File Nos. _____ - ____________
_____ - ____________
As filed with the Securities and Exchange Commission on [date]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
iMillennium Capital Trust
17225 El Camino Real
Suite 415
Houston, Texas 77058
(281) 990-7485
With copies to:
Max Berueffy, Esq.
American Data Services, Inc.
150 Motor Parkway
Hauppauge, NY 11788-0132
Steven B. Boehm, Esq.
Sutherland Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2415
Approximate Date of Proposed Public Offering: As soon as practicable after the
effectiveness of the registration under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, as amended,
Registrant hereby elects to register an indefinite number of shares of
Registrant and any series thereof hereinafter created.
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PROSPECTUS
[date], 1999
iMILLENNIUM FUND
A non-diversified mutual fund that invests
in internet and internet-related companies
with the potential for long-term growth.
Shares of the Fund are offered to investors
without any sales charges.
The Securities and Exchange Commission has not approved or disapproved the
shares of the Fund or determined whether this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
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TABLE OF CONTENTS Page
AN OVERVIEW OF THE FUND.........................................................
Performance and Volatility......................................................
Investor Expenses...............................................................
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS.....................................
MANAGEMENT......................................................................
YOUR ACCOUNT....................................................................
How to Contact the Fund.........................................................
General Information.............................................................
When and How NAV Is Determined..................................................
How to Buy Shares of the Funds..................................................
How to Sell Shares of the Funds.................................................
OTHER INFORMATION...............................................................
Distributions...................................................................
Taxes...........................................................................
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iMILLENNIUM FUND
AN OVERVIEW OF THE FUND
INVESTMENT GOAL. iMillennium Fund (the "Fund") seeks to provide investors with
long-term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES. The Fund will invest primarily in common stocks
and securities convertible into common stocks of domestic and foreign companies
engaged in internet and internet-related activities. When seeking investments
for the Fund, its investment adviser, iMillennium Capital Management, Inc. (the
"Adviser"), seeks individual companies with growth potential that the market has
not yet recognized, and looks for stocks with strong earnings and cash flow
momentum (earnings before depreciation and non-cash charges). The Adviser also
employs measure of intrinsic value such as the company's price to earnings ratio
(the price of a stock divided by its earnings per share), or price/cash flow
ratio. The Fund will sell its holding when the Adviser believes a company's
stock price has reached its maximum growth potential, or when the company has
experienced a fundament shift in its core business processes and objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND. The Fund is subject to the following
principal investment risks:
-- STOCK MARKET VOLATILITY. Stock markets can be volatile. In other words,
the prices of stocks can rise or fall rapidly in response to
developments affecting a specific company or industry, or to changing
economic, political or market conditions. The Fund is subject the
general risk that the value of the Fund's investments may decline if
the stock markets perform poorly. There is a risk that a Fund's
investments will under perform either the securities markets generally
or particular segments of the securities markets.
-- ISSUER SPECIFIC CHANGES. The value of an individual security can be
more volatile, and can perform differently, than the market as a whole.
The price of an individual issuer's securities can rise or fall
dramatically in response to such things as better or worse than
expected earnings reports, news about the development of a promising
product, or the loss of key management personnel. There is also the
risk that the Adviser's assessment of the growth potential of a
specific security may prove incorrect.
-- CONCENTRATION IN INTERNET AND INTERNET-RELATED COMPANIES. Because the
Fund invests primarily in companies engaged in internet and internet
related businesses, its performance is closely tied to internet and
technology developments. Companies in the same industry often face
similar obstacles, issues and regulatory burdens. As a result, the
securities owned by the Fund may react similarly with one another.
Because the internet and technology is developing rapidly, and the
number of companies and product offerings continues to expand, these
companies could become increasingly sensitive to short product cycles,
aggressive pricing and intense competition. Many of these companies are
generally subject to the rate of change in technology, which is higher
than other industries. In addition, many products and services of
companies engaged in the internet and internet-related activities are
also subject to relatively high risks of rapid obsolescence caused by
progressive scientific and technological advances.
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-- "GROWTH INVESTING." "Growth" stocks can perform differently than the
market as a whole and other types of stocks and can be more volatile
than other types of stocks.
-- FOREIGN EXPOSURE. Foreign securities may be riskier than U.S.
investments because of factors such as unstable political and economic
conditions, currency fluctuations, foreign controls on investment and
currency exchange, a lack of adequate information about a company,
differences in government regulation and less liquid and more volatile
markets.
-- NON-DIVERSIFICATION. As a non-diversified fund, the Fund may invest a
greater percentage of its assets in a particular company than other,
"diversified," mutual funds. Therefore, investors should consider this
greater risk versus the safety that may come with a more diversified
portfolio.
-- INEXPERIENCE OF ADVISER. Although the Adviser does have experience
managing private equity capital, it has no previous experience managing
a mutual fund.
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE FUND,
OR THE FUND MAY NOT PERFORM AS WELL AS OTHER POSSIBLE INVESTMENTS.
WHO MAY WANT TO INVEST IN THE FUND
You may want to purchase shares of the Fund if:
-- You want to invest for the long term
-- You want to diversify your portfolio by allocating some portion of your
long-term investments to aggressive equity investing
-- You are willing to accept a high degree of volatility and risk
The Fund may NOT be appropriate for you if:
-- You need regular income or stability of principal
-- You are pursuing a short-term goal or investing emergency reserves
PERFORMANCE
No information regarding the Fund's performance is included because, as of the
date of this Prospectus, the Fund had not commenced operations.
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FEE TABLES
The following tables describe the various fees and expenses that you will bear
if you invest in the Fund.
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SHAREHOLDER TRANSACTION FEES None
(paid directly from your investment):
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Redemption Fee (on shares held less than two years) 3.00%
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ESTIMATED ANNUAL FUND OPERATING EXPENSES:
(expenses that are deducted from Fund assets,
as a percentage of net assets)
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Management Fees1 1.50%
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Distribution and/or Service (Rule 12b-1) Fees 0.25%
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Other Expenses 1, 2 1.00%
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Total Estimated Fund Operating Expenses 2.75%
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EXAMPLE:
This Example 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 and then redeem all of your shares at the end of these
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Neither the 5% rate of
return nor the expenses shown above should be considered indications of past or
future returns and expenses. Although your actual costs may be higher or lower,
based on these assumptions your cost would be:
1 Year $____________ 3 Years $____________
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(1) The Adviser has agreed to waive some or all of its advisory fees or
reimburse certain expenses of the Fund so that Total Operating Expenses will not
exceed 2.75% of its net assets. The Adviser may, in its discretion, cease
waiving fees or reimbursing Fund expenses at any time.
(2) Other Expenses include, among other expenses, administrative,
custody, transfer agency and shareholder servicing fees. The amount of these
expenses is estimated for Fund's first fiscal year of operations.
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INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
This section of the prospectus describes the investment objective of the
iMillennium Fund, how the Adviser tries to achieve that objective, and the
principal risks of investing in the Fund.
INVESTMENT OBJECTIVE. The investment objective of the Fund is long-term growth
of capital.
PRINCIPAL INVESTMENT STRATEGIES. Under normal market conditions, the Fund will
invest at least 65% of its total assets in the common stocks (securities having
the characteristics of common stocks, such as convertible securities, rights and
warrants) of foreign and domestic companies that are engaged in internet and
internet-related businesses. The Fund defines an "internet and internet-related
company" as a company which derives at least 50% of its revenues or earnings
from, or devotes at least 50% of its assets to, the following activities:
>> Connection: Companies involved in providing online access to businesses
and consumers, as well as the companies that provide the necessary
hardware, software, equipment, consulting services, and outsourcing
services necessary to connect to the internet.
>> Commercials: Companies involved in providing or facilitating online
advertising on the internet in the form of ad banners or streaming
commercials on websites.
>> Commerce: Companies involved in online business-to-business commerce,
business-to-consumer commerce, and consumer-to-consumer commerce.
>> Content: Companies involved in providing or facilitating the
dissemination of information, news, and editorial content online.
>> Community: Companies that provide online websites for chat services and
message boards.
The Fund may invest in the common stocks of companies without regard to a
company's market capitalization. The size of a company is measured by its
"market capitalization." The market capitalization of a company is the price of
a share of the company's stock multiplied by the number of shares of stock it
has outstanding. The Fund will not invest in companies with a market
capitalization less than $25 million.
Although the Fund expects to invest primarily in domestic companies, it may also
invest without limit in the securities of foreign companies.
In seeking investments for the Fund, the Adviser uses a "bottom-up" stock
selection approach. The Adviser looks for individual companies with earnings
and/or revenue growth potential that may not be recognized by the market at
large. In determining whether a particular company is suitable for investment by
the Fund, the Adviser focuses on a number of different attributes, including the
company's specific market expertise or dominance; its franchise durability and
pricing power; solid fundamentals (e.g., a strong balance sheet, improving
returns on equity, improving returns on capital invested, strong revenue growth,
and the ability to generate free cash flow); strong management, and reasonable
valuations in the context of projected growth rates.
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The Fund generally will not make investments with income as a consideration.
During normal market conditions, however, the Fund may seek to enhance its
earnings by investing up to 10% of its total assets in all types of fixed income
securities, including corporate bonds and notes and short-term investments such
as commercial paper and variable rate demand notes.
MORE INFORMATION ABOUT INVESTMENTS AND RISKS
FUTURES AND OPTIONS. The Fund may purchase or write (sell) put and call options
on securities and financial indices. These are derivative instruments that give
the Fund the right (where the Fund purchases the option), or the obligation
(where the Fund writes the option) to buy or sell a particular security, such as
a stock or group of stocks in the future at a pre-determined price. The Fund may
also invest in futures on financial indices, another derivative instrument. The
Adviser may use these options strategies for a variety of reasons: as an
efficient means to adjust the Fund's overall exposure to certain markets; in an
effort to enhance income; and as a cash management tool.
The Adviser may also use these options strategies to hedge against the risk of
fluctuations in the prices of securities that the Fund holds or may purchase.
Futures contracts and options and options are not always successful hedges. The
Fund's ability to use these instruments successfully will depend on the
Adviser's ability to predict accurately movements in the prices of securities,
interest rates and the securities markets. The prices of options can be very
volatile. Investing for hedging purposes may result in certain transaction
costs, which may reduce the Fund's total return.
FOREIGN CURRENCY HEDGING. The Adviser may employ currency forwards and options
to hedge the risk to the portfolio when foreign exchange movements are expected
to be unfavorable for U.S. investors. In general, these instruments allow the
Adviser to lock in a specified exchange rate for a stated period of time. If the
Adviser's forecast is wrong, however, such a hedge may cause a loss. The Fund
normally does not engage in extensive currency hedging.
LENDING SECURITIES. The Fund may lend its portfolio securities to brokers,
dealers or other financial institutions. The Fund may not loan more than
one-third of its total assets. The principal risk of securities lending is that
the institution borrowing the securities may become insolvent. In this event,
the Fund could experience delays in recovering its securities and possibly
capital losses.
SHORT SELLING. The Fund may sell securities short by borrowing securities it
does not own and selling them. The Fund is then obligated to replace the
securities borrowed by purchasing them at the market price at the time of
replacement. If the securities sold short increase in value between the time of
sale and the time the Fund purchases them, the Fund will incur a loss. On the
other hand, if the securities decline in value, the Fund may repurchase them at
a lower price and realize a profit.
BORROWING MONEY. The Fund may borrow money from banks as a temporary measure for
emergency purposes, to facilitate redemption requests, or for "leverage," in
other words, so that the Fund may purchase additional securities. The Fund may
borrow up to one-third of its total assets. The use of leverage involves special
risk considerations that may not be associated with other funds having similar
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objectives and policies that do not use leverage. Because substantially all of
the Fund's assets fluctuate in value, while the interest obligation resulting
from a borrowing will be fixed by the loan agreement, the net asset value per
share of the Fund will tend to increase more when its portfolio assets decrease
in value than would otherwise be the case if the Fund did not borrow funds. In
addition, interest costs on borrowings may fluctuate with changing market rates
of interest and may partially offset or exceed the return earned on borrowed
funds. Under adverse market conditions, the Fund might have to sell portfolio
securities to meet interest or principal payments at a time when fundamental
investment considerations would not favor such sales.
SMALL COMPANIES. The Fund may invest a significant portion of its assets in
small companies with a market capitalization less than $500 million. Investing
in small companies involves greater risk than is customarily associated with
more established companies. Stocks of small companies are subject to more abrupt
or erratic price movements than the stocks of larger companies. Small companies
often have limited product lines, markets, or financial resources, and their
managements may lack depth and experience. Such companies usually do not pay
significant dividends that could cushion returns in a falling market. To the
extent that the Fund does invest in small capitalization stocks, there is the
risk that its portfolio will be less marketable and may be subject to greater
fluctuations in price than a portfolio holding stocks of larger issuers. Small
capitalization stocks often pay no dividends, but income is not a primary goal
of the Fund.
FOREIGN SECURITIES. Although the Fund expects to invest primarily in domestic
companies, it may invest without limit in foreign companies. Investing in the
securities of foreign companies may be riskier than U.S. investment because of
factors such as unstable international political and economic conditions,
currency fluctuations, foreign controls on investment and currency exchange,
withholding taxes, a lack of adequate company information, less liquid and more
volatile markets, and a lack of governmental regulations.
PORTFOLIO TURNOVER. The Fund generally does not trade in securities for
short-term profits, but, when circumstances warrant, may buy or sell securities
without regard to the length of time held. In general, the higher the volume of
buying and selling, the greater the impact of brokerage commissions and other
transaction costs on a fund's return. Also, the greater the portfolio turnover
rate, the more likely it is that a fund will generate capital gains that must be
distributed to shareholders as income subject to taxation.
CASH POSITIONS AND DEFENSIVE STRATEGIES. At times, the Fund may employ temporary
defensive strategies in response to unfavorable economic, market, political or
other conditions. At such times, the Fund may increase its cash reserves without
limit by holding high quality, short-term debt securities and money market
instruments and by entering into repurchase agreements. These investments are
inconsistent with the Fund's primary investment strategies. As a result during
these periods, the Fund may not participate in stock market advances, or
declines, to the extent that they would if they remained more fully invested in
common stocks.
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MANAGEMENT
The business of the Fund is managed under the direction of the Board of Trustees
(the "Board") of iMillennium Capital Trust (the "Trust"). The Board formulates
the general policies of the Fund and meets periodically to review the Fund's
performance, monitor investment activities and practices, and discuss other
matters affecting the Fund. Additional information regarding the Trust and the
Board, as well as the Fund's executive officers, may be found in SAI.
THE ADVISER
The Fund's investment adviser is iMillennium Capital Management, Inc. (the
"Adviser"), located at 17225 El Camino Real, Suite 415, Houston, Texas 77058.
Pursuant to the Investment Advisory and Management Agreement (the "Agreement")
between the Adviser and the Trust, the Adviser will furnish continuous
investment advisory and management services to the Fund. The entity that became
iMillennium Capital was organized in May 1996 as Rivero Investment Management
Company. iMillennium Capital is a registered investment adviser and has
approximately $10 million under management. Omar S. Rivero is Chairman and Chief
Executive Officer of the Adviser.
The Adviser manages the investment portfolios of the Fund, subject to policies
adopted by the Trust's Board. Under the Agreement, the Adviser, at its own
expense and without reimbursement from the Trust, furnishes office space and all
necessary office facilities, equipment and executive personnel necessary for
managing the Fund. The Adviser also pays the salaries and fees of all officers
and trustees of the Trust who are also officers, directors, or employees of the
Adviser. The Trust pays the salaries and fees of all other trustees of the
Trust. For its services, the Adviser receives a fee at an annual rate of 1.50%
of the average daily net assets of the Fund.
PORTFOLIO MANAGER
Mr. Rivero manages the investment program of the Fund and is primarily
responsible for the day-to-day management of the Fund's portfolio. Mr. Rivero
has been managing private equity capital since May 1996. Prior to forming Rivero
Investment Management Company, the predecessor of iMillennium Capital, Mr.
Rivero served as a Partner in the law firm of Chaves, Gonzales & Hoblit, L.L.P.
from June 1987 through June 1997.
ADMINISTRATOR
American Data Services, Inc. ("ADS"), 150 Motor Parkway, Hauppauge, New York
11788, provides all administrative services necessary for the operations of the
Fund, subject to the supervision of the Board. As of [date] 1999, ADS provided
administrative, fund accounting and stock transfer services to retail and
institutional mutual funds with approximately $6 billion of total assets through
its offices in New York, Denver, Tampa and Los Angeles.
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DISTRIBUTOR
ADS Distributors, Inc. ("the Distributor"), 150 Motor Parkway, Hauppauge, New
York 11788, an affiliate of the Administrator, is a registered broker-dealer and
member of the National Association of Securities Dealers, Inc. The Distributor
acts as the agent of the Fund in connection with the offering of shares of the
Fund. The Distributor may enter into arrangements with banks, broker-dealers or
other financial institutions through which investors may purchase or redeem
shares and may, at its own expense, compensate persons who provide services in
connection with the sale or expected sale of shares of the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICE FEES
The Board of Trustees of the iMillennium Capital Trust has adopted a
Distribution Plan pursuant to rule 12b-1 under the Investment Company Act of
1940 (the "Plan"). The Plan allows the Fund to use part of its assets to pay for
advertising, marketing and other activities intended to promote the sale of the
Fund's shares. The Fund may also pay for certain shareholder services provided
by institutions that have agreements with the Fund's distributor to provide such
services. Under the Plan, these payments and expenses may not exceed 0.30% of
the average annual net assets of the Fund.
Because these fees are paid out of the Fund's assets on an on-going basis, over
time these fees will increase the cost of an investment in the Fund and may cost
a shareholder more than paying other types of sales charges.
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YOUR ACCOUNT
This section describes how to buy and sell shares of the Fund, and the services
that are available to the Fund's shareholders.
HOW TO CONTACT THE FUNDS
For more information about a Fund or your account, you may write to us at:
iMillennium Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
Or you may call us toll free at (xxx) xxx-xxxx
GENERAL INFORMATION
When you buy or sell ("redeem") shares of the Fund, the price of the shares will
be the net asset value per share, or "NAV," next calculated after the Transfer
Agent receives a properly completed purchase or redemption order. For instance,
if the Transfer Agent receives your purchase request in proper form before 4
p.m., your transaction will be priced at that day's NAV. If the Transfer Agent
receives your purchase request after 4 p.m., your transaction will be priced at
the next day's NAV. The Fund will not accept orders that request a particular
day or price for the transaction or any other special conditions.
WHEN AND HOW NAV IS DETERMINED. The Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may be changed in case of an emergency or if the New York Stock
Exchange closes early. The Fund's NAV is determined by taking the market value
of all securities owned by the Fund (plus all other assets such as cash),
subtracting all liabilities and then dividing the result (net assets) by the
number of shares outstanding. The Fund values securities for which market
quotations are readily available at current market value. If market quotations
are not readily available, then securities are valued at fair value, as
determined by the Board.
SHARE CERTIFICATES. The Fund does not issue share certificates.
STATEMENT AND TRANSACTION CONFIRMATIONS. You will receive quarterly statements
and a confirmation of each transaction. You should verify the accuracy of all
transactions in your account as soon as you receive your confirmation.
SUSPENSION OF SERVICES DURING UNUSUAL MARKET CONDITIONS. The Fund may
temporarily suspend or discontinue any service or privilege during unusual
market conditions.
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HOW TO BUY SHARES OF THE FUNDS
TYPES OF ACCOUNTS
If you are making an initial investment in the Fund, you will need to open one
of the following types of accounts.
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS. Individual and sole
proprietorship accounts are owned by one person, while joint accounts can have
two or more owners. Each individual owner of a joint account may give
instructions on purchase, and redemptions without notice to the other owner.
Account Applications and written instructions to the Fund, or requests for
transactions that require a signature guarantee, must be signed by both owners
exactly as their names appear on the account.
UNIFORM GIFT OR TRANSFER TO A MINOR ACCOUNTS (UGMA, UTMA). Depending on the laws
of your state, you can set up a custodial account under the Uniform Gift (or
Transfers) to Minors Act. These custodial accounts provide a way to give money
to a child and obtain tax benefits. You can give up to the Uniform Transfers to
Minors Act $10,000 a year per child without paying Federal gift tax. To open a
UGMA or UTMA account, you must include the minor's social security number on the
application and the custodian, or trustee, of the UGMA or UTMA must sign
instructions in a manner indicating trustee capacity.
