIONS
SECTION 1, APPOINTMENT.
Adviser and the Fund hereby appoint MSS as servicing agent for the Fund and
MSS hereby accepts such appointment. In order that MSS may perform its duties
under the terms of this Agreement, the Board of Directors of the Fund shall
direct the officers, Adviser, legal counsel, independent accountants and
custodian of the Fund to cooperate fully with MSS and, upon request of MSS, to
provide such information, documents and advice relating to the Fund which MSS
requires to execute its responsibilities hereunder. In connection with its
duties, MSS shall be entitled to rely, and will be held harmless by the Fund
when acting in reasonable reliance, upon any instruction, advice or document
relating to the Fund as provided to MSS by any of the aforementioned persons on
behalf of the Fund. All fees charged by any such persons acting on behalf of the
Fund will be deemed an expense of the Fund.
Any services performed by MSS under this Agreement will conform to the
requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended, and
any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Fund's Articles of Incorporation and by-laws as
amended from time to time and delivered to MSS;
(d) any policies and determinations of the Board of Directors of the Fund which
are communicated to MSS, and
(e) the policies of the Fund as reflected in the Fund's Registration Statement
as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent MSS or any officer thereof from
providing the same or comparable services for or with any other person, firm or
corporation. While the services supplied to the Fund may be different than those
supplied to other persons, firms or corporations, MSS will provide the Fund
equitable treatment in supplying services. The Fund recognizes that it will not
receive preferential treatment from MSS as compared with the treatment provided
to other MSS clients.
SECTION 2. DUTIES AND OBLIGATIONS OF MSS.
Subject to the provisions of this Agreement, MSS will provide to the Fund
the specific services as set forth in Schedule "A" attached hereto.
<PAGE>
SECTION 3. DEFINITIONS.
For purposes of this Agreement:
"Certificate" will mean any notice, instruction, or other instrument in writing,
authorized or required by this Agreement. To be effective, such Certificate
shall be given to and received by the custodian and shall be signed on behalf of
the Fund by any two of its designated officers, and the term Certificate shall
also include Instructions communicated to the custodian by MSS.
"Custodian" will refer to that agent which provides safekeeping of the assets of
the Fund.
"Instructions" will mean communications containing instructions transmitted by
electronic or telecommunications media including, but not limited to, Industry
Standardization for Institutional Trade Communications, computer-to-computer
interface, dedicated transmission line, facsimile transmission (which may be
signed by an officer or unsigned) and tested telex.
"Oral Instruction" will mean an authorization, instruction, approval, item or
set of data, or information of any kind transmitted to MSS in person or by
telephone, telegram, telecopy or other mechanical or documentary means lacking
original signature, by a person or persons reasonably identified to MSS to be a
person or persons so authorized by a resolution of the Board of Trustees of the
Fund or an officer or director of Adviser to give Oral Instructions to MSS on
behalf of the Fund.
"Shareholders" will mean the registered owners of the shares of the Fund in
accordance with the share registry records maintained by MSS for the Fund.
"Shares" will mean the issued and outstanding shares of the Fund.
"Signature Guarantee" will mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Eligible guarantor institutions
include banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
Broker-dealers guaranteeing signatures must be members of a clearing corporation
or maintain net capital of at least $100,000. Signature guarantees will be
accepted from any eligible guarantor institution that participates in a
signature guarantee program.
"Written Instruction" will mean an authorization, instruction, approval, item or
set of data or information of any kind transmitted to MSS in an original writing
containing an original signature or a copy of such document transmitted by
telecopy including transmission of such signature reasonably identified to MSS
to be the signature of a person or persons so authorized by a resolution of the
Board of Trustees of the Fund, or so identified by the Fund or by ADVISER to
give Written Instructions to MSS on behalf of the Fund.
Concerning Oral and Written Instructions For all purposes under this Agreement,
MSS is authorized to act upon receipt of the first of any Written or Oral
Instruction it receives from the Fund or its agents. In cases where the first
instruction is an Oral Instruction that is not in the form of a document or
written record, a confirmatory Written Instruction or Oral Instruction in the
form of a document or written record shall be delivered. In cases where MSS
receives an Instruction, whether Written or Oral, to enter a portfolio
transaction onto the Fund's records, the Fund shall cause the broker/dealer
executing such transaction to send a written confirmation to the Custodian.
MSS shall be entitled to rely on the first Instruction received. For any
act or omission undertaken by MSS in compliance therewith, MSS shall be free of
liability and fully indemnified and held harmless by the Fund and Adviser
provided however, that in the event a Written or Oral Instruction received by
MSS is countermanded by a subsequent Written or Oral Instruction received prior
to MSS acting upon such countermanded Instruction, MSS shall act upon such
subsequent Written or Oral Instruction. The sole obligation of MSS with respect
to any follow-up or confirmatory Written Instruction or Oral Instruction in
documentary or written form shall be to make reasonable efforts to detect any
discrepancy between the original Instruction and such confirmation and to report
such discrepancy to the Fund. The Fund shall be responsible for, and bear the
expense of, taking any action, including any reprocessing, necessary to correct
any discrepancy or error. To the extent such action requires MSS to act, the
Fund or Adviser shall give MSS specific Written Instruction as to the action
required.
The Fund will file with MSS a certified copy of each resolution of the
Fund's Board of Trustees authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
SECTION 4. INDEMNIFICATION.
(a) MSS, its directors, officers, employees, shareholders, and agents will be
liable for any loss suffered by the Fund resulting from the willful
misfeasance, bad faith, negligence or reckless disregard on the part of MSS
in the performance of its obligations and duties under this Agreement.
(b) Any director, officer, employee, shareholder or agent of MSS who may be or
become an officer, director, employee or agent of the Fund or Adviser will
be deemed, when rendering services to the Fund or acting on any business of
the Fund (other than services or business in connection with MSS's duties
hereunder), to be rendering such services to or acting solely for the Fund
and not as a director, officer, employee, shareholder or agent of, or under
the control or direction of MSS even though such person may be receiving
compensation from MSS.
(c) The Fund agrees to indemnify and hold MSS harmless, together with its
directors officers, employees, shareholders and agents from and against any
and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which MSS may sustain or
incur or which may be asserted against MSS by any person by reason of or as
a result of:
(i) any action taken or omitted to be taken by MSS except claims, demands,
expenses and liabilities arising from willful misfeasance, bad faith,
negligence or reckless disregard on the part of MSS in the performance
of its obligations and duties under this Agreement; or
(ii) any action taken or omitted to be taken by MSS in reliance upon any
Certificate, instrument, order or stock certificate or other document
reasonably believed by MSS to be genuine and signed, countersigned or
executed by any duly authorized person, upon the Oral Instructions or
Written Instructions of an authorized person of the Fund or Adviser,
or upon the written opinion of legal counsel for the Fund, Adviser or
MSS ;or
(iii)the offer or sale of shares of the Fund to any person, natural or
otherwise, which is in violation of any state or federal law.
(d) Adviser agrees to indemnify and hold MSS harmless, together with its
directors officers, employees, shareholders and agents from and against any
and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which MSS may sustain or
incur or which may be asserted against MSS by any person by reason of or as
a result of:
(1) any action taken or omitted to be taken by MSS except claims, demands,
expenses and liabilities arising from willful misfeasance, bad faith,
negligence or reckless disregard on the part of MSS in the performance
of its obligations and duties under this Agreement; or
(2) any action taken or omitted to be taken by MSS in reliance upon any
Certificate, instrument, order or stock certificate or other document
reasonably believed by MSS to be genuine and signed, countersigned or
executed by any duly authorized person, upon the Oral Instructions or
Written Instructions of an authorized person of the Fund or Adviser,
or upon the Written opinion of legal counsel for the Fund, Adviser or
MSS ;or
(3) the offer or sale of shares of the Fund to any person, natural or
otherwise, which is in violation of any state or federal law.
If a claim is made against MSS as to which MSS may seek indemnity under
this Section, MSS will notify the Fund or Adviser promptly after receipt of any
written assertion of such claim threatening to institute an action or proceeding
with respect thereto and will notify the Fund or Adviser promptly of any action
commenced against MSS within ten (10) days after MSS has been served with a
summons or other legal process. Failure to notify the Fund or Adviser will not,
however, relieve the Fund or Adviser from any liability, which either may have
on account of the indemnity under this Section so long as the Fund or Adviser
has not been prejudiced in any material respect by such failure.
The Parties will cooperate in the control of the defense of any action,
suit or proceeding in which MSS is involved and for which indemnity is being
sought from the Fund or Adviser to MSS. The Fund may negotiate the settlement of
any action; suit or proceeding, subject to MSS's approval, which approval will
not be unreasonably withheld by MSS. MSS reserves the right, but not the
obligation, to participate in the defense or settlement of a claim, action or
proceeding by use of its own counsel. Costs or expenses incurred by MSS in
connection with, or as a result of such participation, will be borne solely by
the Fund if:
(i) MSS has received an opinion of counsel from counsel to the Fund
stating that the use of counsel to the Fund by MSS would present an
impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both MSS and the Fund, and legal counsel to MSS has reasonably
concluded that there are legal defenses available to it which are
different from or additional to those available to the Fund or which
may be adverse to or inconsistent with defenses available to the Fund
(in which case the Fund will not have the right to direct the defense
of such action on behalf of MSS, or
(iii)the Fund authorizes MSS to employ separate counsel at the expense of
the Fund.