CORPORATE AND PARTNERSHIP ACCOUNTS. To open a corporate or partnership account,
or to send instructions to the Fund, the following documents are required:
For corporations, a corporate resolution signed by an authorized person
with a signature guarantee.
For partnerships, a certification for a partnership agreement, or the
pages from the partnership agreement that identify the general
partners.
An authorized officer of the corporation or other legal entity must sign the
application.
TRUST ACCOUNTS. The trust must be established before you can open a trust
account. To open the account you must include the name of each trustee, the name
of the trust and provide a certification for trust, or the pages from the trust
document that identify the trustees.
RETIREMENT ACCOUNTS. The Fund offers IRA accounts, including traditional and
Roth IRAs. Fund shares may also be an appropriate investment for other
retirement plans. Before investing in any IRA or other retirement plan, you
should consult your tax Adviser. When you makes an investment in an IRA, be sure
to indicate the year in which the contribution is made.
The Fund may also available for investment through various employer-sponsored
retirement plans such as 401(k) Plans. If you are eligible to participate in one
of these Plans, you should discuss the possibility of investing in the Fund with
your Plan's sponsor.
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OPENING YOUR ACCOUNT
BY TELEPHONE
To open an account by telephone, call (xxx) xxx-xxxx to obtain an account number
and instructions. We will take information necessary to open your account,
including social security or tax identification number, over the phone.
After you have obtained an account number, you may purchase shares of the Fund
by wiring federal funds. The Fund will charge you a $10.00 wire fee. Your bank
may also charge a fee for doing this. You should instruct your bank to wire
funds to:
[CUSTODIAN BANK]
ABA # ___________________
for credit to iMillennium Fund
DDA # __________________
for further credit to [your name and account number]
You will then need to mail a signed account application to:
iMillennium Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
BY MAIL
You may also open an account by mailing a completed and signed account
application, together with a check, to:
iMillennium Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
AUTOMATIC INVESTMENT PLANS
You may invest a specified amount of money in the Fund once or twice a month on
specified dates. These payments are taken from your bank account by automated
clearinghouse payment ("ACH"). Automatic investments must be for at least $100.
There is no charge for this service.
To open an Automatic Investment Plan account ("AIP"), call or write to us to
request and "Automatic Investment" form. Complete and sign the form, and return
it to us together with a voided check for the account from which payments will
be made.
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PURCHASES THROUGH THIRD PARTIES
You may be able to invest in shares of the Fund through a broker or other
financial institution, if the institution has made arrangements with the Fund's
Distributor. If you invest through a financial institution, the institution's
policies may be different than those of the Fund, and the institution may charge
fees in addition to those that the Fund charges. For example, banks, brokers,
retirement plans and financial advisers may charge transaction fees and may set
different minimum investments or limitations on buying or selling shares.
Consult a representative of your financial institution or retirement plan for
further information.
HOW TO PAY FOR YOUR PURCHASE OF SHARES
You may purchase shares of the Fund by check, automated clearinghouse ("ACH")
payment, or wire. All payments must be in U.S. dollars.
CHECKS. All checks must be drawn on U.S. banks and made payable to "iMillennium
Fund." No other method of check payment is acceptable (for instance, you may not
pay by travelers check).
ACH PAYMENTS. Instruct your financial institution to make an ACH payment to us.
These payments typically take two days. Your financial institution may charge
you a fee for this service.
WIRES. Instruct your financial institution to make a Federal funds wire payment
to us. The Fund charges a $10.00 fee for receipt of a wire. Your financial
institution may also charge you a fee for this service.
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INVESTMENT MINIMUMS
The Fund accepts investments in the following minimum amounts:
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TYPE OF ACCOUNT MINIMUM INITIAL MINIMUM SUBSEQUENT
INVESTMENT INVESTMENT
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Individual, Sole proprietorship or $2500 $100
Joint accounts
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Corporate, partnership or trust $2500 $100
accounts
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Uniform Gift or Transfer to a Minor $1000 $100
Accounts
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Individual Retirement Accounts (IRA) $1000 $100
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Automatic Investment Plans $1000 $100
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LIMITATIONS ON PURCHASES
The Fund reserves the right to refuse any purchase request, particularly
requests that could adversely affect the Fund or its operations. This includes
those from any individual or group who, in the Fund's view, is likely to engage
in excessive trading (usually defined as more than four exchanges out of the
Fund within a calendar year).
CANCELED OR FAILED PAYMENTS
The Fund accepts checks and ACH transfers at full value subject to collection.
If your payment for shares is not received or you pay with a check or ACH
transfer that does not clear, your purchase will be canceled. You will be
responsible for any losses or expenses incurred by the Fund or the Transfer
Agent, and the Fund may redeem other shares you own in the account as
reimbursement. The Fund and its agents have the right to reject or cancel any
purchase, exchange, or redemption due to nonpayment.
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HOW TO REDEEM SHARES OF THE FUND
You can sell ("redeem") all or any part of your shares subject to certain
restrictions. The Fund will redeem your shares at the net asset value next
determined after the Fund receives your redemption request in good order, less
any redemption fee that applies. This section describes the procedures for
redeeming your shares of the Fund, the restrictions on redemptions, and when the
Fund may charge a redemption fee.
We will mail your redemption proceeds to your current address or transmit them
electronically to your designated bank account. Except under certain emergency
conditions, we will send the proceeds from your redemption to you within seven
days after we receive your redemption request. If the Fund has not yet collected
payment for the shares you are selling, however, it may delay sending redemption
proceeds until payment is collected.
Redemption Fee
The Fund is designed for long-term investors willing to accept the risks
associated with an investment in common stocks of companies engaged in rapidly
developing and volatile industries - the internet and internet-related
businesses. Some of these companies are small, and their stocks may be less
liquid than larger, more established companies. The Fund is not designed for
short-term traders, whose frequent purchases and redemptions can unnecessarily
disrupt the Fund's investment program and drive up its transaction costs. Fore
these reasons, the Fund assesses a 3.00% fee on redemptions of shares held for
less than two years.
Redemption fees are paid to the Fund to help offset transaction costs and to
protect the Fund's long-term shareholders. The Fund will use the "first-in,
first-out" (FIFO) method to determine the two-year holding period. Under this
method, the date of the redemption will be compared with the earliest purchase
date of shares held in the account. If this holding period is less than two
years, the fee will be charged.
The fee does not apply to any shares purchased through reinvested distributions
(dividends and capital gains) or to shares held in retirement plans such as
401(k) or individual retirement accounts ("IRAs").
To determine the holding period, the Fund will use the anniversary date of a
transaction. Thus, shares purchased on December 1, 1999, for example, will be
subject to the fee if they are redeemed on or before November 30, 2001. If they
are redeemed on or after December 1, 1999, no fee will be charged.
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BY MAIL
To redeem shares by mail, prepare a written request including:
-- Your name(s) and signature(s)
-- The name of the Fund, and your account number
-- The dollar amount or number of shares you want to redeem
-- How and where to send your proceeds
-- A signature guarantee, if required (see "Signature Guarantee
Requirements" below) o Any other required documentation, such as such
as corporate resolutions or trust documents
Mail your request and documentation to:
iMillennium Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
BY WIRE
You may only request payment of your redemption proceeds by wire if you have
previously elected wire redemption privileges on your account application or a
separate form.
Wire requests are only available if your redemption is for $1,000 or more. If
there are any wire charges, they will be deducted from the proceeds of your
redemption. Telephone redemptions are not available for IRA accounts.
To request a wire redemption, mail us your request (See "By Mail"), or call us
with your request. If you wish to make your wire request by telephone, however,
you must have previously elected telephone redemption privileges.
BY TELEPHONE
We accept redemption requests by telephone only if you have elected telephone
redemption privileges on your account application or a separate form.
To redeem shares by telephone, call us with your request. You will need to
provide your account number and the exact name(s) in which the account is
registered. We may also require a password or additional forms of
identification.
Your proceeds will be mailed to you or wired to you (if you have elected wire
redemption privileges - See "By Wire" above)
Telephone redemptions are easy and convenient, but this account option involves
a risk of loss from unauthorized or fraudulent transactions. We will take
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reasonable precautions to protect your account from fraud. You should do the
same by keeping your account information private and by reviewing immediately
any account statement and transaction confirmations that you receive. Neither
the Fund nor the Transfer Agent will be responsible for any losses due to
telephone fraud, so long as we have taken reasonable steps to verify the
caller's identity.
AUTOMATIC REDEMPTION
If you own shares of the Fund with an aggregate value of at least $10,000, you
may request a specified amount of money from your account once a month or once a
quarter on a specified date. These payments are sent from your account to a
designated bank account by ACH payment. Automatic redemptions must be for at
least $50.
To set up periodic redemptions automatically, call or write us for an "Automatic
Redemption" form. You should complete the form and mail it to us with a voided
check for the account into which you would like the redemption proceeds
deposited.
REDEMPTIONS THROUGH THIRD PARTIES
If you hold shares through a broker or other financial institution, you will
have to redeem your shares through that financial institution. The net asset
value you receive will be the next calculated after receipt of the order from
the dealer. Consult a representative of your financial institution or retirement
plan for further information.
SIGNATURE GUARANTEE REQUIREMENTS
To protect you and the Fund against fraud, signatures on certain requests must
have a "signature guarantee." For requests made in writing a signature guarantee
is required for any of the following:
-- Redemption of over $5,000 worth of shares
-- Changes to a shareholder's record name or address
-- Redemption from an account for which the address or account
registration has changed within the last 30 days
-- Sending proceeds to any person, address, brokerage firm or bank account
not on record
-- Sending proceeds to an account with a different registration (name or
ownership) from yours
-- Changes to automatic investment or redemption programs, distribution
options, telephone or wire redemption privileges, any other election in
connection with your account. A signature guarantee verifies the
authenticity of your signature. You can obtain one from most banking
institutions or securities brokers, but not from a notary public.
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SMALL ACCOUNTS
If the value of your account in the Fund falls below $500 (not including IRAs),
the Fund may ask you to increase your balance. If the account value is still
below $500 after 30 days, the Fund may close your account and send you the
proceeds. The Fund will not close your account if it falls below these amounts
solely as a result of a reduction in your account's market value.
REDEMPTION IN KIND
The Fund reserves the right to make redemptions "in kind" -- payment of
redemption proceeds in portfolio securities rather than cash -- if the amount
requested is the greater of $250,000 or 1% of the Fund's assets.
LOST ACCOUNTS
The Transfer Agent will consider your account "lost" if correspondence to your
address of record is returned as undeliverable, unless the Transfer Agent
determines your new address. When an account is "lost," all distributions on the
account will be reinvested in additional shares of the Fund. In addition, the
amount of any outstanding (unpaid for six months or more) checks for
distributions that have been returned to the Transfer Agent will be reinvested
and the checks will be canceled.
TRANSFERRING REGISTRATION
You may transfer the registration of your Fund shares. To do so, call us at
xxx-xxx-xxxx, or write the Fund c/o American Data Services, Inc., P.O. Box 5536,
Hauppauge, NY 11788-0132, to request an account transfer form. You should then
send the completed form to the same address.
OTHER INFORMATION
DISTRIBUTIONS
The Fund distributes its net investment income, if any, semi-annually. Any net
capital gain realized by the Fund will be distributed at least annually. All
distributions are reinvested in additional shares, unless you elect to receive
distributions in cash. You may elect to receive your distributions in cash when
you open your account, or at anytime afterwards. For Federal income tax
purposes, distributions are treated the same whether they are received in cash
or reinvested. Shares become entitled to receive distributions on the day after
the shares are issued.
TAXES
The following is general information about tax liabilities that you may incur in
connection with your purchase, ownership and redemption of shares of the Fund.
It is not intended to be tax advice, nor does it take into consideration the
particular circumstances of any shareholder. You should consult your tax adviser
about the Federal, state and local tax consequences in your particular
circumstances.
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TAXES ON DISTRIBUTIONS. The Fund operates in a manner such that it will not be
liable for Federal income or excise tax. Distributions of net investment income
or short-term capital gain are taxable to you as ordinary income. Distributions
of long-term capital gain are taxable to you as long-term capital gain,
regardless of how long you have held your shares. Distributions may also be
subject to state and local taxes.
The Fund will mail reports containing information about the Fund's distributions
during the year to you after December 31 of each year.
TAXES ON REDEMPTIONS OF SHARES. The sale of Fund shares is a taxable transaction
for Federal income tax purposes. Your taxable gain or loss is computed by
subtracting your tax basis in the shares from the redemption proceeds. Because
your tax basis depends on the original purchase price and on the price at which
any dividends may have been reinvested, you should keep your account statement
so that you or your tax preparer will be able to determine whether a sale will
result in a taxable gain or loss.
"BUYING A DIVIDEND." All distributions reduce the net asset value of the Fund's
shares by the amount of the distribution. Unless your investment is in a
tax-deferred account, you may wish to avoid buying shares of the Fund shortly
before a distribution. If you do, you will pay the full pre-distribution price
for your shares and then receive part of your investment back as a taxable
distribution.
TAX WITHHOLDING. The Fund may be required to withhold U.S. federal income tax at
the rate of 31 percent from all taxable distributions and form proceeds from
certain sales payable to shareholders who fail to provide the Fund with their
correct taxpayers identification number or to make required certifications, or
who have been notified by the IRS that they are subject to backup withholding.
Any such withheld amounts may be credited against the shareholder's U.S. federal
income tax liability.
ORGANIZATION AND SHAREHOLDER MEETINGS
iMillennium Fund is a series of iMillenium Capital Trust (the "Trust"), a
Delaware business trust that is registered with the SEC as an open-end,
management investment company (a "mutual fund"). iMillenium Fund is the only
current portfolio of the Trust. It is not intended that meetings of shareholders
be held except when required by Federal or Delaware law and all shareholders of
iMillenium Fund are entitled to vote at shareholders' meetings.
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FOR MORE INFORMATION
The following documents are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS. Additional information about the Fund's
investments is available in the Fund's annual and semi-annual reports
to shareholders. In the annual report, you will find a discussion of
the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI"). The SAI provides more
detailed information about the Fund and is incorporated by reference
into this Prospectus.
You can get free copies of both reports and the SAI, request other information
and discuss your questions about the Fund by contacting the Fund at:
iMillennium Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, New York 11788-0132
1-xxx-xxx-xxxx
You can also review the Fund's reports and SAI by visiting the Public Reference
Room of the Securities and Exchange Commission at 450 Fifth Street, NW,
Washington, DC 20549. You may also obtain copies, for a fee, by writing to the
Public Reference Room at this address, or by calling 800-SEC-0330.
You may also download a free, text-only version from the Commission's Internet
website at www.sec.gov.
iMillennium Fund's Investment Company Act File number is 811-_________
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iMILLENNIUM FUND
STATEMENT OF ADDITIONAL INFORMATION
[DATE]
Table of Contents
Page
Investment Objective, Policies and Restrictions..................... 2
Trustees and Executive Officers.....................................15
Investment Advisory and Other Services..............................16
Shareholder Servicing & Distribution Plan...........................18
Portfolio Transactions and Allocation of Brokerage..................20
Taxation............................................................21
Ownership of Shares.................................................22
Purchase of Shares..................................................22
Dividends and Distributions.........................................22
Net Asset Value ....................................................22
Performance Comparisons.............................................23
Redemption of Shares................................................24
Counsel and Independent Auditors....................................25
Other Information...................................................25
Appendix............................................................25
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the Fund's Prospectus dated [date]. A copy of the Prospectus
may be obtained from the Fund at the Hauppauge Corporate Center, 150 Motor
Parkway, Hauppauge, New York 11788 or telephone (516) 951-0500.
GLOSSARY
As used in this SAI, the following terms have the meanings listed.
"ADS" means American Data Services, Inc., the administrator, fund accountant,
and transfer and distribution disbursing agent of the Fund.
"Adviser" means iMillennium Capital Management, Inc.
"Board" means the Board of Trustees of the Trust.
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended.
"Trust" means iMillennium Fund, a Delaware business trust is registered with the
SEC as an open-end, management investment company, commonly referred to as a
"mutual fund".
"Custodian" means the custodian of the Fund's assets.
"Fitch" means Fitch IBCA, Inc.
"Fund" means iMillennium Fund, a separate series of the Trust.
"Moody's" means Moody's Investors Service.
"NRSRO" means a nationally recognized statistical rating organization.
"NAV" means net asset value.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's.
"U.S. Government Securities" means obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Trust Act of 1940, as amended.
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The Fund's investment objective is long-term growth of capital. The Fund will
seek to achieve this objective investing primarily in the common stocks and
securities convertible into common stocks of domestic and foreign companies
engaged in the internet and internet-related activities. In seeking investments
for the Fund, the Adviser uses a "bottom-up" stock selection approach. The
Adviser looks for individual companies with earnings and/or revenue growth
potential that may not be recognized by the market at large. In determining
whether a particular company is suitable for investment by the Fund, the Adviser
focuses on a number of different attributes, including the company's specific
market expertise or dominance; its franchise durability and pricing power; solid
fundamentals (e.g., a strong balance sheet, improving returns on equity,
improving returns on capital invested, strong revenue growth, and the ability to
generate free cash flow); strong management, and reasonable valuations in the
context of projected growth rates.
The Fund is designed for investment of that portion of an investor's funds,
which can appropriately bear the special risks associated with certain types of
investments (e.g., investments in smaller capitalization companies). The Fund's
investment techniques, strategies and risks are discussed in the Prospectus.
Additional information regarding the types of investments that the Fund makes,
the risks associated with those investments, and Fund's restrictions are set
forth below. This discussion supplements the disclosure in the prospectus.
Unless otherwise noted, the policies described in this Statement of Additional
Information are not fundamental and may be changed by the Board of Trustees.
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INVESTMENTS AND ASSOCIATED RISKS
1. EQUITY SECURITIES
RISKS IN GENERAL. An investment in the Fund should be made with an
understanding of the risks inherent in an investment in equity securities,
including the risk that the general condition of the stock market may
deteriorate. Common stocks are susceptible to general stock market fluctuations
and to volatile increases and decreases in value according to various
unpredictable factors including expectations regarding government, economic,
monetary and fiscal policies, inflation and interest rates, economic expansion
or contraction and global or regional political, economic and banking crises. In
addition to the general risks and considerations of equity investing, the Fund
is subject to the specific risks associated with the specific investments
discussed below.
COMMON AND PREFERRED STOCK. Common stock represents an equity (ownership)
interest in a company, and usually possesses voting rights and earns dividends.
Dividends on common stock are not fixed but are declared at the discretion of
the issuer. Common stock generally represents the riskiest investment in a
company. In addition, common stock generally has the greatest appreciation and
depreciation potential because increases and decreases in earnings are usually
reflected in a company's stock price.
Preferred stock is a class of stock having a preference over common stock as to
the payment of dividends and the recovery of investment should a company be
liquidated, although preferred stock is usually junior to the debt securities of
the issuer. Preferred stock typically does not possess voting rights and its
market value may change based on changes in interest rates.
The fundamental risk of investing in common and preferred stock is the risk that
the value of the stock might decrease. Stock values fluctuate in response to the
activities of an individual company or in response to general market and/or
economic conditions. Historically, common stocks have provided greater long-term
returns and have entailed greater short-term risks than preferred stocks,
fixed-income and money market investments. The market value of all securities,
including common and preferred stocks, is based upon the market's perception of
value and not necessarily the book value of an issuer or other objective
measures of a company's worth. If you invest in a Fund, you should be willing to
accept the risks of the stock market and should consider an investment in the
Fund only as a part of your overall investment portfolio.
CONVERTIBLE SECURITIES. Convertible securities include debt securities,
preferred stock or other securities that may be converted into or exchanged for
a given amount of common stock of the same or a different issuer during a
specified period and at a specified price in the future. A convertible security
entitles the holder to receive interest on debt or the dividend on preferred
stock until the convertible security matures or is redeemed, converted or
exchanged. Convertible securities rank senior to common stock in a company's
capital structure but are usually subordinated to comparable nonconvertible
securities. Convertible securities have unique investment characteristics in
that they generally: (1) have higher yields than common stocks, but lower yields
than comparable non-convertible securities; (2) are less subject to fluctuation
in value than the underlying stocks since they have fixed income
characteristics; and (3) provide the potential for capital appreciation if the
market price of the underlying common stock increases. A convertible security
may be subject to redemption at the option of the issuer at a price established
in the convertible security's governing instrument. If a convertible security is
called for redemption, a Fund will be required to permit the issuer to redeem
the security, convert it into the underlying common stock or sell it to a third
party.
Investment in convertible securities generally entails less risk than an
investment in the issuer's common stock. Convertible securities are typically
issued by smaller capitalized companies whose stock price may be volatile.
Therefore, the price of a convertible security may reflect variations in the
price of the underlying common stock in a way that nonconvertible debt does not.
The extent to which such risk is reduced, however, depends in large measure upon
the degree to which the convertible security sells above its value as a fixed
income security.
STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRS") AND DIAMONDS. The Fund may
invest in Standard & Poor's Depositary Receipts ("SPDRs"). SPDRs are units of
beneficial interest in an investment company sponsored by a wholly-owned
subsidiary of the American Stock Exchange, Inc. which represent proportionate
undivided interests in a portfolio of securities consisting of substantially all
of the common stocks, in substantially the same weighting, as the component
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common stocks of the Standard & Poor's 500 Stock Index (the "S&P 500 Index").
SPDRs are listed on the American Stock Exchange (the "Exchange") and traded in
the secondary market on a per-SPDR basis.
The Fund may also invest in DIAMONDS. DIAMONDS are units of beneficial interest
in an investment company representing proportionate undivided interests in a
portfolio of securities consisting of all the component common stocks of the Dow
Jones Industrial Average (the "DJIA"). DIAMONDS are listed on the Exchange and
may be traded in the secondary market on a per-DIAMONDS basis.
SPDRs are designed to provide investment results that generally correspond to
the price and yield performance of the component common stocks of the S&P 500
Index. DIAMONDS are designed to provide investors with investment results that
generally correspond to the price and yield performance of the component common
stocks of the DJIA. The value of both SPDRs and DIAMONDS are subject to change
as the values of their respective component common stocks fluctuate according to
the volatility of the market. Investments in SPDRs and DIAMONDS involve certain
inherent risks generally associated with investments in a broadly based
portfolio of common stocks, including the risk that the general level of stock
prices may decline, thereby adversely affecting the value of each unit of SPDRs
and/or DIAMONDS invested in by the Fund. Moreover, the Fund's investment in
SPDRs and DIAMONDS may not exactly match the performance of a direct investment
in the respective indices to which they are intended to correspond. For example,
replicating and maintaining price and yield performance of an index may be
problematic for the Fund due to transaction costs and other expenses.
Additionally, the respective investment company's may not fully replicate the
performance of their respective benchmark indices due to the temporary
unavailability of certain index securities in the secondary market or due to
other extraordinary circumstances such as discrepancies between the investment
company and the indices with respect to the weighting of securities or the
number of, for example, larger capitalized stocks held by an index and the
investment company. Under these type circumstances, the value of the SPDRs or
DIAMONDS held by the Fund will have a negative impact on the net asset value of
the Fund.
2. FOREIGN SECURITIES
DEPOSITARY RECEIPTS. The Fund may invest in American Depositary
Receipts ("ADRs") or other forms of depositary receipts. ADRs are receipts
typically issued in connection with a U.S. or foreign bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. Investments in these types of foreign securities involve certain
inherent risks generally associated with investments in foreign securities,
including the following:
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, and resource self-sufficiency, diversification and balance of
payments position. The internal politics of certain foreign countries may not be
as stable as those of the United States. Governments in certain foreign
countries also continue to participate to a significant degree, through
ownership interest or regulation, in their respective economies. Action by these
governments could include restrictions on foreign investment, nationalization,
expropriation of goods or imposition of taxes, and could have a significant
effect on market prices of securities and payment of interest. The economies of
many foreign countries are heavily dependent upon international trade and are
accordingly affected by the trade policies and economic conditions of their
trading partners. Enactment by these trading partners of protectionist trade
legislation could have a significant adverse effect upon the securities markets
of such countries.
CURRENCY FLUCTUATIONS. A change in the value of any foreign currency
against the U.S. dollar will result in a corresponding change in the U.S. dollar
value of an ADR's underlying portfolio securities denominated in that currency.
Such changes will affect the Fund to the extent that the Fund is invested in
ADR's comprised of foreign securities.
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TAXES. The interest and dividends payable on certain foreign securities
comprising an ADR may be subject to foreign withholding taxes, thus reducing the
net amount of income to be paid to the Fund and that may, ultimately, be
available for distribution to the Fund's shareholders.
3. FIXED INCOME INVESTMENTS.
During normal market conditions, the Fund may invest up to 10% of its total
assets in all types of fixed income securities and up to 5% of its total assets
in high-yield bonds and mortgage and asset backed securities.
Yields on fixed income securities are dependent on a variety of factors,
including the general conditions of the money market and other fixed income
securities markets, the size of a particular offering, the maturity of the
obligation and the rating of the issue. An investment in the Fund that invests
in fixed income securities is subject to risk even if all fixed income
securities in the Fund's portfolio are paid in full at maturity. All fixed
income securities, including U.S. Government Securities, can change in value
when there is a change in interest rates or the issuer's actual or perceived
creditworthiness or ability to meet its obligations.
There is normally an inverse relationship between the market value of securities
sensitive to prevailing interest rates and actual changes in interest rates. In
other words, an increase in interest rates produces a decrease in market value.
The longer the remaining maturity (and duration) of a security, the greater will
be the effect of interest rate changes on the market value of that security.
Changes in the ability of an issuer to make payments of interest and principal
and in the markets' perception of an issuer's creditworthiness will also affect
the market value of the debt securities of that issuer. Obligations of issuers
of fixed income securities (including municipal securities) are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the Federal Bankruptcy Reform Act of 1978. In
addition, the obligations of municipal issuers may become subject to laws
enacted in the future by Congress, state legislatures, or referenda extending
the time for payment of principal and/or interest, or imposing other constraints
upon enforcement of such obligations or upon the ability of municipalities to
levy taxes. Changes in the ability of an issuer to make payments of interest and
principal and in the market's perception of an issuer's creditworthiness will
also affect the market value of the debt securities of that issuer. The
possibility exists, therefore, that, the ability of any issuer to pay, when due,
the principal of and interest on its debt securities may become impaired.
The corporate debt securities in which the Fund may invest include corporate
bonds and notes and short-term investments such as commercial paper and variable
rate demand notes. Commercial paper (short-term promissory notes) is issued by
companies to finance their or their affiliate's current obligations and is
frequently unsecured. Variable and floating rate demand notes are unsecured
obligations redeemable upon not more than 30 days' notice. These obligations
include master demand notes that permit investment of fluctuating amounts at
varying rates of interest pursuant to a direct arrangement with the issuer of
the instrument. The issuer of these obligations often has the right, after a
given period, to prepay the outstanding principal amount of the obligations upon
a specified number of days' notice. These obligations generally are not traded,
nor generally is there an established secondary market for these obligations. To
the extent a demand note does not have a 7-day or shorter demand feature and
there is no readily available market for the obligation, it is treated as an
illiquid security.
4. SHORT-TERM INVESTMENTS AND TEMPORARY DEFENSIVE POSITIONS.
While seeking desirable equity or other investments for the Fund, or for
temporary defensive purposes during periods of market instability, the Fund may
invest without limit in money market mutual funds, commercial paper and other
money market instruments that are of prime quality. Prime quality instruments
are those instruments that are rated in one of the two highest short-term rating
categories by an NRSRO or, if not rated, determined by the Adviser to be of
comparable quality.
Money market instruments usually have maturities of one year or less and fixed
rates of return. The money market instruments in which the Fund may invest
include U.S. Government Securities, time deposits, banker's acceptances and
certificates of deposit of depository institutions (such as banks), corporate
notes and short-term bonds and money market mutual Fund.
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BANK CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES. The Fund may acquire
certificates of deposit, bankers' acceptances and time deposits. Certificates of
deposit are negotiable certificates issued against funds deposited in a
commercial bank for a definite period of time and earning a specified return.
Bankers' acceptances are negotiable drafts or bills of exchange, normally drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning in effect that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Certificates of deposit and bankers'
acceptances acquired by the Fund will be dollar-denominated obligations of
domestic banks or financial institutions which at the time of purchase have
capital, surplus and undivided profits in excess of $100 million (including
assets of both domestic and foreign branches), based on latest published
reports, or less than $100 million if the principal amount of such bank
obligations are fully insured by the U.S. Government.
Domestic banks are subject to different governmental regulations with respect to
the amount and types of loans, which may be made, and interest rates, which may
be charged. In addition, the profitability of the banking industry depends
largely upon the availability and cost of funds for the purpose of financing
lending operations under prevailing money market conditions. General economic
conditions as well as exposure to credit losses arising from possible financial
difficulties of borrowers play an important part in the operations of the
banking industry.
As a result of federal and state laws and regulations, domestic banks are, among
other things, required to maintain specified levels of reserves, limited in the
amount which they can loan to a single borrower, and subject to other
regulations designed to promote financial soundness.
GOVERNMENT OBLIGATIONS. The Fund may invest in U.S. Government obligations. Such
obligations include Treasury bills, certificates of indebtedness, notes and
bonds, and issues of such entities as the Government National Mortgage
Association ("GNMA"), Export-Import Bank of the United States, Tennessee Valley
Authority, Resolution Funding Corporation, Farmers Home Administration, Federal
Home Loan Banks, Federal Intermediate Credit Banks, Federal Farm Credit Banks,
Federal Land Banks, Federal Housing Administration, Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation, and the Student
Loan Marketing Association.
Certain of these obligations, such as those of the GNMA, are supported by the
full faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of United States, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the FNMA, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it were not obligated to do so
by law.
Master Demand Notes. The money market instruments in which the Fund may invest
may have variable or floating rates of interest. These obligations include
master demand notes that permit investment of fluctuating amounts at varying
rates of interest pursuant to direct arrangement with the issuer of the
instrument. The issuer of these obligations often has the right, after a given
period, to prepay the outstanding principal amount of the obligations upon a
specified number of days' notice. These obligations generally are not traded,
nor generally is there an established secondary market for these obligations. To
the extent a demand note does not have a 7-day or shorter demand feature and
there is no readily available market for the obligation, it mistreated as an
illiquid security.
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5. SHORT SALES.
The Fund is authorized to make short sales of securities it owns or has the
right to acquire at no added cost through conversion or exchange of other
securities it owns (referred to as short sales "against the box"). The Fund may
not make short sales of securities, which it does not currently own, or have the
right to acquire (i.e., short sales that are not "against the box").
If the Fund makes a short sale "against the box," the Fund would not immediately
deliver the securities sold and would not receive the proceeds from the sale.
The seller is said to have a short position in the securities sold until it
delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Fund will
deposit in escrow in a separate account with the Custodian an equal amount of
the securities sold short or securities convertible into or exchangeable for
such securities. The Fund can close out its short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund might want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.
The Fund's decision to make a short sale "against the box" may be a technique to
hedge against market risks when the Adviser believes that the price of a
security may decline, causing a decline in the value of a security owned by the
Fund or a security convertible into or exchangeable for such security. In such
case, any future losses in the Fund's long position would be reduced by a gain
in the short position. The extent to which such gains or losses in the long
position are reduced will depend upon the amount of securities sold short
relative to the amount of the securities the Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.
Short sales transactions may sometimes be executed by borrowing securities from
margin accounts established by the Adviser for this purpose. Some interest may
be charged within these margin accounts as a result of price fluctuations of
boxed positions, even though no leverage is employed, since the offsetting long
and short positions within that boxed position will generally offset each
other's market risk.
6. HEDGING AND OPTION INCOME STRATEGIES
The Fund may seek to hedge against a decline in the value of securities it owns
or an increase in the price of securities which it plans to purchase by
purchasing and writing (i.e., selling) covered options on securities in which it
has invested and on any securities index based in whole or in part on securities
in which that fund may invest. The Fund' options may be traded on an exchange or
in an over-the-counter market.
The Fund will not hedge more than 30% of the value of its total assets by buying
put options and writing call options.
These instruments are often referred to as "derivatives," which may be defined
as financial instruments whose performance is derived, at least in part, from
the performance of another asset (such as a security, currency or an index of
securities).
An option is covered if, as long as the Fund is obligated under the option, it
owns an offsetting position in the underlying security or maintains cash, U.S.
Government Securities or other liquid, high-grade debt securities with a value
at all times sufficient to cover the Fund's obligation under the option.
IN GENERAL A call option is a contract pursuant to which the purchaser of the
call option, in return for a premium paid, has the right to buy the security (or
index) underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option, who receives the premium,
has the obligation upon exercise of the option to deliver the underlying
security (or a cash amount equal to the value of the index) against payment of
the exercise price during the option period.
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<PAGE>
A put option gives its purchaser, in return for a premium, the right to sell the
underlying security (or index) at a specified price during the term of the
option. The writer of the put option, who receives the premium, has the
obligation to buy the underlying security (or receive a cash amount equal to the
value of the index), upon exercise at the exercise price during the option
period.
The amount of premium received or paid for an option is based upon certain
factors, including the market price of the underlying security or index, the
relationship of the exercise price to the market price, the historical price
volatility of the underlying security or index, the option period and interest
rates.
There are a limited number of options contracts on securities indices and option
contracts may not be available on all securities that the Fund may own or seek
to own.
RISKS. The Fund's use of options subjects the Fund to certain investment risks
and transaction costs to which it might not otherwise be subject. These risks
include: (1) dependence on the Adviser's ability to predict movements in the
prices of individual securities and fluctuations in the general securities
markets; (2) imperfect correlations between movements in the prices of options
and movements in the price of the securities (or indices) hedged or used for
cover which may cause a given hedge not to achieve its objective; (3) the fact
that the skills and techniques needed to trade these instruments are different
from those needed to select the securities in which the Fund invest; and (4)lack
of assurance that a liquid secondary market will exist for any particular
instrument at any particular time, which, among other things, may hinder the
Fund's ability to limit exposures by closing its positions.
Other risks include the inability of the Fund, as the writer of covered call
options, to benefit from any appreciation of the underlying securities above the
exercise price, and the possible loss of the entire premium paid for options
purchased by the Fund.
7. WARRANTS
The Fund may invest in warrants. A warrant gives the holder a right to purchase
at any time during a specified period a predetermined number of shares of common
stock at a fixed price. Unlike convertible debt securities or preferred stock,
warrants do not pay a fixed dividend. Investments in warrants involve certain
risks, including the possible lack of a liquid market for resale of the
warrants, potential price fluctuations as a result of speculation or other
factors, and failure of the price of the underlying security to reach or have
reasonable prospects of reaching a level at which the warrant can be prudently
exercised (in which event the warrant may expire without being exercised,
resulting in a loss of the Fund's entire investment therein).
8. FUTURES CONTRACTS AND RELATED OPTIONS
Subject to applicable law, and unless otherwise specified in the prospectus, the
Fund may invest without limit in futures contracts and related options for
hedging and non-hedging purposes, such as to manage the effective duration of
the Fund's portfolio or as a substitute for direct investment. A financial
futures contract sale creates an obligation by the seller to deliver the type of
financial instrument called for in the contract in a specified delivery month
for a stated price. A financial futures contract purchase creates an obligation
by the purchaser to take delivery of the type of financial instrument called for
in the contract in a specified delivery month at a stated price. The specific
instruments delivered or taken, respectively, at settlement date are not
determined until on or near that date. The determination is made in accordance
with the rules of the exchange on which the futures contract sale or purchase
was made. Futures contracts are traded in the United States only on commodity
exchanges or boards of trade -- known as "contract markets" -- approved for such
trading by the Commodity Futures Trading Commission (the "CFTC"), and must be
executed through a futures commission merchant or brokerage firm which is a
member of the relevant contract market.
Although futures contracts (other than index futures) by their terms call for
actual delivery or acceptance of commodities or securities, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery.
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Closing out a futures contract sale is affected by purchasing a futures contract
for the same aggregate amount of the specific type of financial instrument or
commodity with the same delivery date. If the price of the initial sale of the
futures contract exceeds the price of the offsetting purchase, the seller is
paid the difference and realizes a gain. Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the seller realizes a
loss. If the Fund is unable to enter into a closing transaction, the amount of
the Fund's potential loss is unlimited. The closing out of a futures contract
purchase is affected by the purchaser's entering into a futures contract sale.
If the offsetting sale price exceeds the purchase price, the purchaser realizes
a gain, and if the purchase price exceeds the offsetting sale price, he realizes
a loss. In general, 40% of the gain or loss arising from the closing out of a
futures contract traded on an exchange approved by the CFTC is treated as
short-term gain or loss, and 60% is treated as long-term gain or loss.
Unlike when the Fund purchases or sells a security, no price is paid or received
by the Fund upon the purchase or sale of a futures contract. Upon entering into
a contract, the Fund is required to deposit with its custodian in a segregated
account in the name of the futures broker an amount of liquid assets. This
amount is known as "initial margin." The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of Funds to finance the
transactions. Rather, initial margin is similar to a performance bond or good
faith deposit, which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied.
Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin" or "maintenance margin," to and
from the broker (or the custodian) are made on a daily basis as the price of the
underlying security or commodity fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as "marking to
the market." For example, when the Fund has purchased a futures contract on a
security and the price of the underlying security has risen, that position will
have increased in value and the Fund will receive from the broker a variation
margin payment based on that increase in value. Conversely, when the Fund has
purchased a security futures contract and the price of the underlying security
has declined, the position would be less valuable and the Fund would be required
to make a variation margin payment to the broker.
The Fund may elect to close some or all of its futures positions at any time
prior to their expiration in order to reduce or eliminate a hedge position then
currently held by the Fund. The Fund may close its positions by taking opposite
positions, which will operate to terminate the Fund's position in the futures
contracts. Final determinations of variation margin are then made, additional
cash is required to be paid by or released to a Fund, and the Fund realizes a
loss or a gain. Such closing transactions involve additional commission costs.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts it may buy or sell and enter into closing
transactions with respect to such options to terminate existing positions.
Options on futures contracts give the purchaser the right in return for the
premium paid to assume a position in a futures contract at the specified option
exercise price at any time during the period of the option. The Fund may use
options on futures contracts in lieu of writing or buying options directly on
the underlying securities or purchasing and selling the underlying futures
contracts. For example, to hedge against a possible decrease in the value of its
portfolio securities, the Fund may purchase put options or write call options on
futures contracts rather than selling futures contracts. Similarly, the Fund may
purchase call options or write put options on futures contracts as a substitute
for the purchase of futures contracts to hedge against a possible increase in
the price of securities which the Fund expects to purchase. Such options
generally operate in the same manner as options purchased or written directly on
the underlying investments.
As with options on securities, the holder or writer of an option may terminate
his position by selling or purchasing an offsetting option. There is no
guarantee that such closing transactions can be affected.
The Fund will be required to deposit initial margin and maintenance margin with
respect to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those described above in connection with the
discussion of futures contracts.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. Successful use
of futures contracts by the Fund is subject to the Adviser's ability to predict
movements in various factors affecting securities markets, including interest
rates. Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
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<PAGE>
(plus transaction costs). However, there may be circumstances when the purchase
of a call or put option on a futures contract would result in a loss to the Fund
when the purchase or sale of a futures contract would not, such as when there is
no movement in the prices of the hedged investments. The writing of an option on
a futures contract involves risks similar to those risks relating to the sale of
futures contracts.
The use of options and futures strategies also involves the risk of imperfect
correlation among movements in the prices of the securities underlying the
futures and options purchased and sold by the Fund, of the options and futures
contracts themselves, and, in the case of hedging transactions, of the
securities which are the subject of a hedge. The successful use of these
strategies further depends on the ability of the Adviser to forecast interest
rates and market movements correctly.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain market clearing facilities
inadequate, and thereby result in the institution by exchanges of special
procedures which may interfere with the timely execution of customer orders.
To reduce or eliminate a position held by the Fund, the Fund may seek to close
out such position. The ability to establish and close out positions will be
subject to the development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist for a particular
futures contract or option. Reasons for the absence of a liquid secondary market
on an exchange include the following: (i) there may be insufficient trading
interest in certain contracts or options; (ii) restrictions may be imposed by an
exchange on opening transactions or closing transactions or both; (iii) trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of contracts or options, or underlying securities;
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing corporation may not at
all times be adequate to handle current trading volume; or (vi) one or more
exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary market on
that exchange for such contracts or options (or in the class or series of
contracts or options) would cease to exist, although outstanding contracts or
options on the exchange that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be exercisable in accordance
with their terms.
INDEX FUTURES CONTRACTS. An index futures contract is a contract to buy or sell
units of an index at a specified future date at a price agreed upon when the
contract is made. Entering into a contract to buy units of an index is commonly
referred to as buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of an index is commonly referred
to as selling a contract or holding a short position. A unit is the current
value of the index. The Fund may enter into stock index futures contracts, debt
index futures contracts, or other index futures contracts appropriate to its
objective. The Fund may also purchase and sell options on index futures
contracts.