(e) The terms of this Section will survive the termination of this Agreement
<PAGE>
Section 5. Representations and Warranties.
(a) MSS represents and warrants that:
(i) it is a limited liability company duly organized and existing and in
good standing under the laws of Ohio;
(ii) it is empowered under applicable laws and by its Certificate of
Organization and by-laws to enter into and perform this Agreement;
(iii)all requisite corporate proceedings have been taken to authorize MSS
to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities, personnel
and equipment required to fully perform its duties and obligations
hereunder;
(v) no legal or administrative proceedings have been instituted or
threatened which would impair MSS's ability to perform its duties and
obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of MSS
or any law or regulation applicable to it;
(vii)it is registered as a transfer agent under Section 17A(c)(2) of the
Exchange Act
(viii) this Agreement has been duly authorized by MSS and, when executed
and delivered, will constitute a valid, legal and binding obligation
of MSS, enforceable in accordance with its terms.
(b) The Fund represents and warrants that:
(i) it is a corporation duly organized and existing and in good standing
under the laws of the State of Maryland;
(ii) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(iii)all requisite proceedings have been taken to authorize the Fund to
enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its duties
and obligations under this Agreement;
(v) the Fund's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligations of the Fund, or any law or regulation applicable to
either;
(vi) the Shares are properly registered or otherwise authorized for
issuance and sale;
(vii)this Agreement has been duly authorized by the Fund and, when
executed and delivered, will constitute a valid, legal and binding
obligation of the Fund, enforceable in accordance with its terms.
(c) Adviser represents and warrants that:
(ix) it is a corporation duly organized and existing and in good standing
under the laws of Maryland;
(x) it is empowered under applicable laws and by its Articles of
Incorporation and by-laws to enter into and perform this Agreement;
(xi) all requisite corporate proceedings have been taken to authorize MSS
to enter into and perform this Agreement;
(xii)it has and will continue to have access to the facilities, personnel
and equipment required to fully perform its duties and obligations
hereunder;
(xiii) no legal or administrative proceedings have been instituted or
threatened which would impair Adviser's ability to perform its duties
and obligations under this Agreement;
(xiv)its entrance into this Agreement shall not cause a material breach or
be in material conflict with any other agreement or obligation of
Adviser or any law or regulation applicable to it;
(xv) this Agreement has been duly authorized by Adviser and, when executed
and delivered, will constitute a valid, legal and binding obligation
of Adviser, enforceable in accordance with its terms.
(d) Delivery of Documents
The Fund will furnish or cause to be furnished to MSS the following
documents (i) current Prospectus and Statement of Additional Information; (ii)
most recent Annual Report, when it becomes available; (iii) most recent
Semi-Annual Report for registered investment companies on Form N-SAR, when it
becomes available; (iv) certified copies of resolutions of the Fund's Board of
Directors/Trustees authorizing the execution of Written Instructions or the
transmittal of Oral Instructions and those persons authorized to give such
Instructions.
(e) Record Keeping and Other Information
MSS will create and maintain all records required of it pursuant to its
duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Fund and will be
available during regular business hours for inspection, copying, and use by the
Fund. Where applicable, such records will be maintained by MSS for the periods
and in the places required by Rule 31a-2 under the Act. Upon termination of this
Agreement, MSS will deliver all such records to the Fund or such other person or
persons as the Fund may designate.
<PAGE>
In case of any request or demand for the inspection of the Share records of the
Fund, MSS shall notify the Fund and secure instructions permitting or refusing
such inspection. MSS may, however, exhibit such records to any person in any
case where MSS is advised by its counsel in writing that it may be held liable
for failure to do so.
SECTION 6. COMPENSATION.
Adviser agrees to pay MSS compensation for its services, and to reimburse
it for expenses at the rates, times, manner and amounts as set forth in Schedule
"B" attached hereto and incorporated herein by reference. Adviser further agrees
to pay MSS compensation as may be set forth in any amendments to such Schedule
"B" when agreed upon in writing by the Parties. In addition, Adviser agrees to
reimburse MSS for any out-of-pocket expenses paid by MSS on behalf of the Fund
within five (5) calendar days of Adviser's receipt of an invoice therefor.