For example, the S&P 500 Index is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500 Index assigns
relative weightings to the common stocks included in the Index, and the value
fluctuates with changes in the market values of those common stocks. In the case
of the S&P 500 Index, contracts are to buy or sell 500 units. Thus, if the value
of the S&P 500 Index were $150, one contract could be worth $75,000 (500 units x
$150). The stock index futures contract specifies that no delivery of the actual
stocks making up the index will take place. Instead, settlement in cash must
occur upon the termination of the contract, with the settlement being the
difference between the contract price and the actual level of the stock index at
the expiration of the contract. For example, if the Fund enters into a futures
contract to buy 500 units of the S&P 500 Index at a specified future date at a
contract price of $150 and the S&P 500 Index is at $154 on that future date, the
Fund will gain $2,000 (500 units x gain of $4). If the Fund enters into a
futures contract to sell 500 units of the stock index at a specified future date
at a contract price of $150 and the S&P 500 Index is at $152 on that future
date, the Fund will lose $1,000 (500 units x loss of $2).
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There are several risks in connection with the use by the Fund of index futures.
One risk arises because of the imperfect correlation between movements in the
prices of the index futures and movements in the prices of securities, which are
the subject of the hedge. The Adviser will, however, attempt to reduce this risk
by buying or selling, to the extent possible, futures on indices the movements
of which will, in its judgment, have a significant correlation with movements in
the prices of the securities sought to be hedged.
Successful use of index futures by the Fund is also subject to the Adviser's
ability to predict movements in the direction of the market. For example, it is
possible that, where the Fund has sold futures to hedge its portfolio against a
decline in the market, the index on which the futures are written may advance
and the value of securities held in the Fund's portfolio may decline. If this
occurred, the Fund would lose money on the futures and also experience a decline
in value in its portfolio securities. It is also possible that, if the Fund has
hedged against the possibility of a decline in the market adversely affecting
securities held in its portfolio and securities prices increase instead, the
Fund will lose part or all of the benefit of the increased value of those
securities it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has insufficient cash,
it may have to sell securities to meet daily variation margin requirements at a
time when it is disadvantageous to do so.
In addition to the possibility that there may be an imperfect correlation, or no
correlation at all, between movements in the index futures and the portion of
the Fund's portfolio being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain market
distortions. First, all participants in the futures market are subject to margin
deposit and maintenance requirements. Rather than meeting additional margin
deposit requirements, investors may close futures contracts through offsetting
transactions, which could distort the normal relationship between the index and
futures markets. Second, margin requirements in the futures market are less
onerous than margin requirements in the securities market, and as a result the
futures market may attract more speculators than the securities market does.
Increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and also because of the imperfect correlation between movements
in the index and movements in the prices of index futures, even a correct
forecast of general market trends by the Adviser may still not result in a
profitable position over a short time period.
OPTIONS ON STOCK INDEX FUTURES. Options on index futures are similar to options
on securities except that options on index futures give the purchaser the right,
in return for the premium paid, to assume a position in an index futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index futures contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the index future. If an option is
exercised on the last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the exercise price
of the option and the closing level of the index on which the future is based on
the expiration date. Purchasers of options who fail to exercise their options
prior to the exercise date suffer a loss of the premium paid.
OPTIONS ON INDICES. As an alternative to purchasing call and put options on
index futures, the Fund may purchase and sell call and put options on the
underlying indices themselves. Such options would be used in a manner identical
to the use of options on index futures.
INDEX WARRANTS. The Fund may purchase put warrants and call warrants whose
values vary depending on the change in the value of one or more specified
securities indices ("index warrants"). Index warrants are generally issued by
banks or other financial institutions and give the holder the right, at any time
during the term of the warrant, to receive upon exercise of the warrant a cash
payment from the issuer based on the value of the underlying index at the time
of exercise. In general, if the value of the underlying index rises above the
exercise price of the index warrant, the holder of a call warrant will be
entitled to receive a cash payment from the issuer upon exercise based on the
difference between the value of the index and the exercise price of the warrant;
if the value of the underlying index falls, the holder of a put warrant will be
entitled to receive a cash payment from the issuer upon exercise based on the
difference between the exercise price of the warrant and the value of the index.
The holder of a warrant would not be entitled to any payments from the issuer at
any time when, in the case of a call warrant, the exercise price is greater than
the value of the underlying index, or, in the case of a put warrant, the
exercise price is less than the value of the underlying index. If the Fund were
not to exercise an index warrant prior to its expiration, then the Fund would
lose the amount of the purchase price paid by it for the warrant.
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The Fund will normally use index warrants in a manner similar to its use of
options on securities indices. The risks of the Fund's use of index warrants are
generally similar to those relating to its use of index options. Unlike most
index options, however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only by the credit of
the bank or other institution which issues the warrant. Also, index warrants
generally have longer terms than index options. Although the Fund will normally
invest only in exchange-listed warrants, index warrants are not likely to be as
liquid as certain index options backed by a recognized clearing agency. In
addition, the terms of index warrants may limit the Fund's ability to exercise
the warrants at such time, or in such quantities, as the Fund would otherwise
wish to do.
9. ILLIQUID AND RESTRICTED SECURITIES.
ILLIQUID SECURITIES. The Fund may not invest more than 15% of the value of its
net assets in securities that at the time of purchase have legal or contractual
restrictions on resale or are otherwise illiquid. The Adviser will monitor the
amount of illiquid securities in the Fund's portfolio, under the supervision of
the Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
that are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemption requests
within seven days. The Fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the Commission under the Securities
Act, the Trust's Board of Trustees may determine that such securities are not
illiquid securities notwithstanding their legal or contractual restrictions on
resale. In all other cases, however, securities subject to restrictions on
resale will be deemed illiquid.
RESTRICTED SECURITIES. The SEC Staff currently takes the view that any
delegation by the Board of Trustees of the authority to determine that a
restricted security is readily marketable (as described in the investment
restrictions of the Fund) must be pursuant to written procedures established by
the Board of Trustees. It is the present intention of the Board of Trustees
that, if the Board of Trustees decides to delegate such determinations to the
Adviser or another person, they would do so pursuant to written procedures,
consistent with the Staff's position. Should the Staff modify its position in
the future, the Board of Trustees would consider what action would be
appropriate in light of the Staff's position at that time.
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DETERMINATION OF LIQUIDITY. The Board has the ultimate responsibility for
determining whether specific securities are liquid or illiquid and has delegated
the function of making determinations of liquidity to the Adviser, pursuant to
guidelines approved by the Board. The Adviser determines and monitors the
liquidity of the portfolio securities and reports periodically on its decisions
to the Board. The Adviser takes into account a number of factors in reaching
liquidity decisions, including but not limited to: (1) the frequency of trades
and quotations for the security; (2) the number of dealers willing to purchase
or sell the security and the number of other potential buyers; (3) the
willingness of dealers to undertake to make a market in the security; and (4)
the nature of the marketplace trades, including the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of the
transfer.
An institutional market has developed for certain restricted securities.
Accordingly, contractual or legal restrictions on the resale of a security may
not be indicative of the liquidity of the security. If such securities are
eligible for purchase by institutional buyers in accordance with Rule 144A under
the 1933 Act or other exemptions, the Adviser may determine that the securities
are not illiquid.
10. REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements. A repurchase agreement involves
the purchase by the Fund of the securities with the condition that after a
stated period of time the original seller will buy back the same securities at a
predetermined price or yield. The Fund's custodian will hold the securities
underlying any repurchase agreement or such securities will be part of the
Federal Reserve Book Entry System. The market value of the collateral underlying
the repurchase agreement will be determined on each business day. If at any time
the market value of the Fund's collateral falls below the repurchase price of
the repurchase agreement (including any accrued interest), the Fund will
promptly receive additional collateral (so the total collateral is an amount at
least equal to the repurchase price plus accrued interest).
11. SECURITIES LOANS
The Fund may make secured loans of its portfolio securities, on either a
short-term or long-term basis, amounting to not more than 25% of its total
assets, thereby realizing additional income. The risks in lending portfolio
securities, as with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss rights in the collateral should the
borrower fail financially. As a matter of policy, securities loans are made to
broker-dealers pursuant to agreements requiring that the loans be continuously
secured by collateral consisting of cash or short-term debt obligations at least
equal at all times to the value of the securities on loan, "marked-to-market"
daily. The borrower pays to the Fund an amount equal to any dividends or
interest received on securities lent. The Fund retains all or a portion of the
interest received on investment of the cash collateral or receives a fee from
the borrower. Although voting rights, or rights to consent, with respect to the
loaned securities may pass to the borrower, the Fund retains the right to call
the loans at any time on reasonable notice, and it will do so to enable the Fund
to exercise voting rights on any matters materially affecting the investment.
The Fund may also call such loans in order to sell the securities.
SECURITY RATINGS INFORMATION
The Fund's investments in fixed income securities are subject to credit risk
relating to the financial condition of the issuers of the securities that the
Fund holds. To limit credit risk, the Fund invests no more than 5% of its assets
in debt securities that are considered non-investment grade. Investment grade
means rated in the top four long-term rating categories or top two short-term
rating categories by an NRSRO, or unrated and determined by the Adviser to be of
comparable quality.
The lowest long-term ratings that are investment grade for corporate bonds,
including convertible bonds, are "Baa" in the case of Moody's and "BBB" in the
case of S&P and Fitch; for preferred stock are "Baa" in the case of Moody's and
"BBB" in the case of S&P and Fitch; and for short-term debt, including
commercial paper, are "Prime-2" (P-2) in the case of Moody's, "A-2" in the case
of S&P and "F-2" in the case of Fitch.
Unrated securities may not be as actively traded as rated securities. The Fund
may retain securities whose rating has been lowered below the lowest permissible
rating category (or that are unrated and determined by the Adviser to be of
comparable quality to securities whose rating has been lowered below the lowest
permissible rating category) if the Adviser determines that retaining such
security is in the best interests of the Fund. Because a downgrade often results
in a reduction in the market price of the security, sale of a downgraded
security may result in a loss.
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Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The Fund may
use these ratings to determine whether to purchase, sell or hold a security.
Ratings are general and are not absolute standards of quality. Securities with
the same maturity, interest rate and rating may have different market prices. If
an issue of securities ceases to be rated or if its rating is reduced after it
is purchased by the Fund, the Adviser will determine whether the Fund should
continue to hold the obligation. To the extent that the ratings given by an
NRSRO may change as a result of changes in such organizations or their rating
systems, the Adviser will attempt to substitute comparable ratings. Credit
ratings attempt to evaluate the safety of principal and interest payments and do
not evaluate the risks of fluctuations in market value. Also, rating agencies
may fail to make timely changes in credit ratings. An issuer's current financial
condition may be better or worse than a rating indicates.
INVESTMENT LIMITATIONS
For purposes of all investment policies of the Fund: (1) the term 1940 Act
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Fund may rely; and (2) the term Code includes the rules thereunder,
IRS interpretations and any private letter ruling or similar authority upon
which the Fund may rely.
Except as required by the 1940 Act or the Code, if any percentage restriction on
investment or utilization of assets is adhered to at the time an investment is
made, a later change in percentage resulting from a change in the market values
of the Fund's assets or purchases and redemptions of shares will not be
considered a violation of the limitation.
A fundamental policy of the Fund cannot be changed without the affirmative vote
of the lesser of: (1) 50% of the outstanding shares of the Fund; or (2) 67% of
the shares of the Fund present or represented at a shareholders meeting at which
the holders of more than 50% of the outstanding shares of the Fund are present
or represented. A nonfundamental policy of the Fund may be changed by the Board
without shareholder approval.
A. FUNDAMENTAL LIMITATIONS
The Fund has adopted the following fundamental investment policies.
1. ISSUANCE OF SENIOR SECURITIES
The Fund may not issue senior securities except pursuant to Section 18 of the
1940 Act and except that the Fund may borrow money subject to its investment
limitation on borrowing.
2. UNDERWRITING ACTIVITIES
The Fund may not act as an underwriter of securities of other issuers, except to
the extent that, in connection with the disposition of portfolio securities, the
Fund may be deemed to be an underwriter for purpose of the 1933 Act.
3. CONCENTRATION
The Fund may not purchase the securities of issuers (other than U.S. Government
Securities) conducting their business activity in the same industry if,
immediately after such purchase, the value of the Fund's investments in such
industry would comprise 25% or more of the value of its total assets.
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4. PURCHASES AND SALES OF REAL ESTATE
The Fund not may purchase or sell real estate or any interest therein, except
that the Fund may invest in securities issued or guaranteed by corporate or
governmental entities secured by real estate or interests therein, such as
mortgage pass-throughs and collateralized mortgage obligations, or issued by
companies that invest in real estate or interests therein.
5. PURCHASES AND SALES OF COMMODITIES
The Fund may not purchase or sell physical commodities or contracts, options or
options on contracts to purchase or sell physical commodities.
6. MAKING LOANS
The Fund may not make loans to other persons except for the purchase of debt
securities that are otherwise permitted investments or loans of portfolio
securities through the use of repurchase agreements.
7. DIVERSIFICATION
The Fund is considered "non-diversified" under the 1940 Act. In order to qualify
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended, each Fund currently intends to comply with certain
diversification limits imposed by Subchapter M.
Subchapter M currently requires a fund to invest no more than 25% of its total
assets in securities of any one issuer and to invest at least 50% of its total
assets so that no more than 5% of the fund's total assets are invested in
securities of any one issuer. However, Subchapter M allows unlimited investments
in cash, cash items, government securities (as defined in Subchapter M) and
securities of other investment companies. These tax requirements are generally
applied at the end of each quarter of a fund's taxable year.
B. NONFUNDAMENTAL LIMITATIONS
The Fund has adopted the following nonfundamental investment policies. The Fund
may not:
1. PLEDGE, MORTGAGE & HYPOTHECATE
Pledge, mortgage or hypothecate its assets, except to secure indebtedness
permitted to be incurred by the Fund. The deposit in escrow of securities in
connection with the writing of put and call options, collateralized loans of
securities and collateral arrangements with respect to margin for futures
contracts are not deemed to be pledges or hypothecations for this purpose.
2. SHORT SALES
Make short sales of securities except short sales against the box.
3. PURCHASES ON MARGIN
Purchase securities on margin except for the use of short-term credit necessary
for the clearance of purchases and sales of portfolio securities, but the Fund
may make margin deposits in connection with permitted transactions in options.
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4. ILLIQUID SECURITIES
Purchase a security if, as a result, more than 15% of its net assets would be
invested in illiquid securities. If the 15% limit on illiquid securities is
exceeded by virtue of other than a change in market values, the condition will
be reported by the Adviser to the Board.
5. BORROWING
Purchase portfolio securities if its outstanding borrowings exceed 5% of the
value of its total assets or borrow for purposes other than meeting redemptions
in an amount exceeding 5% of the value of its total assets at the time the
borrowing is made.
6. HISTORY OF ISSUER
Invest more than 5% of its net assets in securities (other than
fully-collateralized debt obligations) issued by companies that have conducted
continuous operations for less than three years, including the operations of
predecessors, unless guaranteed as to principal and interest by an issuer in
whose securities the Fund could invest.
7. OFFICERS' AND TRUSTEES' HOLDINGS
Invest in or hold securities of any issuer if officers and Trustees of the Trust
or the Adviser, individually owning beneficially more than 1/2 of 1% of the
securities of the issuer, in the aggregate own more than 5% of the issuer's
securities.
8. OIL, GAS & MINERAL EXPLORATION
Invest in interests in oil or gas or interests in other mineral exploration or
development programs.
TRUSTEES AND EXECUTIVE OFFICERS
Because iMillennium Capital Trust is a Delaware business trust, there are
Trustees appointed to run the Trust. These Trustees are responsible for
overseeing the general operations of the Trust and the services of the Adviser
and other companies that provide necessary services to the Fund. Among other
things, the Board approves the contractual arrangements with these service
providers, ensures the Funds' compliance with applicable securities laws and
that sees dividends and capital gains are distributed to shareholders. The
Trustees have appointed officers to provide many of the functions necessary for
day-to-day operations of the Fund.
Trustees and officers of the Trust, together with information as to their
principal business occupations during the last five years, are shown below. Each
Trustee who is considered an "interested person" of the Trust (as defined in
Section 2(a)(19) of the 1940 Act) is indicated by an asterisk next to his name.
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POSITIONS HELD WITH THE
COMPANY PRINCIPAL OCCUPATION
NAME AND ADDRESS LAST FIVE YEARS
- ------------------------ ----------------------------- -------------------------
- ------------------------ ----------------------------- -------------------------
*Omar Rivero Trustee and President President, iMillennium
17225 El Camino Real Capital Management, Inc.,
Suite 415 formerly Rivero
Houston, Texas 77058 Investment Management
Company, Houston, Texas,
since 1996.Prior to that,
Partner, Chaves, Gonzales
& Hoblit, L.L.P.,
Houston, Texas.
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- ------------------------ ----------------------------- -------------------------
Trustee
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- ------------------------ ----------------------------- -------------------------
Trustee
- ------------------------ ----------------------------- -------------------------
- ------------------------ ----------------------------- -------------------------
Trustee
- ------------------------ ----------------------------- -------------------------
- ------------------------ ----------------------------- -------------------------
Trustee
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- ------------------------ ----------------------------- -------------------------
Vice President and Treasurer
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Asst. Treasurer
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Vice President and Secretary
- ------------------------ ----------------------------- -------------------------
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Asst. Secretary
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The members of the Audit Committee of the Board of Trustees are [independent
trustees' names]. Mr. XXX acts as the chairperson of such committee. The Audit
Committee oversees the Fund's financial reporting process, reviews audit results
and recommends annually to the Trust a firm of independent certified public
accountants.
Those Trustees who are officers or employees of the Administrator or its
affiliates receive no remuneration from the Fund. Each disinterested Trustee
receives a fee from the Fund for each regular quarterly and in-person special
meeting of the Board of Trustees attended. Members of the Board who are not
affiliated with the Adviser or the Administrator receive an annual fee of $x,xxx
plus $xxx for each Board meeting attended. In addition, each Trustee who is not
affiliated with the Adviser or the Administrator is reimbursed for expenses
incurred in connection with attending meetings.
The following table sets forth the estimated compensation expected to be
received by each Trustee from the Trust during the fiscal year ending as of
November 30, 1999.
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Aggregate Annual Estimated Compensation from the Trust
Trustee
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INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
The investment adviser for the Fund is is iMillennium Capital Management, Inc.
The Adviser will act as such pursuant to a written agreement which, after its
initial two-year period, must be annually re-approved by the Board of Trustees.
The address of the Adviser is 17225 El Camino Real, Suite 415, Houston, Texas
77058. The Adviser can also be contacted by telephone at (281) 990-7485.
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CONTROL OF THE ADVISER. The stock of the Adviser is majority-owned by Mr. Omar
S. Rivero. Mr. Rivero is also the Chairman and Chief Executive Officer of the
Adviser. Mr. Rivero manages the investment program of the Fund and is primarily
responsible for the day-to-day management of the Fund's portfolio.
INVESTMENT ADVISORY AGREEMENT. The Adviser acts as the investment adviser of the
Fund under an Investment Advisory Agreement which has been approved by the Board
of Trustees (including a majority of the Trustees who are not parties to the
agreement, or interested persons of any such party).
The Investment Advisory Agreement will terminate automatically in the event of
its assignment. In addition, the Agreement is terminable at any time, without
penalty, by the Board of Trustees of the Trust or by vote of a majority of the
Fund's outstanding voting securities on not more than 60 days' written notice to
the Adviser, and by the Adviser on 60 days' written notice to the Trust. Unless
sooner terminated, the Agreement shall continue in effect for more than two
years after its execution only so long as such continuance is specifically
approved at least annually by either the Board of Trustees or by a vote of a
majority of the outstanding shares of the Fund, provided that in either event
such continuance is also approved by a vote of a majority of the Trustees who
are not parties to such Agreement, or interested persons of such parties, cast
in person at a meeting called for the purpose of voting on such approval.
Pursuant to its Investment Advisory Agreement, the Fund will pay the Adviser
monthly an advisory fee equal, on an annual basis, to 1.50% of its average daily
net assets. The Adviser may waive a portion of its fees from time to time.