For the purpose of determining fees payable to MSS, the value of the Fund's
net assets will be computed at the times and in the manner specified in the
Fund's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Fund seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to this Agreement specifying the additional services
and corresponding compensation will be executed by the Parties.
In the event that Adviser is more that thirty (30) days delinquent in its
payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the
Adviser or fund), this Agreement may be terminated upon thirty (30) days written
notice to the Fund and Adviser by MSS. The Adviser and/or Fund must notify MSS
in writing of any contested amounts within five (5) calendar days of receipt of
a billing for such amounts. Disputed amounts are not due and payable while they
are being disputed.
SECTION 7. DAYS OF OPERATION.
Nothing contained in this Agreement is intended to or will require MSS in
any capacity hereunder, to perform any functions or duties on any holiday, day
of special observance or another day on which the New York Stock Exchange
("NYSE") is closed. Functions or duties normally scheduled to be performed on
such days will be performed on the next succeeding business day on which the
NYSE is open. Notwithstanding the foregoing, MSS will compute the net asset
value of the Fund on each day required pursuant to Rule 22c-1 under the Act.
<PAGE>
SECTION 8. ACTS OF GOD, ETC.
MSS will not be liable or responsible for delays or errors caused by acts
of God or by reason of circumstances beyond its control, including, acts of
civil or military authority, national emergencies, labor difficulties,
mechanical breakdown, insurrection, war, riots, or failure or unavailability of
transportation, communication, or power supply, fire, flood or other
catastrophe.
In the event of equipment failures beyond MSS's control, MSS will, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions, but will have no liability with respect thereto. The foregoing
obligation will not extend to computer terminals located outside of premises
maintained by MSS wherein MSS has entered into and maintains in effect
agreements making reasonable provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is available.
SECTION 9. INSPECTION AND OWNERSHIP OF RECORDS.
In the event of a request or demand for inspection of the records of the
Fund, MSS will use its best efforts to notify the Fund and to secure
instructions from the Fund permitting or refusing such inspection. MSS may,
however, make such records available for inspection to any person in any case
where it is advised in writing by its counsel that it may be held liable for
failure to do so after notice to the Fund.
MSS recognizes that the records it maintains for the Fund are the property
of the Fund and such records be surrendered to the Fund upon written notice to
MSS as outlined under Section 10(c) below. The Adviser is responsible for the
payment in advance of any fees owed to MSS. MSS agrees to maintain the records
and all other information of the Fund in a confidential manner and will not use
such information for any purpose other that the performance of MSS's duties
under this Agreement.
SECTION 10. DURATION AND TERMINATION.
(a) The initial term of this Agreement will be for a period of one (1) year,
commencing on the date hereinabove first written (the "Effective Date") and
will continue thereafter subject to termination by either party as set
forth in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be fixed
for the initial term commencing on the Effective Date of this Agreement and
will continue thereafter subject to their review and any adjustment.
(c) After the initial term of this Agreement, any Party may terminate this
Agreement upon ninety days (90) prior written notice to the other parties
(the "Notice Date"). The date upon which this Agreement shall be terminated
is referred to herein as the Termination Date. The period of time between
the Notice Date and the Termination Date is hereby identified as the
"Notice Period". Any time up to, but not later that fifteen (15) days prior
to the Termination Date, Adviser will pay to MSS such compensation as may
be due as of the Termination Date and will likewise reimburse MSS for any
out-of-pocket expenses and disbursements reasonably incurred or expected to
by incurred by MSS up to and including the Termination Date.
(d) In connection with the termination of this Agreement, if a successor to any
of MSS's duties or responsibilities under this Agreement is designated by
the Fund by written notice to MSS, MSS will promptly, on the Termination
Date and upon receipt by MSS of any payments owed to it as set forth in
Section 10(c) above, transfer to the successor, at the Fund's expense, all
records which belong to the Fund and will provide appropriate, reasonable
and professional cooperation in transferring such records to the named
successor.
(e) Should the Fund desire to move any of the services outlined in this
Agreement to a successor prior to the Termination Date, MSS shall make a
good faith effort to facilitate the conversion on such prior date. However,
there can be no guarantee that MSS will be able to facilitate such
conversion of services prior to the end of the Notice Period. Should
services be converted to a successor prior to the end of the Notice Period,
or if the Fund is liquidated or its assets merged or purchased or the like
with another entity, payment of fees to MSS shall be accelerated to a date
prior to the conversion or termination of services and calculated as if
such services had remained at MSS until the expiration of the Notice Period
and shall be calculated at the asset levels on the Notice Date.
(f) Notwithstanding any other provisions of Paragraph 10, in the event the Fund
deregisters as an Investment Company with the United States Securities and
the Exchange Commission ("SEC"), this Agreement may be terminated by the
Fund upon ninety (90) days written notice to MSS. The Termination Date
shall be ninety (90) days after the receipt of such notice by MSS. Any time
up to, but not later than fifteen (15) days prior to the Termination Date,
the Fund will pay to MSS such compensation as may be due as of the
Termination Date and will likewise reimburse MSS for any out-of-pocket
expenses and disbursements reasonably incurred or expected to be incurred
by MSS up to and including the Termination Date.
(g) Notwithstanding the foregoing, this Agreement may be terminated at any time
by either Party in the event of a material breach by the other Party
involving negligence, willful misfeasance, bad faith or a reckless
disregard of a Party's obligations and duties under this Agreement,
provided that such breach shall have remained unremedied for sixty (60)
days or more after receipt by the breaching Party of written specification
thereof.
<PAGE>
Section 11. Rights of Ownership. All computer programs and procedures developed
to perform services required to be provided by MSS under this Agreement are the
property of MSS. All records and other data except such computer programs and
procedures are the exclusive property of the Fund, and all such other records
and data will be furnished to the Fund in an appropriate form as soon as
practicable after termination of this Agreement for any reason.
Section 12. Amendments to Documents. The Fund will furnish MSS with written
copies of any amendments to, or changes in, The Fund's Articles of
incorporation, by-laws, Prospectus or Statement of Additional Information within
a reasonable time prior to such amendments or changes becoming effective. In
addition, the Fund agrees that no amendments will be made to the Prospectus or
Statement of Additional Information of the Fund which might have the effect of
changing the procedures employed by MSS in providing the services agreed to
hereunder or which amendment might affect the duties of MSS hereunder, unless
the Fund first obtains MSS's approval of such amendments or changes.
Section 13. Confidentiality. The Parties hereto agree that any non-public
information obtained hereunder concerning the other Party is confidential and
may not be disclosed to any other person without the prior written consent of
the other Party, except as may be required by applicable law or at the request
of the U.S. Securities and Exchange Commission or other governmental agency. MSS
agrees that it will not use any non-public information for any purpose other
than performance or its duties or obligations hereunder. The obligations of the
Parties under this Section will survive the termination of this Agreement. The
Parties further agree that a breach of this Section would irreparably damage the
other Party, and accordingly agree that each Party shall be entitled, without
bond or other security, to secure an injunction or injunctions against the
offending Party to halt or prevent breaches of this Section.
Section 14. Notices. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement shall be in writing and shall be delivered in person or sent by
first class mail, postage prepaid or by prepaid overnight delivery service to
the respective parties as follows:
If to the Fund: If to Adviser:
Electric City Funds, Inc. Mohawk Asset Management, Inc.
One North Church Street One North Church Street
Schenectady, NY 12305 Schenectady, NY 12305
Attn: James W. Denney Attn: James W. Denney
If to MSS:
Mutual Shareholder Services, LLC
1301 East Ninth Street, Suite 1005
Cleveland, Ohio 44114-1800
Attention: Gregory B. Getts, Ph.D.
Section 15. Amendments. No provision of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized and
executed by the Parties. This Agreement may be amended from time to time by
supplemental agreement executed by the Parties, and the compensation stated in
Schedule "B" attached hereto may be adjusted accordingly as mutually agreed
upon.
Section 16. Authorization. The Parties represent and warrant to each other that
the execution and delivery of this Agreement by the undersigned officer of each
Party has been duly and validly authorized; and when duly executed, this
Agreement will constitute a valid, legally binding and fully enforceable
obligation of each Party.
Section 17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed will be deemed to be an original,
but such counterparts will together constitute but one and the same instrument.
Section 18. Assignment. This Agreement will extend to and be binding upon the
Parties hereto and their respective successors and assigns; provided, however,
that this Agreement will not be assignable by the Fund or Adviser without the
consent of MSS or by MSS without the written consent of the Fund and Adviser,
which consent shall be authorized or approved by a resolution by its respective
Boards of Directors/Trustees.
Section 19. Governing Law. This Agreement will be governed by the laws of the
State of Ohio and the exclusive venue of any action arising under this Agreement
will be Cuyahoga County, Ohio.
Section 20. Severability. If any part, term, or provision of this Agreement is
held by a court of competent jurisdiction to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions of the Agreement
shall be considered severable and unaffected by such ruling, and the rights and
obligations of the parties will be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid, provided that the Agreement is not thereby materially impaired.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement, together
with Schedules "A", "B", "C" attached, to be signed by their duly authorized
officers as of the day and year first above written.