Under the Investment Advisory Agreement, the Adviser provides the Fund with
advice and assistance in the selection and disposition of the Fund's
investments. All investment decisions are subject to review by the Board of
Trustees of the Trust. The Adviser is obligated to pay the salaries and fees of
any affiliates of the Adviser serving as officers of the Trust or the Fund.
The same security may be suitable for the Fund or other private accounts managed
by the Adviser. If and when the Fund or two or more accounts simultaneously
purchase or sell the same security, the transactions will be allocated as to
price and amount in accordance with arrangements equitable to the Fund or
account. The simultaneous purchase or sale of the same securities by the Fund
and other accounts may have a detrimental effect on the Fund, as this may affect
the price paid or received by the Fund or the size of the position obtainable or
able to be sold by the Fund.
ADMINISTRATOR
The Administrator for the Fund is American Data Services, Inc. (the
"Administrator"), which has its principal office at The Hauppauge Corporate
Center, 150 Motor Parkway, Hauppauge, New York 11788, and is primarily in the
business of providing administrative, fund accounting and stock transfer
services to retail and institutional mutual funds through its offices in New
York, Denver and Los Angeles.
Pursuant to an Administrative Service Agreement with the Fund, the Administrator
provides all administrative services necessary for the Fund, subject to the
supervision of the Board of Trustees. The Administrator will provide persons to
serve as officers of the Fund. Such officers may be Trustees, officers or
employees of the Administrator or its affiliates.
The Administrative Service Agreement is terminable by the Board of Trustees of
the Trust or the Administrator on sixty days' written notice and may be assigned
provided the non-assigning party provides prior written consent. The Agreement
shall remain in effect for two years from the date of its initial approval, and
subject to annual approval of the Board of Trustees for one-year periods
thereafter. The Agreement provides that in the absence of willful misfeasance,
bad faith or gross negligence on the part of the Administrator or reckless
disregard of its obligations thereunder, the Administrator shall not be liable
for any action or failure to act in accordance with its duties thereunder.
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Under the Administrative Service Agreement, the Administrator provides all
administrative services, including, without limitation: (i) provides services of
persons competent to perform such administrative and clerical functions as are
necessary to provide effective administration of the Fund; (ii) overseeing the
performance of administrative and professional services to the Fund by others,
including the Fund's Custodian; (iii) preparing, but not paying for, the
periodic updating of the Fund's Registration Statement, Prospectus and Statement
of Additional Information in conjunction with Fund counsel, including the
printing of such documents for the purpose of filings with the Securities and
Exchange Commission and state securities administrators, preparing the Fund's
tax returns, and preparing reports to the Fund's shareholders and the Securities
and Exchange Commission; (iv) preparing in conjunction with Fund counsel, but
not paying for, all filings under the securities or "Blue Sky" laws of such
states or countries as are designated by the Distributor, which may be required
to register or qualify, or continue the registration or qualification, of the
Fund and/or its shares under such laws; (v) preparing notices and agendas for
meetings of the Board of Trustees and minutes of such meetings in all matters
required by the 1940 Act to be acted upon by the Board; and (vi) monitoring
daily and periodic compliance with respect to all requirements and restrictions
of the Investment Trust Act, the Internal Revenue Code and the Prospectus.
The Administrator, pursuant to the Fund Accounting Service Agreement, provides
the Fund with all accounting services, including, without limitation: (i) daily
computation of net asset value; (ii) maintenance of security ledgers and books
and records as required by the Investment Trust Act; (iii) production of the
Fund's listing of portfolio securities and general ledger reports; (iv)
reconciliation of accounting records; (v) calculation of yield and total return
for the Fund; (vi) maintaining certain books and records described in Rule 31a-1
under the 1940 Act, and reconciling account information and balances among the
Fund's Custodian and Adviser; and (vii) monitoring and evaluating daily income
and expense accruals, and sales and redemptions of shares of the Fund.
ADMINISTRATOR'S FEES. For the services rendered to the Fund by the
Administrator, the Fund pays the Administrator a monthly fee based on the Fund's
average net assets. The Fund also pays the Administrator for any out-of-pocket
expenses. These fees are set forth in the Fund's Prospectus.
In return for providing the Fund with all accounting related services, the Fund
pays the Administrator a monthly fee based on the Fund's average net assets,
plus any out-of-pocket expenses for such services.
CUSTODIAN
_______________ serves as custodian for the Fund's cash and securities (the
"Custodian"). Pursuant to a Custodian Agreement, it is responsible for
maintaining the books and records of the Fund's portfolio securities and cash.
The Custodian does not assist in, and is not responsible for, investment
decisions involving assets of the Fund.
TRANSFER AGENT AND DIVIDEND AGENT
American Data Services, Inc., the Administrator, also acts as the Fund's
transfer and dividend agent.
DISTRIBUTION AGREEMENT
Pursuant to a Distribution Agreement, ADS Distributors, Inc. (the "Distributor")
has agreed to act as the principal underwriter for the Fund in the sale and
distribution to the public of shares of the Fund, either through dealers or
otherwise. The Distributor has agreed to offer such shares for sale at all times
when such shares are available for sale and may lawfully be offered for sale and
sold.
SHAREHOLDER SERVICING AND DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan"), which was reviewed and
approved by a majority of the disinterested Trustees of the Trust, pursuant to
Rule 12b-1 under the Act (the "Rule"). The Rule provides that an investment
company which bears any direct or indirect expense of distributing its shares
must do so only in accordance with a plan permitted by the Rule. The Plan
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provides that the Fund will compensate the Distributor for certain expenses and
costs incurred in connection with providing marketing and promotional support to
the Fund, shareholder servicing and maintaining shareholder accounts, to
compensate parties with which it has written agreements and whose clients own
shares of the Fund for providing servicing to their clients ("shareholder
servicing") and financial institutions with which it has written agreements and
whose clients are Fund shareholders (each a "broker-dealer") for providing
distribution assistance and promotional support to the Fund, which is subject to
a maximum of 0.25% per annum of the Fund's average daily net assets. Fees paid
under the Plan may not be waived for individual shareholders.
Each shareholder servicing agent and broker-dealer will, as agent for its
customers, among other things: answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
the Fund may be effected and certain other matters pertaining to the Fund;
assist shareholders in designating and changing dividend options, account
designations and addresses; provide necessary personnel and facilities to
establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder designated accounts;
furnish quarterly and year-end statements and confirmations within five business
days after activity in the account; transmit to shareholders of the Fund proxy
statements, annual reports, updated prospectuses and other communications;
receive, tabulate and transmit proxies executed by shareholders with respect to
meetings of shareholders of the Fund; and provide such other related services as
the Fund or a shareholder may request.
The Plan, the shareholder servicing agreements and the form of distribution
agreement each provide that the Adviser or the Distributor may make payments
from time to time from their own resources which may include the advisory fee
and the asset based sales charges and past profits for the following purposes:
(i) to defray the costs of and to compensate others, including financial
intermediaries with whom the Distributor has entered into written agreements,
for performing shareholder servicing and related administrative functions of the
Fund; to compensate certain financial intermediaries for providing assistance in
distributing Fund shares; (ii) to pay the costs of printing and distributing the
Fund's prospectus to prospective investors; and (iii) to defray the cost of the
preparation and printing of brochures and other promotional materials, mailings
to prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor will determine the amount
of such payments made pursuant to the Plan with the shareholder servicing agents
and broker-dealers with whom it has contracted, provided that such payments made
pursuant to the Plan will not increase the amount which the Fund is required to
pay the Distributor for any fiscal year under the shareholder servicing
agreements or otherwise.
Shareholder servicing agents and broker-dealers may charge investors a fee in
connection with their use of specialized purchase and redemption procedures
offered to investors by the shareholder servicing agents and broker-dealers. In
addition, shareholder servicing agents and broker-dealers offering purchase and
redemption procedures similar to those offered to shareholders who invest in the
fund directly may impose charges, limitations, minimums and restrictions in
addition to or different from those applicable to shareholders who invest in the
Fund directly. Accordingly, the net yield to investors who invest through
shareholder servicing agents and broker-dealers may be less than realized by
investing in the Fund directly. An investor should read the Prospectus in
conjunction with the materials provided by the shareholder servicing agent and
broker-dealer describing the procedures under which Fund shares may be purchased
and redeemed through the shareholder servicing agent and broker-dealer.
In accordance with the Rule, the Plan provides that all written agreements
relating to the Plan entered into by the Fund, the Distributor or the Adviser,
and the shareholder servicing agents, broker-dealers, or other organizations,
must be in a form satisfactory to the Board of Trustees. In addition, the Plan
requires the Fund and the Distributor to prepare, at least quarterly, written
reports setting forth all amounts expended for distribution purposes by the Fund
and the Distributor pursuant to the Plan and identifying the distribution
activities for which those expenditures were made for review by the Board of
Trustees.
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OTHER EXPENSES
The Fund pays certain operating expenses that are not assumed by the Adviser,
the Administrator or any of their respective affiliates. These expenses,
together with fees paid to the Adviser, the Administrator, the Distributor and
the Transfer Agent, are deducted from income of the Fund before dividends are
paid. These expenses include, but are not limited to, organizational costs, fees
and expenses of officers and Trustees who are not affiliated with the Adviser,
the Administrator or any of their respective affiliates, taxes, interest, legal
fees, custodian fees, audit fees, brokerage fees and commissions, fees and
expenses of registering and qualifying the Fund and its shares for distribution
under federal and state securities laws, the expenses of reports to
shareholders, shareholders' meetings and proxy solicitations.
PORTFOLIO TRANSACTIONS AND ALLOCATION OF BROKERAGE
The Fund's assets are invested by the Adviser in a manner consistent with its
investment objective, policies, and restrictions and with any instructions the
Board of Trustees may issue from time to time. Within this framework, the
Adviser is responsible for making all determinations as to the purchase and sale
of portfolio securities and for taking all steps necessary to implement
securities transactions on behalf of the Fund.
U.S. Government securities generally are traded in the over-the-counter market
through broker-dealers. A broker-dealer is a securities firm or bank that makes
a market for securities by offering to buy at one price and sell at a slightly
higher price. The difference between the prices is known as a spread.
In placing orders for the purchase and sale of portfolio securities for the
Fund, the Adviser will use its best efforts to obtain the best possible price
and execution and will otherwise place orders with broker-dealers subject to and
in accordance with any instructions the Board of Trustees may issue from time to
time. The Adviser will select broker-dealers including, the Distributor, to
execute portfolio transactions on behalf of the Fund primarily on the basis of
best price and execution.
When consistent with the objectives of prompt execution and favorable net price,
business may be placed with broker-dealers who furnish investment research or
services to the Adviser. Such research or services include advice, both directly
and in writing, as to the value of securities; the advisability of investing in,
purchasing or selling securities; and the availability of securities, or
purchasers or sellers of securities; as well as analyses and reports concerning
issues, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts. To the extent portfolio transactions are
effected with broker-dealers who furnish research services to the Adviser, the
Adviser receives a benefit, not capable of evaluation in dollar amounts, without
providing any direct monetary benefit to the Fund from these transactions. The
Adviser believes that most research services obtained by it generally benefit
several or all of the investment companies and private accounts which it
manages, as opposed to solely benefitting one specific managed fund or account.
Transactions on U.S. stock exchanges, commodities markets and futures markets
and other agency transactions involve the payment by the Fund of negotiated
brokerage commissions. Such commissions vary among different brokers. A
particular broker may charge different commissions according to such factors as
the difficulty and size of the transaction. Transactions in foreign investments
often involve the payment of fixed brokerage commissions, which may be higher
than those in the United States. There is generally no stated commission in the
case of securities traded in the over-the-counter markets, but the price paid by
the Fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
It has for many years been a common practice in the investment advisory business
for advisers of investment companies and other institutional investors to
receive brokerage and research services (as defined in the Securities Exchange
Act of 1934, as amended (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from third parties
with which such broker-dealers have arrangements. Consistent with this practice,
the Adviser may receive brokerage and research services and other similar
services from many broker-dealers with which the Adviser may place the Fund's
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portfolio transactions and from third parties with which these broker-dealers
have arrangements. These services include such matters as general economic and
market reviews, industry and company reviews, evaluations of investments,
recommendations as to the purchase and sale of investments, newspapers,
magazines, pricing services, quotation services, news services and personal
computers utilized by the Adviser. Where the services referred to above are not
used exclusively by the Adviser for research purposes, the Adviser, based upon
its own allocations of expected use, bears that portion of the cost of these
services which directly relates to their non-research use. Some of these
services are of value to the Adviser and its affiliates in advising various of
their clients (including the Fund), although not all of these services are
necessarily useful and of value in managing the Fund. The management fee paid by
the Fund is not reduced because the Adviser and its affiliates receive these
services even though the Adviser might otherwise be required to purchase some of
these services for cash.
As permitted by Section 28(e) of the 1934 Act, the Adviser may cause the Fund to
pay a broker-dealer which provides "brokerage and research services" (as defined
in the 1934 Act) to the Adviser an amount of disclosed commission for effecting
securities transactions on stock exchanges and other transactions for the Fund
on an agency basis in excess of the commission which another broker-dealer would
have charged for effecting that transaction. The Adviser's authority to cause
the Fund to pay any such greater commissions is also subject to such policies as
the Trustees may adopt from time to time. The Adviser does not currently intend
to cause any Fund to make such payments. It is the position of the staff of the
Securities and Exchange Commission that Section 28(e) does not apply to the
payment of such greater commissions in "principal" transactions. Accordingly,
the Adviser will use its best effort to obtain the most favorable price and
execution available with respect to such transactions, as described above.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine, the Adviser may
consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
TAXATION
The Fund intends to qualify each year as a "regulated investment company" under
Subchapter M of the Code. By so qualifying, the Fund will not incur federal
income or state taxes on its net investment income and on net realized capital
gains to the extent distributed as dividends to shareholders.
Amounts not distributed on a timely basis in accordance with a calendar year
distribution requirement are subject to a nondeductible 4% excise tax at the
Fund level. To avoid the tax, the Fund must distribute during each calendar year
an amount equal to the sum of (a) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (b) at
least 98% of its capital gains in excess of capital losses (adjusted for certain
ordinary losses) for a one-year period generally ending on October 31st of the
calendar year, and (c) all ordinary income and capital gains for previous years
that were not distributed during such years.
Under the Code, dividends derived from interest, and any short-term capital
gains, are taxable to shareholders as ordinary income for federal and state tax
purposes, regardless of whether such dividends are taken in cash or reinvested
in additional shares. Distributions made from the Fund's net realized long-term
capital gains (if any) and designated as capital gain dividends are taxable to
shareholders as long-term capital gains, regardless of the length of time Fund
shares are held. Corporate investors are not eligible for the dividends-received
deduction with respect to distributions derived from interest on short-or
long-term capital gains from the Fund but may be entitled to such a deduction in
respect to distributions attributable to dividends received by the Fund. A
distribution will be treated as paid on December 31st of a calendar year if it
is declared by the Fund in October, November or December of the year with a
record date in such a month and paid by the Fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year
the distributions are declared, rather than the calendar year in which the
distributions are received.
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Distributions paid by the Fund from net long-term capital gains (excess of
long-term capital gains over long-term capital losses), if any, whether received
in cash or reinvested in additional shares, are taxable as long-term capital
gains, regardless of the length of time you have owned shares in the Fund.
Distributions paid by the Fund from net short-term capital gains (excess of
short-term capital gains over short-term capital losses), if any, whether
received in cash or reinvested in additional shares are taxable as ordinary
income. Capital gains distributions are made when the Fund realizes net capital
gains on sales of portfolio securities during the year. Realized capital gains
are not expected to be a significant or predictable part of the Fund's
investment return.
Any redemption of the Fund shares is a taxable event and may result in a capital
gain or loss. A capital gain or loss may be realized from an ordinary redemption
of shares.
Dividend distributions, capital gains distributions, and capital gains or losses
from redemptions and exchanges may also be subject to state and local taxes.
Ordinarily, distributions and redemption proceeds paid to Fund shareholders are
not subject to withholding of federal income tax. However, 31% of the Fund's
distributions and redemption proceeds must be withheld if a Fund shareholder
fails to supply the Fund or its agent with such shareholder's taxpayer
identification number or if the Fund shareholder who is otherwise exempt from
withholding fails to properly document such shareholder's status as an exempt
recipient.
The information above is only a summary of some of the tax considerations
generally affecting the Fund and its shareholders. No attempt has been made to
discuss individual tax consequences. To determine whether the Fund is a suitable
investment based on his or her tax situation, a prospective investor may wish to
consult a tax advisor.
OWNERSHIP OF SHARES
Each share has one vote in the election of Trustees. Cumulative voting is not
authorized. This means that the holders of more than 50% of the shares voting
for the election of Trustees can elect 100% of the Trustees if they choose to do
so, and, in that event, the holders of the remaining shares will be unable to
elect any Trustees.
PURCHASE OF SHARES
Shares of the Fund may be purchased at the net asset value per share next
determined after receipt of an order by the Fund's Distributor in proper form
with accompanying check or other bank wire payment arrangements satisfactory to
the Fund. The Fund's minimum initial investment is $2,500.00 (except for
retirement accounts for which the minimum initial investment is $1,000.00) and
the minimum subsequent investment is $100.00.
DIVIDENDS AND DISTRIBUTIONS
Net investment income, if any, is declared as dividends and paid annually.
Substantially all the realized net capital gains for the Fund, if any, are also
declared and paid on an annual basis. Dividends and distributions are payable to
shareholders of record at the time of declaration.
Distributions are automatically reinvested in additional Fund shares unless the
shareholder has elected to have them paid in cash.
The net investment income of the Fund for each business day is determined
immediately prior to the determination of net asset value. Net investment income
for other days is determined at the time net asset value is determined on the
prior business day. See "Purchase of Shares" and "Redemption of Shares" in the
Prospectus.
-23-
<PAGE>
NET ASSET VALUE
The method for determining the Fund's net asset value is summarized in the
Prospectus in the text following the heading "Valuation of Shares." The net
asset value of the Fund's shares is determined on each day on which the New York
Stock Exchange is open, provided that the net asset value need not be determined
on days when no Fund shares are tendered for redemption and no order for Fund
shares is received. The New York Stock Exchange is not open for business on the
following holidays (or on the nearest Monday or Friday if the holiday falls on a
weekend): New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
PERFORMANCE COMPARISONS
Total return quoted in advertising and sales literature reflects all aspects of
the Fund's return, including the effect of reinvesting dividends and capital
gain distributions and any change in the Fund's net asset value during the
period.
The Fund's total return must be displayed in any advertisement containing the
Fund's yield. Total return is the average annual total return for the 1-, 5- and
10-year period ended on the date of the most recent balance sheet included in
the Statement of Additional Information, computed by finding the average annual
compounded rates of return over 1-, 5- and 10-year periods that would equate the
initial amount invested to the ending redeemable value according to the
following formula:
P(1 + T)n = ERV
Where:
P = a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000 payment made at
the beginning of the 1-, 5- or 10-year periods at the end of the 1-,
5-or 10-year periods (or fractions thereof).
Because the Fund has not had a registration in effect for 1, 5 or 10 years, the
period during which the registration has been effective shall be substituted.
Average annual total return is calculated by determining the growth or decline
in value of a hypothetical historical investment in the Fund over a stated
period and then calculating the annual compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant throughout the period. For example, a cumulative total return of 100%
over 10 years would produce an average annual total return of 7.18%, which is
the steady annual rate that would result in 100% growth on a compounded basis in
10 years. While average annual total returns are a convenient means of comparing
investment alternatives, investors should realize that the Fund's performance is
not constant over time, but changes from year to year, and that average annual
total returns represent averaged figures as opposed to actual year-to-year
performance.
In addition to average annual total returns, the Fund may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Average annual and cumulative total returns may be quoted
as a percentage or as a dollar amount and may be calculated for a single
investment, a series of investments, or a series of redemptions over any time
period. Performance information may be quoted numerically or in a table, graph,
or similar illustration.
-24-
<PAGE>
The Fund's performance may be compared with the performance of other funds with
comparable investment objectives, tracked by fund rating services or with other
indexes of market performance. Sources of economic data that may be considered
in making such comparisons may include, but are not limited to, rankings of any
mutual fund or mutual fund category tracked by Lipper Analytical Services, Inc.
or Morningstar, Inc.; data provided by the Investment Trust Institute; major
indexes of stock market performance; and indexes and historical data supplied by
major securities brokerage or investment advisory firms. The Fund may also
utilize reprints from newspapers and magazines furnished by third parties to
illustrate historical performance.
The agencies listed below measure performance based on their own criteria rather
than on the standardized performance measures described in the preceding
section.
Lipper Analytical Services, Inc. distributes mutual fund rankings monthly. The
rankings are based on total return performance calculated by Lipper, generally
reflecting changes in net asset value adjusted for reinvestment of capital gains
and income dividends. They do not reflect deduction of any sales charges. Lipper
rankings cover a variety of performance periods, including year-to-date, 1-year,
5-year, and 10-year performance. Lipper classifies mutual funds by investment
objective and asset category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The ratings are
divided into five groups: highest, above average, neutral, below average and
lowest. They represent the fund's historical risk/reward ratio relative to other
funds in its broad investment class as determined by Morningstar, Inc.
Morningstar ratings cover a variety of performance periods, including 1-year,
3-year, 5-year, 10-year and overall performance. The performance factor for the
overall rating is a weighted-average assessment of the fund's 1-year, 3-year,
5-year, and 10-year total return performance (if available) reflecting deduction
of expenses and sales charges. Performance is adjusted using quantitative
techniques to reflect the risk profile of the fund. The ratings are derived from
a purely quantitative system that does not utilize the subjective criteria
customarily employed by rating agencies such as Standard & Poor's and Moody's
Investor Service, Inc.
CDA/Weisenberger's Management Results publishes mutual fund rankings and is
distributed monthly. The rankings are based entirely on total return calculated
by Weisenberger for periods such as year-to-date, 1-year, 3-year, 5-year and
10-year. Mutual funds are ranked in general categories (e.g., international
bond, international equity, municipal bond, and maximum capital gain).
Weisenberger rankings do not reflect deduction of sales charges or fees.
Independent publications may also evaluate the Fund's performance. The Fund may
from time to time refer to results published in various periodicals, including
Barrons, Financial World, Forbes, Fortune, Investor's Business Daily,
Kiplinger's Personal Finance Magazine, Money, U.S. News and World Report and The
Wall Street Journal.
REDEMPTION OF SHARES
Redemption of shares, or payment for redemptions, may be suspended at times (a)
when the New York Stock Exchange is closed for other than customary weekend or
holiday closings, (b) when trading on said Exchange is restricted, (c) when an
emergency exists, as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable, or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or (d) during any other
period when the Securities and Exchange Commission, by order, so permits,
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist.
Shareholders who purchased shares through a broker-dealer other than the
Distributor may also redeem such shares by written request to the Transfer Agent
which shares are held by the Transfer Agent at the address set forth in the
-25-
<PAGE>
Prospectus. To be considered in "good order", written requests for redemption
should indicate the dollar amount or number of shares to be redeemed, refer to
the shareholder's Fund account number, including either the social security or
tax identification number. The request should be signed in exactly the same way
the account is registered. If there is more than one owner of the shares, all
owners must sign. If shares to be redeemed have a value of $5,000 or more or
redemption proceeds are to be paid by someone other than the shareholder at the
shareholder's address of record, the signature(s) must be guaranteed by an
"eligible guarantor institution," which includes a commercial bank that is a
member of the Federal Deposit Insurance Corporation, a trust company, a member
firm of a domestic stock exchange, a savings association or a credit union that
is authorized by its charter to provide a signature guarantee. The Transfer
Agent may reject redemption instructions if the guarantor is neither a member of
nor a participant in a signature guarantee program. Signature guarantees by
notaries public are not acceptable. The purpose of a signature guarantee is to
protect shareholders against the possibility of fraud. Further documentation
will be requested from corporations, administrators, executors, personal
representatives, trustees and custodians. Redemption requests given by facsimile
will not be accepted. Unless other instructions are given in proper form, a
check for the proceeds of the redemption will be sent to the shareholder's
address of record.
Share purchases and redemptions are governed by Maryland law.[Max, should this
be "Delaware" law?]
COUNSEL AND INDEPENDENT ACCOUNTANTS
Legal matters in connection with the issuance of shares of common stock of the
Fund are passed upon by [outside counsel and address of firm]. [independent
auditors and address of firm] have been selected as independent accountants for
the Fund.[Max, if you can, refer me to legal counsel here in Houston. It's my
understanding that ADS will select the auditors.]
OTHER INFORMATION
The Adviser has been continuously registered with the Securities Exchange
Commission (SEC) under the 1940 Act since [date registered as ADS]. The Trust
has filed a registration statement under the Securities Act of 1933 and the 1940
Act with respect to the shares offered. Such registrations do not imply approval
or supervision of the Fund or the Adviser by the SEC.
For further information, please refer to the registration statement and exhibits
on file with the SEC in Washington, D.C. These documents are available upon
payment of a reproduction fee. Statements in the Prospectus and in this
Statement of Additional Information concerning the contents of contracts or
other documents, copies of which are filed as exhibits to the registration
statement, are qualified by reference to such contracts or documents.
-26-
<PAGE>
APPENDIX
SECURITY RATINGS
The following rating services describe rated securities as follows:
MOODY'S INVESTORS SERVICE, INC.
BONDS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds, which are rated B generally, lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
STANDARD & POOR'S
BONDS
AAA--Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A-1
<PAGE>
A--Debt rated 'A' has a strong capacity to pay interest and repay principal
although somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB-B-CCC-CC-C--Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. 'BB'
indicates the lowest degree of speculation and 'C' the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB--Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B--Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.
CCC--Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
A-2
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Copy of the Trust Instrument of iMillennium Capital Trust (the
"Registrant") dated October 28, 1999 (filed herewith).
(b) Not Applicable.
(c) Not Applicable.
(d) Form of Investment Advisory Agreement between Registrant and
iMillennium Capital Management, Inc., to be filed by subsequent
amendment.
(e) Form of Distribution Agreement between Registrant and ADS Distributors,
Inc., to be filed by subsequent amendment.
(f) Not Applicable.
(g) Form of Custody Agreement between Registrant and [Name of Custodian] to
be filed by subsequent amendment.
(h) (1) Form of Administration Agreement between Registrant American Data
Services, Inc. (filed herewith)
(2) Form of Transfer Agency Agreement between Registrant and American Data
Services, Inc. (filed herewith).
(3) Form of Fund Accounting Agreement between Registrant and American Data
Services, Inc. (filed herewith).
(i) Opinion of Counsel to Registrant (to be filed by subsequent Amendment)
(j) Opinion of Independent Auditors (to be filed by subsequent Amendment)
(k) None
(l) Investment Representation letter of original purchaser of shares of
Registrant (to be filed by subsequent Amendment)
(m) Form of Rule 12b-1 Plan adopted by the Registrant (to be filed by
subsequent Amendment)
(n) Not Applicable
(o) Not Applicable
<PAGE>
ITEM 24. Persons Controlled By Or Under Common Control With Registrant
None.
ITEM 25. Indemnification
IN ACCORDANCE WITH SECTION 3803 OF THE DELAWARE BUSINESS TRUST ACT, SECTION
10.02 OF THE REGISTRANT'S TRUST INSTRUMENT PROVIDES AS FOLLOWS:
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such
capacity, shall not be personally liable to any Person other than the
Trust or beneficial owner for any act, omission or obligation of the
Trust or any Trustee. A Trustee shall not be liable for any act or
omission or any conduct whatsoever in his capacity as Trustee, provided
that nothing contained herein or in the Delaware Act shall protect any
Trustee against any liability to the Trust or to Shareholders to which
he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection
10.02(b): (i) every Person who is, or has been, a Trustee or officer of
the Trust (hereinafter referred to as a "Covered Person") shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him
in connection with any claim, action, suit or proceeding in which he
becomes involved as a party or otherwise by virtue of his being or
having been a Trustee or officer and against amounts paid or incurred
by him in the settlement thereof; (ii) the words "claim," "action,"
"suit," or "proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual or
threatened while in office or thereafter, and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office or (B) not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust; or (ii)
in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office, (x) by the court or other body approving the
settlement; (y) by at least a majority of those Trustees who are
neither Interested Persons of the Trust nor are parties to the matter
based upon a review of readily available facts (as opposed to a full
trial-type inquiry); or (z) by written opinion of independent legal
counsel based upon a review of readily available facts (as opposed to a
full trial-type inquiry); provided, however, that any Shareholder may,
by appropriate legal proceedings, challenge any such determination by
the Trustees or by independent counsel.
<PAGE>
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall
not be exclusive of or affect any other rights to which any Covered
Person may now or hereafter be entitled, shall continue as to a Person
who has ceased to be a Covered Person and shall inure to the benefit of
the heirs, executors and administrators of such a Person. Nothing
contained herein shall affect any rights to indemnification to which
Trust personnel, other than Covered Persons, and other Persons may be
entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character
described in Subsection 10.02(a) may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount
will be paid over by him to the Trust or Series if it is ultimately
determined that he is not entitled to indemnification under this
Section 10.02; provided, however, that either (i) such Covered Person
shall have provided appropriate security for such undertaking, (ii) the
Trust is insured against losses arising out of any such advance
payments or (iii) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or
independent legal counsel in a written opinion, shall have determined,
based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to
believe that such Covered Person will be found entitled to
indemnification under Section 10.02.
SECTION [X] OF THE INVESTMENT ADVISORY AGREEMENT PROVIDES AS FOLLOWS:
[To be completed in subsequent Amendment]
SECTION [X] OF THE DISTRIBUTION SERVICES AGREEMENT PROVIDES:
[To be completed in subsequent Amendment]
<PAGE>
SECTION 5 OF THE ADMINISTRATION SERVICES AGREEMENT PROVIDES AS FOLLOWS:
(a) Standard OF CARE. ADS shall be under no duty to take any
action except as specifically set forth herein or as may be
specifically agreed to by ADS in writing. ADS shall use its best
judgment and efforts in rendering the services described in this
Agreement. ADS shall not be liable to the Trust or any of the Trust's
shareholders for any action or inaction of ADS relating to any event
whatsoever in the absence of bad faith, willful misfeasance or gross
negligence in the performance of ADS's duties or obligations under this
Agreement or by reason of ADS's reckless disregard of its duties and
obligations under this Agreement.
(b) INDEMNIFICATION BY THE TRUST. The Trust agrees to
indemnify and hold harmless ADS, its employees, agents, directors,
officers and managers and any person who controls ADS within the
meaning of section 15 of the Securities Act or section 20 of the
Securities Exchange Act of 1934, as amended, ("ADS Indemnitees")
against and from any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable
counsel fees and other expenses of every nature and character arising
out of or in any way related to ADS's actions taken or failures to act
with respect to a Fund that are consistent with the standard of care
set forth in Section 3(a) or based, if applicable, on good faith
reliance upon an item described in Section 3(d)(a "Claim"). The Trust
shall not be required to indemnify any ADS Indemnitee if, prior to
confessing any Claim against the ADS Indemnitee, ADS or the ADS
Indemnitee does not give the Trust written notice of and reasonable
opportunity to defend against the claim in its own name or in the name
of the ADS Indemnitee.
(c) INDEMNIFICATION BY ADS. ADS agrees to indemnify and hold
harmless the Trust, its employees, agents, trustees and officers
against and from any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable
counsel fees and other expenses of every nature and character arising
out of ADS's actions taken or failures to act with respect to a Fund
that are not consistent with the standard of care set forth in Section
3(a). ADS shall not be required to indemnify the Trust if, prior to
confessing any Claim against the Trust, the Trust does not give ADS
written notice of and reasonable opportunity to defend against the
claim in its own name or in the name of the Trust.
(d) RELIANCE UPON INSTRUCTIONS. An ADS Indemnitee shall not be
liable for any action taken or failure to act in good faith reliance
upon:
(i) the advice of the Trust or of counsel, who may be
counsel to the Trust or counsel to ADS, and upon statements of
accountants, brokers and other persons reasonably believed in
good faith by ADS to be expert in the matters upon which they
are consulted;
(ii) any oral instruction which it receives and which
it reasonably believes in good faith was transmitted by the
person or persons authorized by the Board to give such oral
instruction. ADS shall have no duty or obligation to make any
inquiry or effort of certification of such oral instruction;
<PAGE>
(iii) any written instruction or certified copy of
any resolution of the Board, and ADS may rely upon the
genuineness of any such document or copy thereof reasonably
believed in good faith by ADS to have been validly executed;
or
(iv) any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement,
instrument, report, notice, consent, order, or other document
reasonably believed in good faith by ADS to be genuine and to
have been signed or presented by the Trust or other proper
party or parties;
and no ADS Indemnitee shall be under any duty or obligation to inquire
into the validity or invalidity or authority or lack thereof of any
statement, oral or written instruction, resolution, signature, request,
letter of transmittal, certificate, opinion of counsel, instrument,
report, notice, consent, order, or any other document or instrument
which ADS reasonably believes in good faith to be genuine.
(e) Errors Of Other Service Providers. ADS shall not be liable
for the errors of other service providers to the Trust, including the
errors of pricing services (other than to pursue all reasonable claims
against the pricing service based on the pricing services' standard
contracts entered into by ADS) and errors in information provided by an
investment adviser (including prices and pricing formulas and the
untimely transmission of trade information), custodian or transfer
agent to the Trust.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The descriptions of iMillennium Capital Management, Inc., under the caption
"Management-Adviser" in the Prospectus and Statement of Additional Information
are incorporated by reference herein.
The following are the directors and officers of iMillennium Capital Management,
Inc., 17225 El Camino Real, Suite 415, Houston, Texas 77058, including their
business connections which are of a substantial nature. Unless otherwise stated,
all addresses are 17225 El Camino Real, Suite 415, Houston, Texas 77058.
- ----------------------- ------------------------- -----------------------------
Name Position with Adviser Business Connection
- ----------------------- ------------------------- -----------------------------
- ----------------------- ------------------------- -----------------------------
Omar Rivero
- ----------------------- ------------------------- -----------------------------
- ----------------------- ------------------------- -----------------------------
ITEM 27. PRINCIPAL UNDERWRITER
(a) The principal underwriter of the Company's shares, ADS Distributors, Inc.,
currently acts as a principal underwriter, depositor or investment adviser for
the following other investment companies:
Alpha Funds
MP63 Fund
ICM/Isabelle Small Cap Value Fund
Canandaigua Funds
ADS Distributors, Inc. is registered with the Securities and Exchange Commission
as a broker-dealer and is a member of the National Association of Securities
Dealers. ADS Distributors, Inc., is an indirect wholly-owned subsidiary of
Orbitex Financial Services Group, Inc.
(b) The following table contains information with respect to each director,
officer or partner ADS Distributors:
Name and Principal Positions and Offices Positions and Offices
Business Address* with Underwriter with Registrant
----------------- ---------------- ---------------
Michael Miola Chairman of the Board, Director, President,
Director, and Treasurer Chief Financial Officer
* Unless otherwise indicated, all addresses are: The Hauppauge
Corporate Center, 150 Motor Parkway, Hauppauge, NY 11788
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The majority of the accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained at the offices of American Data Services, Inc., 150
Motor Parkway, Hauppauage, New York 11788-0132. The records required to be
maintained under Rule 31a-1(b)(1) with respect to journals of receipts and
deliveries of securities and receipts and disbursements of cash are maintained
at the offices of the Registrant's custodian, [name and address of custodian].
The records required to be maintained under Rule 31a-1(b)(5), (6) and (9) are
maintained at the offices of iMillennium Capital Management, Inc., [address]
ITEM 29. Management Services
Not Applicable.
<PAGE>
ITEM 30. UNDERTAKINGS
(i) Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six
months from the latter of the effective date of Registrant's
Securities Act of 1933 Registration Statement relating to the
prospectuses offering those shares or the commencement of public
shares of the respective shares; and,
(ii) Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual
report to shareholders relating to the portfolio or class thereof to
which the prospectus relates upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Hauppauge, and State of New York on the 5th day of November, 1999.
iMillennium Capital Trust
By: /S/ MAX BERUEFFY
----------------
Max Berueffy, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons on the 5th day of
November, 1999.
SIGNATURES TITLE
(a)Principal Executive Officer
/S/ MAX BERUEFFY
- ----------------
Max Berueffy President and Trustee
(b)Principal Financial and Accounting Officer
/S/ MICHAEL J. WAGNER
- ---------------------
Michael J. Wagner Treasurer
(c) All of the Trustees
/S/ MAX BERUEFFY
- ----------------
Max Berueffy Trustee
/S/ MICHAEL J. WAGNER
- ---------------------
Michael J. Wagner Trustee
/S/ DONNA M. BOUDREAUX
- ----------------------
Donna M. Boudreaux Trustee
<PAGE>
Index to Exhibits
Exhibit Description
- ------- -----------
(a) Copy of the Trust Instrument of iMillennium Capital Trust (the
"Registrant") dated October 28, 1999
(h)(1) Form of Administration Agreement between Registrant and American Data
Services, Inc.
(h)(2) Form of Transfer Agency Agreement between Registrant and American Data
Services, Inc.
(h)(3) Form of Fund Accounting Agreement between Registrant and American Data
Services, Inc. (filed herewith).
Exhibit (a)
Trust Instrument dated October 28, 1999
IMILLENNIUM CAPITAL TRUST
TRUST INSTRUMENT
DATED
October 28, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I NAME AND DEFINITIONS
Section 1.01 Name...................................................1
Section 1.02 Definitions............................................1
ARTICLE II BENEFICIAL INTEREST
Section 2.01 Shares of Beneficial Interest..........................3
Section 2.02 Issuance of Shares.....................................3
Section 2.03 Register of Shares and Share Certificates..............3
Section 2.04 Transfer of Shares.....................................4
Section 2.05 Treasury Shares........................................4
Section 2.06 Establishment of Series or Class.......................4
Section 2.07 Investment in the Trust................................5
Section 2.08 Assets and Liabilities of Series.......................5
Section 2.09 No Preemptive Rights...................................6
Section 2.10 No Personal Liability of Shareholders..................6
Section 2.11 Assent to Trust Instrument and Disclosure..............6
ARTICLE III THE TRUSTEES
Section 3.01 Management of the Trust................................6
Section 3.02 Number of Trustees.....................................7
Section 3.03 Term of Office.........................................7
Section 3.04 Vacancies and Appointments.............................7
Section 3.05 Temporary Absence......................................8
Section 3.06 Effect of Ending of a Trustee's Service................8
Section 3.07 Ownership of Assets of the Trust.......................8
Section 3.08 Meetings of Trustees...................................8
Section 3.09 Quorum.................................................9
Section 3.10 Meeting Actions........................................9
ARTICLE IV POWERS OF THE TRUSTEES
Section 4.01 Powers.................................................9
Section 4.02 Issuance and Repurchase of Shares......................12
Section 4.03 Trustees and Officers as Shareholders..................12
Section 4.04 Principal Transactions.................................12
Section 4.05 Delegations and Committees.............................12
ARTICLE V NET ASSET VALUE AND EXPENSES
Section 5.01 Determination of Net Asset Value.......................12
Section 5.02 Expenses...............................................13
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ARTICLE VI INVESTMENT ADVISERS AND UNDERWRITERS
Section 6.01 Investment Advisers....................................13
Section 6.02 Underwriters...........................................14
ARTICLE VII SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 7.01 Voting Powers..........................................14
Section 7.02 Meetings...............................................14
Section 7.03 Notices................................................15
Section 7.04 Quorum and Required Vote...............................15
Section 7.05 Voting-Proxies.........................................15
Section 7.06 Action Without a Meeting...............................16
Section 7.07 Establishment of Record Dates..........................16
ARTICLE VIII CUSTODIANS
ARTICLE IX DISTRIBUTIONS AND REDEMPTIONS
Section 9.01 Distributions..........................................17
Section 9.02 Redemptions............................................18
Section 9.03 Suspension of the Right of Redemption..................18
Section 9.04 Redemption of Shares in Order to
Qualify as Regulated Investment Company................18
ARTICLE X LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 10.01 Limitation of Liability................................18
Section 10.02 Indemnification........................................18
Section 10.03 Shareholders...........................................19
Section 10.04 Insurance..............................................19
ARTICLE XI OFFICERS
Section 11.01 Officers and Appointment...............................20
Section 11.02 Resignations...........................................21
Section 11.03 Surety Bonds...........................................21
Section 11.04 Removal................................................21
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ARTICLE XII MISCELLANEOUS
Section 12.01 Trust Not a Partnership................................22
Section 12.02 Trustee's Good Faith Action,
Expert Advice, No Bond or Surety.......................22
Section 12.03 Reorganization.........................................22
Section 12.04 Termination of Trust or Series.........................22
Section 12.05 Derivative Actions.....................................23
Section 12.06 Parties to Contract....................................23
Section 12.07 Filing of Copies, References, Headings.................24
Section 12.08 Governing Law..........................................24
Section 12.09 Amendments.............................................25
Section 12.10 Fiscal Year............................................25
Section 12.11 Provisions in Conflict with Law........................25
Section 12.12 Execution via Facsimile................................25
Section 12.13 Principal Office.......................................25
Section 12.14 Inspection of Books....................................25
Section 12.15 Seal...................................................25
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iMILLENNIUM CAPITAL TRUST
TRUST INSTRUMENT, made by Max Berueffy, Michael J. Wagner, Donna M. Boudreaux as
Trustees.