MOHAWK ASSET
ELECTRIC CITY FUNDS, INC. MANAGEMENT, INC.
- ------------------------ --------------------
By: James W. Denney By: James W. Denney
President, Director President
MUTUAL SHAREHOLDER SERVICES, LLC
- -----------------------------
By: Gregory B. Getts, Ph.D.
President
<PAGE>
Schedule A
Accounting Services Provided by MSS
o Journalize each portfolio's investment, capital share, and income and
expense activities.
o Verify investment buy/sell trade tickets when received from the Adviser.
o Maintain individual ledgers for investment securities.
o Maintain historical tax lots for each security.
o Reconcile cash and investment balances of each Portfolio with the
custodian, and provide the advisor with the beginning cash balance
available for investment purposes.
o Update the cash availability throughout the day as required by the advisor.
o Post to and prepare each Portfolio's Statement of Assets and Liabilities
and Statement of operations.
o Calculate expenses payable pursuant to the Fund's various contractual
obligations.
o Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund
o Calculate capital gains and losses.
o Determine each portfolio's net income
o At the Portfolio's expense, obtain security market prices or if such market
prices are not readily available, then obtain such prices from services
approved by the advisor, and in either case calculate the market or fair
value of each Portfolio's investments.
o Where applicable, calculate the amortized cost value of debt instruments.
o Transmit or mail a copy of the portfolio valuations to the advisor.
o Compute the net asset value of each portfolio.
o Compute each Portfolio's yields, total returns, expense ratios and
portfolio turnover rate.
o Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments.
o Prepare semi-annual financial statements, which will include, without
limitation, the Schedule of Investments, the Statement of Assets and
Liabilities, the Statement of Operations, the Statement of Changes in Net
Assets, the Cash Statement, and the Schedule of Capital Gains and Losses.
o Prepare monthly security transactions listings.
o Prepare monthly broker security transactions summaries.
o Assist in the preparation of support schedules necessary for completion of
Federal and State tax returns.
o Assist in the preparation and filing of the Fund's annual and semi-annual
reports with the SEC on Form N-SAR.
o Assist in the preparation of the Fund's annual and semi-annual reports to
shareholders and proxy statements.
o Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the
qualification of the Fund as a regulated investment company of each
portfolio of the Fund under the Code.
o Provide other accounting services as may be agreed upon from time to time
in writing by the Fund and MSS.
Administrative Services Provided by MSS
o Prepare and file the following Federal and State reports:
o Form N-SAR, Semi-annual report for Registered Investment Companies.
o The Fund's Annual and Semi-annual Report.
o Rule 24f-2 Notice- filing regarding sales of securities.
o Ongoing monitoring and filing of State Blue Sky Registrations.
o Prepare and file such reports, applications and documents as may be
necessary or desirable to register the Fund's shares with the Federal and
State securities authorities, and monitor the sale of Fund shares for
compliance with Federal and State securities laws.
o Coordinate and mail reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy
statements, proxies and other reports to shareholders.
o Monitor and pay Fund bills, maintain Fund budget and report budget expenses
and variances to Fund management.
o Monitor the Fund's compliance with the investment restrictions and
limitations imposed by State Blue Sky Laws and applicable regulations
thereunder, the fundamental and non-fundamental investment policies and
limitations set forth in the Fund's Prospectus and Statement of Additional
Information, and the investment restrictions and limitations necessary for
each portfolio of the Fund to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended, or any
successor statute.
o Prepare and distribute to shareholders notices announcing the declaration
of dividends and other distributions to shareholders.
o Provide other administrative services as may be agreed from time to time in
writing by the Fund and MSS.
Transfer Agent, Shareholder Servicing Agent and Dividend Disbursing Agent
Services Provided by MSS
o Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions, automatic
withdrawals, and wire order trades.
o Reinvest or pay dividends and make other distributions.
o Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
o Process and confirm address changes.
o Process standard account record changes as required, i.e., Dividend Codes,
etc.
o Safely store source documents for transactions, such as account
applications and correspondence.
o Perform backup withholding for those accounts requiring such action in
accordance with Federal regulations.
o Solicit missing taxpayer identification numbers.
o Provide remote access inquiry to Fund records via Fund supplied hardware
(Fund responsible for connection line and monthly fees).
o Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
o Name and address, including zip code.
o Balance of shares
o Number of shares, issuance date of each share outstanding, and cancellation
date of each share no longer outstanding, if issued.
o Balance of dollars available for redemption.