WHEREAS, the Trustees desire to establish a business trust for the investment
and reinvestment of funds contributed thereto;
NOW THEREFORE, the Trustees declare that all money and property contributed to
the trust hereunder shall be held and managed in trust under this Trust
Instrument as herein set forth below.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1.01 NAME. The name of the trust created hereby is "iMillennium Capital
Trust."
SECTION 1.02 DEFINITIONS. Wherever used herein, unless otherwise required by the
context or specifically provided:
(a) "Affiliated Person" shall have the meaning given it in the 1940
Act, as modified by or interpreted by applicable orders of the
Commission or any rules or regulations adopted by or interpretive
releases of the Commission thereunder.
(b) "Bylaws" means the Bylaws of the Trust as adopted by the
Trustees;
(c) "Class" means the class of Shares of a Series established in
accordance with the provisions of Article II, Section 2.06.
(d) "Commission" shall have the meaning given it in the 1940 Act.
(e) "Delaware Act" means to Chapter 38 of Title 12 of the Delaware
Code entitled "Treatment of Delaware Business Trusts," as amended
from time to time.
(f) "Interested Person" shall have the meaning given it in the 1940
Act, as modified by or interpreted by any applicable order or orders
of the Commission or any rules or regulations adopted by or
interpretive releases of the Commission thereunder.
(g) "Majority Shareholder Vote" shall have the same meaning as the
term "vote of a majority of the outstanding voting securities" is
given in the 1940 Act, as modified by or interpreted by any
applicable order or orders of the Commission or any rules or
regulations adopted by or interpretive releases of the Commission
thereunder.
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(h) "Net Asset Value" means the net asset value of each Series of the
Trust or Class thereof determined in the manner provided in Article
V, Section 5.01 hereof;
(i) "Outstanding Shares" means those Shares shown from time to time
in the books of the Trust or a Transfer Agent as then issued and
outstanding, but shall not include Shares which have been redeemed or
repurchased by the Trust and which are at the time held in the
treasury of the Trust;
(j) "Person" shall have the meaning given it in the 1940 Act, as
modified by or interpreted by any applicable order or orders of the
Commission or any rules or regulations adopted by or interpretive
releases of the Commission thereunder.
(k) "Series" means a series of Shares of the Trust established in
accordance with the provisions of Article II, Section 2.06.
(l) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
(m) "Shares" means the equal proportionate transferable units of
beneficial interest into which the beneficial interest of each Series
of the Trust or Class thereof shall be divided and may include
fractions of Shares as well as whole Shares;
(n) "Transfer Agent" means the transfer agent or such officer or
agent of the Trust as shall maintain the register of a Series.
(o) "Trust" means iMillennium Capital Trust and reference to the
Trust, when applicable to one or more Series of the Trust, shall
refer to any such Series;
(p) "Trustees" means the person or persons who has or have signed
this Trust Instrument, so long as each such person shall continue in
office in accordance with the terms hereof, and all other Persons who
may from time to time be duly qualified and serving as Trustees in
accordance with the provisions of Article III hereof and reference
herein to a Trustee or to the Trustees shall refer to the individual
Trustees in their capacity as Trustees hereunder;
(q) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account
of the Trust or any Series, or the Trustees on behalf of the Trust or
any Series.
(r) "1940 Act" means the Investment Company Act of 1940, as amended
from time to time.
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ARTICLE II
BENEFICIAL INTEREST
SECTION 2.01 SHARES OF BENEFICIAL INTEREST. The beneficial interest in the Trust
shall be divided into such transferable Shares of one or more separate and
distinct Series or Classes of a Series as the Trustees shall from time to time
create and establish. The number of Shares of each Series, and Class thereof,
authorized hereunder is unlimited. All Shares issued hereunder shall be fully
paid and nonassessable.
SECTION 2.02 ISSUANCE OF SHARES. Subject to applicable law, the Trustees in
their discretion may, from time to time, without vote of the Shareholders, issue
Shares, in addition to the then issued and Outstanding Shares and Shares held in
the treasury, to such party or parties and for such amount and type of
consideration, including cash or securities, at such time or times and on such
terms as the Trustees may deem appropriate, and may in such manner acquire other
assets (including the acquisition of assets subject to, and in connection with,
the assumption of liabilities) and businesses. In connection with any issuance
of Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Trust. Contributions to the Trust may be accepted for, and
Shares shall be redeemed as, whole Shares and/or 1/1,000th of a Share or
integral multiples thereof.
SECTION 2.03 REGISTER OF SHARES AND SHARE CERTIFICATES.
(a) A register shall be kept at the principal office of the Trust or an office
of a Transfer Agent which shall contain the names and addresses of the
Shareholders of each Series and Class thereof, the number of Shares of that
Series and any Classes thereof held by each Shareholder and a record of all
transfers thereof. No Shareholder shall be entitled to receive payment of any
distribution, nor to have notice given to the Shareholder as herein provided,
until the Shareholder has given its address to the Transfer Agent.
(b) All shares shall be uncertificated except as the Trustees may otherwise
authorize. The Trustees may issue certificates to a Shareholder of any Series or
Class thereof for any purpose and the issuance of a certificate to one or more
Shareholders shall not require the issuance of certificates generally. As to
Shares for which no certificate has been issued, each Shareholder shall be
entitled to receive distributions or otherwise to exercise or enjoy the rights
of Shareholders. Share certificates shall be in the form proscribed from time to
time by the Trustees and shall be signed by the President or a Vice President
and by the Treasurer, Assistant Treasurer, Secretary or Assistant Secretary.
Such signatures may be facsimiles if the certificate is signed by a Transfer
Agent or shareholder services agent or by a registrar, other than a Trustee,
officer or employee of the Trust. In case any officer who has signed or whose
facsimile signature has been placed on a certificate shall have ceased to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if the person were such officer at the time of its
issue.]
(c) In the case of the alleged loss or destruction or the mutilation of a Share
certificate, a duplicate certificate may be issued in place thereof, upon such
terms as the Trustees may prescribe or upon the terms generally employed by the
Transfer Agent. The Trustees may at any time discontinue the issuance of Share
certificates and may, by written notice to each Shareholder, require the
surrender of Share certificates to the Trust for cancellation. Such surrender
and cancellation shall not affect the ownership of Shares in the Trust.
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SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the Trustees,
Shares shall be transferable on the records of the Trust only by the record
holder thereof or by that holder's agent thereunto duly authorized in writing,
upon delivery to the Trustees or the Transfer Agent of a duly executed
instrument of transfer and such evidence of the genuineness of such execution
and authorization and of such other matters as may be required by the Trustees
or Transfer Agent. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor the Trust, nor any Transfer Agent or registrar nor any
officer, employee or agent of the Trust shall be affected by any notice of the
proposed transfer.
SECTION 2.05 TREASURY SHARES. Shares held in the treasury shall, until reissued
pursuant to Section 2.02 hereof, not confer any voting rights on the Trustees,
nor shall such Shares be entitled to any distributions declared with respect to
the Shares.
SECTION 2.06 ESTABLISHMENT OF SERIES OR CLASS. The Trust created hereby shall
consist of one or more Series and separate and distinct records shall be
maintained by the Trust for each Series and the assets associated with any such
Series shall be held and accounted for separately from the assets of the Trust
or any other Series. The Trustees may divide the Shares of any Series into
Classes. The Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of the
Shareholders of any Series, to establish and designate and to change in any
manner any such Series or Class and to fix such preferences, voting powers,
rights and privileges of such Series or Classes as the Trustees may from time to
time determine, to divide or combine the Shares or any Series or Classes into a
greater or lesser number, to classify or reclassify any issued Shares of any
Series or Classes into one or more Series or Classes, and to take such other
action with respect to the Shares as the Trustees may deem desirable. The
establishment and designation of any Series or Class shall be effective when
specified in the resolution of the Trustees setting forth such establishment and
designation and the relative rights and preferences of the Shares of such Series
or Class.
All references to Shares in this Trust Instrument shall be deemed to be Shares
of any or all Series or Classes, as the context may require. All provisions
herein relating to the Trust shall apply equally to each Series and each Class,
except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal beneficial interest
in the net assets of such Series subject to Section 2.08 and the preferences,
rights and privileges of each Class of that Series. Each holder of Shares of a
Series or Class thereof shall be entitled to receive the holder's pro rata share
of all distributions made with respect to such Series or Class thereof. Upon
redemption of Shares, such Shareholder shall be paid solely out of the funds and
property of such Series of the Trust.
Each Series and Class thereof of the Trust and their attributes will be set
forth in Annex A to this Trust Instrument.
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SECTION 2.07 INVESTMENT IN THE TRUST. The Trustees shall accept investments in
any Series or Class as the Trustees may from time to time authorize. At the
Trustees' discretion, such investments may be in the form of cash, securities or
other assets in which the affected Series is authorized to invest, valued as
provided in Section 5.01. Investments in a Series shall be credited to each
Shareholder's account in the form of full and fractional Shares at the Net Asset
Value per Share next determined after the investment is received or accepted as
may be determined by the Trustees; provided, however, that the Trustees may, in
their sole discretion, (a) fix the Net Asset Value per Share of the initial
capital contribution or (b) impose a sales or other charge upon investments in
the Trust in such manner and at such time determined by the Trustees.
SECTION 2.08 ASSETS AND LIABILITIES OF SERIES. All consideration received by the
Trust for the issue or sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever from the same may be, shall
be held and accounted for separately from the other assets of the Trust and of
every other Series and may be referred to herein as "assets belonging to" that
Series. The assets belonging to a particular Series shall belong to that Series
for all purposes, and to no other Series, subject only to the rights of
creditors of that Series. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are not readily
identifiable as belonging to any particular Series shall be allocated by the
Trustees between and among one or more of the Series in such manner as the
Trustees, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and such assets, income, earnings, profits or funds, or
payments and proceeds with respect thereto shall be assets belonging to that
Series. The assets belonging to a particular Series shall be so recorded upon
the books of the Trust, and shall be held by the Trustees in trust for the
benefit of the holders of Shares of that Series. The assets belonging to a
Series shall be charged with the liabilities of that Series and all expenses,
costs, charges and reserves attributable to that Series, except that
liabilities, expenses, costs, charges and reserves allocated to a particular
Class shall be borne by that Class. Any general liabilities, expenses, costs,
charges or reserves of the Trust which are not readily identifiable as belonging
to any particular Series or Class shall be allocated and charged by the Trustees
between or among any one or more of the Series of Classes in such manner as the
Trustees in their sole discretion deem fair and equitable. Each such allocation
shall be conclusive and binding upon the Shareholders of all Series for all
purposes. Without limitation of the foregoing provisions of this Section 2.08,
but subject to the right of the Trustees in their discretion to allocate general
liabilities, expenses, costs, changes or reserves as herein provided, the debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular Series shall be enforceable against the
assets of such Series only, and not against the assets of the Trust generally.
Notice of this contractual limitation on inter-Series liabilities may, in the
Trustee's sole discretion, be set forth in the certificate of trust of the Trust
(whether originally or by amendment) as filed or to be filed in the Office of
the Secretary of State of the State of Delaware pursuant to the Delaware Act,
and upon the giving of such notice in the certificate of trust, the statutory
provisions of Section 3804 of the Delaware Act relating to limitations on
inter-Series liabilities (and the statutory effect under Section 3804 of setting
forth such notice in the certificate of trust) shall become applicable to the
Trust and each Series.
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All Persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the appropriate
Series or (if the Trustees shall have yet to have established Series) of the
Trust for payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past, present or
future, shall be personally liable therefor. No Shareholder or former
Shareholder of any Series shall have a claim on or any right to any assets
allocated or belonging to any other Series.
SECTION 2.09 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust or the Trustees, whether of the same or other Series.
SECTION 2.10 NO PERSONAL LIABILITY OF SHAREHOLDER. No Shareholder of the Trust
or of any Series shall be personally liable for the debts, liabilities,
obligation and expenses incurred by, contracted for, or otherwise existing with
respect to, the Trust or by or on behalf of any Series. The Trustees shall have
no power to bind any Shareholder personally or to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription for
any Shares or otherwise. Every note, bond, contract or other undertaking issued
by or on behalf of the Trust or the Trustees relating to the Trust or to a
Series shall include a recitation limiting the obligation represented thereby to
the Trust or to one or more Series and its or their assets (but the omission of
such a recitation shall not operate to bind any Shareholder or Trustee of the
Trust).
SECTION 2.11 ASSENT TO TRUST INSTRUMENT AND DISCLOSURE. Every Shareholder, by
virtue of having purchased a Share shall become a Shareholder (i) and shall be
held to have expressly assented and agreed to be bound by the terms hereof (ii)
and shall upon demand disclose to the Trustees in writing such information with
respect to direct and indirect ownership of Shares as the Trustees deem
necessary to comply with the requirements of any taxing authority.
ARTICLE III
THE TRUSTEES
SECTION 3.01 MANAGEMENT OF THE TRUST. The Trustees shall have exclusive and
absolute control over the Trust Property and over the business of the Trust to
the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with unlimited powers of delegation except
as may be prohibited by applicable law. The Trustees shall have full power and
authority to conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and without the
State of Delaware, in any and all states, commonwealths, territories,
dependencies, colonies or possessions of the United States of America and in any
foreign jurisdiction. The Trustees shall have full power and authority to do any
and all acts and to make and execute any and all contracts and instruments that
they may consider necessary, proper, desirable or appropriate in connection with
the management of the Trust although such things are not herein specifically
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mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Trust Instrument, the presumption shall be in favor of a grant of power to
the Trustees.
The enumeration of any specific power in this Trust Instrument shall not be
construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court.
Each Trustee and each committee member may receive such compensation for his
services and reimbursement for his expenses as may be fixed from time to time by
the Trustees.
Except for the Trustees named herein or appointed to fill vacancies pursuant to
Section 3.04 of this Article III, the Trustees shall be elected by the
Shareholders owning a plurality of the Shares voting at a meeting of
Shareholders.
SECTION 3.02 NUMBER OF TRUSTEES. The initial Trustees shall be the persons named
herein. On a date fixed by the Trustees, the Shareholders shall elect at least
one (1) but not more than fifteen Trustees. The number of Trustees always shall
be at least one (1), and otherwise shall be such number as shall be fixed from
time to time by the Trustees, provided, however, that the number of Trustees
shall in no event be more than fifteen (15).
SECTION 3.03 TERM OF OFFICE. The Trustees shall hold office during the lifetime
of this Trust, and until its termination as herein provided; except (a) that any
Trustee may resign his trust by written instrument signed by him and delivered
to the other Trustees, which shall take effect upon such delivery or upon such
later date as is specified therein; (b) that any Trustee may be removed at any
time by written instrument, signed by at least two-thirds of the number of
Trustees prior to such removal, specifying the date when such removal shall
become effective; (c) that any Trustee who requests in writing to be retired,
has become physically or mentally incapacitated by reason of disease or
otherwise, or is otherwise unable to serve, may be retired by written instrument
signed by a majority of the other Trustees, specifying the date of his
retirement; (d) that a Trustee shall be removed upon attaining any retirement
age for Trustees specified by resolution of the Trustees and (e) that a Trustee
may be removed at any meeting of the Shareholders of the Trust by a vote of
Shareholders owning at least two-thirds of the Outstanding Shares.
SECTION 3.04 VACANCIES AND APPOINTMENTS. In case of the declination to serve,
death, resignation, retirement, removal, physical or mental incapacity by reason
of disease or otherwise, or a Trustee is otherwise unable to serve, or an
increase in the number of Trustees, a vacancy shall occur. Whenever a vacancy in
the Board of Trustees shall occur, until such vacancy is filled, the other
Trustees shall have all the powers hereunder. In the case of a vacancy, the
remaining Trustees shall fill such vacancy by appointing such other Person as
they in their discretion shall see fit consistent with the limitations of
applicable law. Such appointment shall take effect upon the execution of a
written instrument signed by a majority of the Trustees in office or by
resolution of the Trustees, duly adopted.
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An appointment of a Trustee may be made by the Trustees then in office in
anticipation of a vacancy to occur by reason of retirement, resignation or
increase in number of Trustees effective at a later date, provided that said
appointment shall become effective only at or after the effective date of said
retirement, resignation or increase in number of Trustees. As soon as any
Trustee appointed pursuant to this Section 3.04 shall have accepted this trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder.
SECTION 3.05 TEMPORARY ABSENCE. Any Trustee may, by power of attorney, delegate
his power for a period not exceeding six months at any time to any other Trustee
or Trustees, provided that at least one Trustee must personally exercise the
other powers hereunder except as herein otherwise expressly provided.
SECTION 3.06 EFFECT OF ENDING OF A TRUSTEE'S SERVICE. The declination to serve,
death, resignation, retirement, removal, incapacity, or inability of the
Trustees, or any one of them, shall not operate to terminate the trust or to
revoke any existing agency created pursuant to the terms of this Trust
Instrument.
SECTION 3.07 OWNERSHIP OF ASSETS OF THE TRUST. The assets of the Trust and of
each Series shall be held separate and apart from any assets now or hereafter
held in any capacity other than as Trustee hereunder by the Trustees or any
successor Trustees. Legal title in all of the assets of the Trust and the right
to conduct any business shall at all times be considered as vested in the
Trustees on behalf of the Trust, except that the Trustees may cause legal title
to any Trust Property to be held by, or in the name of the Trust, or in the name
of any Person as nominee. No Shareholder shall be deemed to have a severable
ownership in any individual asset of the Trust or of any Series or any right of
partition or possession thereof, but each Shareholder shall have, except as
otherwise provided for herein, a proportionate undivided beneficial interest in
the Trust or Series. The Shares shall be personal property giving only the
rights specifically set forth in this Trust Instrument.
SECTION 3.08 ACTION AND MEETINGS OF TRUSTEES. The Trustees shall act by majority
vote (unless a greater amount is specified in this Trust Instrument or
applicable law) at a meeting duly called or by unanimous written consent without
a meeting. Notice of the time, date and place of all meetings of the Trustees
shall be given by the party calling the meeting to each Trustee by telephone,
facsimile or other electronic mechanism sent to his home or business address at
least twenty-four hours in advance of the meeting or by written notice mailed to
his home or business address at least seventy-two hours in advance of the
meeting. Notice need not be given to any Trustee who attends the meeting without
objecting to the lack of notice or who executes a written waiver of notice with
respect to the meeting. Written consents or waivers of the Trustees may be
executed in one or more counterparts. Regular special meetings of the Trustees
may be held at such places and at such times as the Trustees may from time to
time determine; each Trustee present at such determination shall be deemed a
party calling the meeting and no call or notice will be required to such Trustee
provided that any Trustee who is absent when such determination is made shall be
given notice of the determination by the Chairman or any two other Trustees. Any
meeting may adjourn to any place. Meetings of the Trustees may be called orally
or in writing by the Chairman or any two other Trustees. Except as otherwise
provided, notice of any meeting of the Trustees shall be given by the party
calling the meeting to each Trustee.
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SECTION 3.09 QUORUM. A majority of the Trustees shall constitute a quorum for
the transaction of business and an action of a majority of the quorum shall
constitute action of the Trustees except to the extent otherwise provided for in
this Trust Instrument.
SECTION 3.10 MEETING ACTIONS. When all the Trustees shall be present at any
meeting, however called or wherever held, or shall assent to the holding of the
meeting without notice, or shall sign a written assent thereto filed with the
record of such meeting, the acts of such meeting shall be valid as if such
meeting had been regularly held. Any action by the Trustees may be taken without
a meeting if a written consent thereto is signed by all the Trustees and filed
with the records of the Trustees' meeting. Such consent shall be treated, for
all purposes, as a vote at a meeting of the Trustees held at the principal place
of business of the Trustees. Trustees may participate in a meeting of Trustees
by conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting. Any meeting
conducted by telephone shall be deemed to take place at and from the principal
office of the Trust.