o Dividend Code (daily accrual, etc.)
o Type of account code.
o Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
o Original establishment date for accounts opened by exchange.
o W-9 withholding status and periodic reporting.
o State of residence code.
o Social Security or taxpayer identification number, and indication of
certification.
o Historical transactions on the account for the last 18 months, or such
other period as mutually agreed to from time to time.
o Indication as to whether telephone transactions are permitted for an
account.
o Beneficial owner code, i.e., male, female, joint tenant, etc.
o Provide the following reports and statements:
o Prepare daily journals for Fund reflecting all shares and dollar activity
for the previous day.
o Supply information monthly for Fund's preparation of Blue Sky Reporting.
o Supply monthly purchase, redemption and liquidation information for use in
Fund's N-SAR report.
o Provide monthly average daily balance reports for the Fund.
o Prepare and mail copies of summary statements to dealers and investment
advisors.
o Mail cumulative transaction confirmation statements to investors whenever a
transaction occurs and quarterly.
o Address and mail periodic financial reports and statements to investors.
o Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042, 5498 and 1042S.
o Enclose various marketing materials provided by the Fund in statement
mailings.
o Prepare and mail confirmation statements to dealers as required.
o Prepare certified list of stockholders for proxy mailings.
<PAGE>
Schedule B
Compensation Schedule
For Services Provided by MSS
Accounting Fees
If the average value of each Portfolio
is between the following Yearly Fee Monthly Fee
$ 0.00 25,000,000 21,000 1,750
$ 25,000,000 50,000,000 30,500 2,542
$ 50,000,000 75,000,000 36,250 3,021
$ 75,000,000 100,000,000 42,000 3,500
$100,000,000 125,000,000 47,750 3,979
$125,000,000 150,000,000 53,500 4,458
$150,000,000+ 59,250 4,938
Shareholder Servicing Fees
$11.50 annual fee per shareholder with a minimum monthly fee of $775.00.
Blue Sky Servicing Fees
$100.00 per state per filing
Example of calculating monthly charges for small new Fund
Monthly Fees
Approximate Total Net Assets 2,000,000 1,750
No. of Shareholders 150 775
Blue Sky States __ ----
-----
2,525
Less 45% discount* 1,136
Discounted monthly fee 1,389
Discounted Annual Fee 16,665
*Discount calculated as follows:
60% 0.00 500,000 10% 8,000,000 9,000,000
50% 500,000 1,000,000 5% 9,000,000 10,000,000
45% 1,000,000 2,000,000 0% 10,000,000+
40% 2,000,000 3,000,000
35% 3,000,000 4,000,000
30% 4,000,000 5,000,000
25% 5,000,000 6,000,000
20% 6,000,000 7,000,000
15% 7,000,000 8,000,000
<PAGE>
Schedule C
Portfolios Covered by this Agreement
The Electric City Value Fund
Exhibit 23N Plan of Distribution Pursuant to Rule 12b-1
PLAN OF DISTRIBUTION
PURSUANT TO RULE 12b-1
WHEREAS, Electric City Funds, Inc., an corporation organized and existing under
the laws of the Commonwealth of Maryland (the "Trust"),engages in business as an
open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the"1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets (the "Portfolio");
and
WHEREAS, the Trust offers the following series of such Shares:
The Electric City Value Fund; and
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust, as defined in the 1940 Act, and who have no
direct or indirect financial interest in the operation of this Plan of
Distribution Pursuant to Rule 12b-1 (the "Plan") or in any agreement relating
hereto (the "Non-Interested Trustees"), having determined, in the exercise of
their reasonable business judgment and in light of their fiduciary duties under
state law and under Section 36(a) and (b) of the 1940 Act, that there is a
reasonable likelihood that the Plan will benefit the Trust and its shareholders,
have approved the Plan by votes cast at a meeting called for the purpose of
voting hereon and on any agreements related hereto; and
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule 12b-1
under the 1940 Act, on the following terms and conditions:
1. Distribution and Servicing Activities. Subject to the supervision of the
Trustees of the Trust, the Trust may, directly or indirectly, engage in any
activities primarily intended to result in the sale of Shares of each
series of the Trust, which activities may include, but are not limited to,
the following:
(a) payments to the Trust's Sponsor and to securities dealers and others in
respect of the sale of Shares of each series;
(b) payment of compensation to and expenses of personnel (including personnel
of organizations with which the Trust has entered into agreements related
to this Plan) who engage in or support distribution of Shares of each
series or who render shareholder support services not otherwise provided by
the Trust's transfer agent, administrator, or custodian, including but not
limited to, answering inquiries regarding the Trust, processing shareholder
transactions, providing personal services and/or the maintenance of
shareholder accounts, providing other shareholder liaison services,
responding to shareholder inquiries, providing information on shareholder
investments in each series, and providing such other shareholder services
as the Trust may reasonably request;
(c) formulation and implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and television,
radio, newspaper, magazine and other mass media advertising;
(d) preparation, printing and distribution of sales literature;
(e) preparation, printing and distribution of prospectuses and statements of
additional information and reports of the Trust for recipients other than
existing shareholders of the Trust; and
(f) obtaining such information, analyses and reports with respect to marketing
and promotional activities as the Trust may, from time to time, deem
advisable.
The Trust is authorized to engage in the activities listed above, and in
any other activities primarily intended to result in the sale of Shares of
each series of the Trust, either directly or through other persons with
which the Trust has entered into agreements related to this Plan.
2. Maximum Expenditures. During the period in which this Plan is effective,
the Trust shall pay to Mohawk Asset Management, Inc. (the "Sponsor") a
monthly fee for distribution and shareholder servicing activities in an
amount calculated at the rate of 0.25% per annum of the average daily net
asset value of the Shares of each series of the Trust. Notwithstanding the
foregoing, the expenditures to be made by the Trust pursuant to this Plan
and the basis upon which payment of such expenditures will be made shall be
determined by the Trustees of the Trust, and in no event may such
expenditures paid by the Trust exceed an amount calculated at the rate of
0.25% of the average annual net assets of the Shares of each series of the
Trust, nor may such expenditures paid as service fees to any person who
sells Shares of any series of the Trust exceed an amount calculated at the
rate of 0.25% of the average annual net asset value of such Shares. At the
request of the Sponsor, such payments for distribution and shareholder
servicing activities may be made directly by the Trust to other persons
with which the Trust has entered into agreements related to this Plan.
3. Term and Termination. (a) This Plan shall become effective as of the 15th
day of December, 1999. Unless terminated as herein provided, this Plan
shall continue in effect for one year from the date hereof and shall
continue in effect for successive periods of one year thereafter, but only
so long as each such continuance is specifically approved by votes of a
majority of both (i) the Trustees of the Trust and (ii) the Non-Interested
Trustees, cast in person at a meeting called for the purpose of voting on
such approval. (b) This Plan may be terminated at any time with respect to
any series of the Trust by a vote of a majority of the Non-Interested
Trustees or by a vote of a majority of the outstanding voting securities of
the Shares of such series as defined in the 1940 Act.
4. Amendments. This Plan may not be amended to increase materially the maximum
expenditures permitted by Section 2 hereof for any series of the Trust
unless such amendment is approved by a vote of the majority of the
outstanding voting securities of the Shares of such series, as defined in
the 1940 Act, with respect to which a material increase in the amount of
expenditures is proposed, and no material amendment to this Plan shall be
made unless approved in the manner provided for annual renewal of this Plan
in Section 3(a) hereof.
5. Selection and Nomination of Trustees. While this Plan is in effect, the
selection and nomination of the Non-Interested Trustees of the Trust shall
be committed to the discretion of such Non-Interested Trustees.
6. Quarterly Reports. The Treasurer of the Trust shall provide to the Trustees
of the Trust, and the Trustees shall review quarterly, a written report of
the amounts expended pursuant to this Plan and any related agreements and
the purposes for which such expenditures were made.
7. Record keeping. The Trust shall preserve copies of this Plan and any
related agreements and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan. Any such
related agreements or such reports for the first two years will be
maintained in an easily accessible place.
8. Limitation of Liability. Any obligations of the Trust hereunder shall not
be binding upon any of the Trustees, officers or shareholders of the Trust
personally, but shall bind only the assets and property of the Trust. The
term "Quaker Investment Trust" means and refers to the Trustees from time
to time serving under the Agreement and Declaration of Trust of the Trust,
a copy of which is on file with the Secretary of The Commonwealth of
Massachusetts. The execution of this Plan has been authorized by the
Trustees, and this Plan has been signed on behalf of the Trust by an
authorized officer of the Trust, acting as such and not individually, and
neither such authorization by such Trustees nor such execution by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the
assets and property of the Trust as provided in the Agreement and
Declaration of Trust.
IN WITNESS THEREOF, the Trustees of the Trust, including a majority of the
Non-Interested Trustees, have adopted this Plan at a meeting held on December
15, 1999, and have further directed that the Plan be made effective as of a date
to be determined by the Board in the future.
ELECTRIC CITY FUNDS, INC.
- -------------------------------------
James W. Denney
President