ARTICLE IV
POWERS OF THE TRUSTEES
SECTION 4.01 POWERS. The Trustees in all instances shall act as principals, free
from the control of the Shareholders. The Trustees shall not in any way be bound
or limited by present or future laws or customs in regard to trust investments,
but shall have full power and authority to make any and all investments which
they, in their sole discretion, shall deem proper to accomplish the purpose of
this Trust without recourse to any court or other authority. Subject to any
applicable limitation in this Trust Instrument or the Bylaws, the Trustees shall
have the power and authority:
(a) To invest and reinvest cash and other property, to hold cash or
other property uninvested, and to sell, exchange, lend, pledge,
mortgage, hypothecate, write options on, lease and otherwise dispose
of or act with respect to any or all of the assets of the Trust;
(b) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct
of such operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security the Trust Property; to
endorse, guarantee, or undertake the performance of an obligation or
engagement of any other Person and to lend Trust Property;
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(d) To provide for the distribution of interests of the Trust either
through a principal underwriter, by the Trust itself, or both, or
otherwise pursuant to a plan of distribution of any kind;
(e) To adopt Bylaws not inconsistent with this Trust Instrument
providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to
the Shareholders; such Bylaws shall be deemed incorporated and
included in this Trust Instrument;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more custodians of any assets of the Trust and
to retain one or more Transfer Agents and shareholder servicing
agents, or both;
(h) To consent to, execute or participate in any agreement or plan of
merger, reorganization or consolidation or certificate of merger or
similar document with respect to the Trust or any Series or Class;
(i) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager,
custodian, underwriter or other agent or independent contractor;
(j) To sell or exchange any or all of the assets of the Trust,
subject to the provisions of Article XII, Subsections 12.04(b) and
(c);
(k) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such Person or Persons as the Trustees
shall deem proper, granting to such Person or Persons such power and
discretion with relation to securities or property as the Trustees
shall deem proper;
(l) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(m) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other
negotiable form; or either in the name of the Trust or in the name of
a custodian or a nominee or nominees, subject in either case to
proper safeguards;
(n) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes
in accordance with the provisions of Article II and to establish
Classes of such Series having relative rights, powers and duties as
they may provide;
(o) Subject to the provisions of Section 3804 of the Delaware Act, to
allocate assets, liabilities and expenses of the Trust to a
particular Series or Class thereof or to apportion the same between
or among two or more Series or Classes;
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(p) To consent to or participate in any plan for the reorganization,
consolidation or merger of any Person or concern or any security of
which is held in the Trust; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or
concern; and to pay calls or subscriptions with respect to any
security held in the Trust;
(q) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not
limited to, claims for taxes;
(r) To make distributions of income, capital gain or otherwise to
Shareholders;
(s) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Series or Class, and to
require the redemption of the Shares of any Shareholders whose
investment is less than such minimum upon giving notice to such
Shareholder;
(t) To interpret the investment objectives, policies, practices
or limitations of any Series;
(u) To establish a registered office and have a registered agent in
the state of Delaware; and
(v) To terminate a Class, or, subject to the provisions of Section
12.04, the Trust or Series.
(w) In general to carry on any other business in connection with or
incidental to any of the foregoing powers or any other power given to
the Trustees in this Trust Instrument, to do everything necessary,
suitable or proper for the accomplishment of any purpose or the
attainment of any object or the furtherance of any power set forth
herein, either alone or in association with others, and to do every
other act or thing incidental or appurtenant to or arising out of or
connected with the aforesaid business or purposes, objects or
powers.]
The foregoing clauses shall be construed as objects and powers, and the
foregoing enumeration of specific powers shall not be held to limit or restrict
in any manner the general powers of the Trustees. Any action by one or more of
the Trustees in their capacity as such hereunder shall be deemed an action on
behalf of the Trust or the applicable Series, and not an action in an individual
capacity.
No Trustee hereunder shall have any power to bind personally the Trust's
officers.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to make any
inquiry concerning the authority of the Trustees, or to oversee the application
of any payments made or property transferred to the Trustees or upon their
order.
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SECTION 4.02 ISSUANCE AND REPURCHASE OF SHARES. The Trustees shall have the
power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold, resell,
reissue, dispose of, and otherwise deal in Shares and, subject to the provisions
set forth in Article II and Article IX, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the Trust, or the particular Series of the Trust, with respect to
which such Shares are issued.
SECTION 4.03 TRUSTEES AND OFFICERS AS SHAREHOLDERS. Any Trustee, officer or
other agent of the Trust may acquire, own and dispose of Shares to the same
extent as if the Trustee, officer or other agent were not a Trustee, officer or
agent; and the Trustees may issue and sell or cause to be issued and sold Shares
to and buy such Shares from any such trustee, officer or other agent or any
Person in which the trustee, officer or other agent is interested, subject only
to the general limitations herein contained as to the sale and purchase of such
Shares.
SECTION 4.04 PRINCIPAL TRANSACTIONS. Except to the extent prohibited by
applicable law, the Trustees may, on behalf of the Trust, buy any securities
from, sell any securities to, lend any assets of the Trust to, or contract in
any way, whether orally or written, with any Trustee or officer of the Trust or
any other Person, however related to the Trust; or have any dealings of any kind
with any Person.
SECTION 4.05 DELEGATIONS AND COMMITTEES. the Trustees may delegate to anyone or
more of their number the authority to approve particular actions on behalf of
the Trust. The Trustees may establish one or more committees, delegate any of
the powers of the Trustees to any committee and adopt a committee charter
providing for the responsibilities, membership (including Trustees, officers or
other agents of the Trust therein) and any other characteristics of a committee
as the Trustees may deem proper. The Trustees may by resolution appoint a
committee consisting of less than the whole number of Trustees then in office,
which committee may be empowered to act for and bind the Trustees and the Trust,
as if the acts of such committee were the acts of all the Trustees then in
office, with respect to any and all matters as the Trustees may deem proper.
The Trustees may elect from their own number an executive committee, which shall
have any or all the powers of the Trustees while the Trustees are not in
session.
All members of each committee shall hold such offices at the pleasure of the
Trustees. The Trustees may abolish any committee at any time. Any committee to
which the Trustees delegate any of their powers or duties shall keep records of
its meetings and shall report its actions to the Trustees. The Trustees shall
have power to rescind any action of any committee, but no such rescission shall
have retroactive effect.
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ARTICLE V
NET ASSET VALUE AND EXPENSES
SECTION 5.01 DETERMINATION OF NET ASSET VALUE. The "Net Asset Value" of any
Series shall be the amount by which the assets of that Series exceed its
liabilities, all as determined by or under the direction of the Trustees in any
manner the Trustees deem appropriate, that is in accordance with applicable law.
The Net Asset Value of any Class shall be the amount by which the net assets
attributable to that Class exceed any liabilities attributed to that Class as
determined by or under the direction of the Trustees in any manner the Trustees
deem appropriate is in accordance with applicable law. The valuation of any
securities or other assets for purposes of calculating a Series' (or Class') Net
Asset Value.
SECTION 5.02 EXPENSES. Subject to the provisions of Article II, Section 2.08,
the Trustees shall be reimbursed from the estate or the assets belonging to the
appropriate Series for their expenses and disbursements, including, without
limitation, interest charges, taxes, brokerage fees and commissions; expenses of
issue, repurchase and redemption of shares; insurance premiums; applicable fees,
interest charges and expenses of third parties, including the Trust's investment
advisers, managers, administrators, distributors, custodians, transfer agents
and fund accountants; fees of pricing, interest, dividend, credit and other
reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining its existence;
costs of preparing and printing the Trust's prospectuses, statements of
additional information and shareholder reports and delivering them to
Shareholders or others; expenses of meetings of Shareholders and proxy
solicitations therefore; costs of maintaining books and accounts; costs of
reproduction, stationery and supplies; fees and expenses of the Trust's;
compensation of the Trust's officers and employees and costs of other personnel
performing services for the Trust; costs of Trustee meetings; registration fees
and related expenses; for such non-recurring items as may arise, including
litigation to which the Trust (or a Trustee acting as such) is a party, and for
all losses and liabilities by them incurred in administering the Trust, and for
the payment of such expenses, disbursements, losses and liabilities the Trustees
shall have a lien on the assets belonging to the appropriate Series, or in the
case of an expense allocable to more than one Series, on the assets of each such
Series, prior to any rights or interests of the Shareholders thereto. This
section shall not preclude the Trust from directly paying any of the
aforementioned fees and expenses.
ARTICLE VI
INVESTMENT ADVISERS AND UNDERWRITERS
SECTION 6.01 INVESTMENT ADVISERS. The Trustees may in their discretion, from
time to time, enter into an investment advisory contract or contracts on behalf
of the Trust or any Series whereby the other party or parties to such contract
or contracts shall undertake to furnish the Trustees with such investment
advisory and other facilities and services upon such terms and conditions as may
be prescribed by the Trustees. Notwithstanding any other provision of this Trust
Instrument, the Trustees may authorize any investment adviser to effect
purchases, sales or exchanges of portfolio securities, other investment
instruments of the Trust, or other Trust Property on behalf of the Trustees, or
may authorize any officer, agent, or Trustee to effect such purchases, sales or
exchanges pursuant to recommendations of the investment adviser. Any such
purchases, sales and exchanges shall be deemed to have been authorized by all of
the Trustees.
The Trustees may authorize the investment adviser to employ, from time to time,
one or more sub-advisers to perform such of the acts and services of the
investment adviser, and upon such terms and conditions, as may be agreed upon
between the investment adviser and sub-adviser. Any reference in this Trust
Instrument to an investment adviser shall be deemed to include such
sub-advisers, unless the context otherwise requires.
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SECTION 6.02 UNDERWRITERS. The Trustees may in their discretion from time to
time enter into an exclusive or non-exclusive underwriting contract or contracts
providing for the sale of Shares, whereby the Trust may either agree to sell
Shares to the other party to the contract or appoint such other party its sales
agent for such Shares. In either case, the contract shall be on such terms and
conditions as may be prescribed by the Trustees; and such contracts may also
provide for the repurchase or sale of Shares by such other party as principal or
as agent of the Trust.
ARTICLE VII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.01 VOTING POWERS. The Shareholders shall have power to vote only (a)
for the election of Trustees as provided in Article III, Sections 3.01 and 3.02
,or (b) for the removal of Trustees as provided in Article III, Section 3.03(e),
(c) to amend this Trust Instrument as provided for in Section 12.08 and (d) with
respect to such additional matters relating to the Trust as may be required by
law, or by this Trust Instrument.
On any matter submitted to a vote of the Shareholders, all Shares shall be voted
separately by individual Series, except (i) when required by applicable law,
Shares shall be voted in the aggregate and not by individual Series; and (ii)
when the Trustees have determined that the matter affects the interests of more
than one Series, then the Shareholders of all such Series shall be entitled to
vote thereon and (iii) when the Trustees have determined that the matter affects
the interests of one of more classes, then the Shareholders of all such classes
shall be entitled to vote. [Each whole Share shall be entitled to one vote as to
any matter on which a Shareholder is entitled to vote, and each fractional Share
shall be entitled to a proportionate fractional vote.] [Each whole dollar of Net
Asset Value of a Share shall be entitled to one vote as to any matter on which a
Shareholder is entitled to vote, and any fraction of a dollar of Net Asset Value
of a Share shall be entitled to a proportionate fractional vote.]
Notwithstanding anything else herein or in the Bylaws, in the event a proposal
by anyone other than the officers or Trustees of the Trust is submitted to a
vote of the Shareholders of one or more Classes, one or more Series or of the
Trust, or in the event of any proxy contest or proxy solicitation or proposal in
opposition to any proposal by the officers or Trustees of the Trust, Shares may
be voted only in person or by written proxy. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required or permitted by law, this Trust Instrument or the Bylaws to be taken by
Shareholders.
SECTION 7.02 MEETINGS. The first Shareholders' meeting shall be held in order to
elect Trustees as specified in Section 3.02 of Article III. Meetings may be held
within or without the State of Delaware as specified by the Trustees. A meeting
of Shareholders shall be called by the Secretary whenever (i) ordered by the
Trustees or (ii) requested in writing by the holder or holders of at least one
third of the Outstanding Shares entitled to vote. If the Secretary, when so
ordered or requested, refuses or neglects for more than 30 days to call such
special meeting, the Trustees or the Shareholders so requesting, may, in the
name of the Secretary, call the meeting by giving notice thereof in the manner
required when notice is given by the Secretary. If the meeting is a meeting of
the Shareholders of one or more Series or Classes, but not a meeting of all
Shareholders of the Trust, then only special meetings of the Shareholders of
such one or more Series or Classes shall be called and only the shareholders of
such one or more Series or Classes shall be entitled to notice of and to vote at
such meeting.
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SECTION 7.03 NOTICES. Except as provided in Section 7.02, notices of any meeting
of the Shareholders shall be given by the Secretary by delivering or mailing,
postage prepaid, to each Shareholder entitled to vote at said meeting, written
or printed notification of such meeting at least ten (10) days before the
meeting, to such address as may be registered with the Trust by the Shareholder.
Notice of any Shareholder meeting need not be given to any Shareholder if a
written waiver of notice, executed before or after such meeting, is filed with
the record of such meeting, or to any Shareholder who shall attend such meeting
in person or by proxy. Notice of adjournment of a Shareholder's meeting to
another time or place need not be given, if such time and place are announced at
the meeting or reasonable notice is given to Persons present at the meeting and
the adjourned meeting is held within a reasonable time after the date set for
the original meeting.
SECTION 7.04 QUORUM AND REQUIRED VOTE. One-third (or such higher proportion as
the Trustees, in their sole discretion, may determine with respect to a meeting)
of Shares entitled to vote in person or by proxy shall be a quorum for the
transaction of business at a Shareholders' meeting, except that where any
provision of law or of this Trust Instrument permits or requires that holders of
any Series shall vote as a Series (or that holders of a Class shall vote as a
Class), then one-third (or such higher proportion as the Trustees, in their sole
discretion, may determine with respect to a meeting) of the aggregate number of
Shares of that Series (or that Class) entitled to vote shall be necessary to
constitute a quorum for the transaction of business by that Series (or that
Class). Any lesser number shall be sufficient only for holding a vote to adjourn
the meeting. Any adjourned session or sessions may be held, within a reasonable
time after the date set for the original meeting, without the necessity of
further notice. Except when a larger vote is required by law or by any provision
of this Trust Instrument or the Bylaws, a majority of the Shares voted in person
or by proxy shall decide any questions and a plurality shall elect a Trustee,
provided that where any provision of law or of this Trust Instrument permits or
requires that the holders of any Series shall vote as a Series (or that the
holders of any Class shall vote as a Class), then a majority of the Shares
present in person or by proxy of that Series (or Class), voted on the matter in
person or by proxy shall decide that matter insofar as that Series (or Class) is
concerned.
SECTION 7.05 VOTING-PROXIES. Shares may be voted in person or by proxy or in any
manner provided for in the Bylaws except as otherwise required by Section 7.01.
Shareholders entitled to vote may vote either in person or by proxy, provided
that either (a) an instrument authorizing such proxy to act is executed by the
Shareholder in writing and dated not more than eleven (11) months before the
meeting, unless the instrument specifically provides for a longer period or (b)
the Trustees or President authorize an electronic, telephonic, computerized or
other alternative to execution of a written instrument authorizing the proxy to
act which authorization is received not more than eleven (11) months before the
meeting. Proxies shall be delivered to the Secretary of the Trust or other
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person responsible for recording the proceedings before being voted. A proxy
with respect to Shares held in the name of two or more Persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden or proving invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting. Except as otherwise provided
herein, all maters relating to the giving, voting or validity of proxies shall
be governed by the General Corporation Law of the State of Delaware relating to
proxies, and judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Shareholders were shareholder of a Delaware
corporation.
SECTION 7.06 ACTION WITHOUT A MEETING. Any action to be taken by Shareholders
may be taken without a meeting if all Shareholders entitled to vote on the
matter consent to the action in writing, which may be in one or more
counterparts, and the written consents are filed with the records of meetings of
Shareholders of the Trust. Such consent shall be treated for all purposes as a
vote at a meeting of the Shareholders held at the principal place of business of
the Trust.
SECTION 7.07 ESTABLISHMENT OF RECORD DATES. The Trustees may close the Share
transfer books of the Trust for a period not exceeding one hundred twenty (120)
days preceding the date of any meeting of Shareholders, or the date for the
payment of any distributions, or the date for the allotment of rights, or the
date when any change or conversion or exchange of Shares shall go into effect;
or in lieu of closing the stock transfer books as aforesaid, the Trustees may
fix in advance a date, not exceeding one hundred, twenty (120) days preceding
the date of any meeting of Shareholders, or the date for payment of any
distribution, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect, as a record
date for the determination of the Shareholders entitled to notice of, and to
vote at, any such meeting, or entitled to receive payment of any such
distribution, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of Shares, and in such case
such Shareholders and only those Shareholders as shall be Shareholders on the
date so fixed shall be entitled to such notice of, and to vote at, such meeting,
or to receive payment of such distribution, or to receive such allotment or
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any such record date
fixed as aforesaid.
ARTICLE VIII
CUSTODIANS
The Trustees shall at all times employ one or more persons permitted to act as
custodian for assets of the Trust under applicable law as custodian with
authority as the Trust's agent, but subject to such restrictions, limitations
and other requirements, if any, as may be contained in the Bylaws: (a) to hold
the securities owned by the Trust and deliver the same upon written order or
oral order confirmed in writing; (b) to receive and receipt for any moneys due
to the Trust and deposit the same in its own banking department or elsewhere as
the Trustees may direct; and (c) to disburse such funds upon orders or vouchers.
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The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a person permitted to act as custodian
for assets of the Trust under applicable law.
ARTICLE IX
DISTRIBUTIONS AND REDEMPTIONS
SECTION 9.01 DISTRIBUTIONS.
(a) The Trustees may from time to time declare and pay distributions with
respect to any Series or Class. The amount of such distributions, the conditions
to and timing of their payment and whether they are in cash or any other Trust
Property shall be wholly in the discretion of the Trustees or their delegates.
(b) Distributions may be paid or made to Shareholders when declaredor the
Shareholders of record at such other date or time or dates or times and subject
to such conditions as the Trustees shall determine, which distributions, at the
election of the Trustees, may be paid pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine. The Trustees may adopt and offer to Shareholders such reinvestment
plans, cash payout plans or related plans with respect to distributions as the
Trustees shall deem appropriate.
(c) Anything in this Trust Instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a stock distribution pro rata
among the Shareholders of a particular Series, or Class thereof, as of the
record date of that Series or Classified as provided in Subsection 9.01(b).
SECTION 9.02 REDEMPTIONS. In case any Shareholder of a particular Series desires
to dispose of the Shareholder's Shares or any portion thereof, the Shareholder
may deposit at the office of the Transfer Agent or other authorized agent of
that Series a written request or such other form of request as the Trustees may
from time to time authorize, requesting that the Series purchase the Shares in
accordance with this Section 9.02; and the Shareholder so requesting shall be
entitled to require the Series to purchase, and the Series or the principal
underwriter of the Series shall purchase the Shares, but only at the Net Asset
Value thereof (as described in Section 5.01 of this Article IX) reduced by the
amount of any sales or other charges applicable to the Shares. The Series shall
make payment for any such Shares to be redeemed, as aforesaid, in cash or
property from the assets of that Series and payment for such Shares shall be
made by the Series or the principal underwriter of the Series to the Shareholder
within seven (7) days after the date upon which the request is effective. Upon
redemption, Shares shall become treasury Shares and may be re-issued from time
to time.
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SECTION 9.03 SUSPENSION OF THE RIGHT OF REDEMPTION. The Trustees may declare a
suspension of the right of redemption or postpone the date of payment with
respect to the Trust or any Series or Class thereof as permitted under
applicable law. Such suspension shall take effect at such time as the Trustees
shall specify but not later than the close of business on the business day next
following the declaration of suspension, and thereafter there shall be no right
of redemption or payment until the Trustees shall declare the suspension at an
end. In the case of a suspension of the right of redemption, a Shareholder may
either withdraw his request for redemption or receive payment based on the Net
Asset Value per Share next determined after the termination of the suspension
SECTION 9.04 REDEMPTION OF SHARES IN ORDER TO QUALIFY AS REGULATED INVESTMENT
COMPANY. If the Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of Shares of any Series has disqualified or
may disqualify any Series as a regulated investment company under the Internal
Revenue Code of 1986, as amended, then the Trustees shall have the power (but
not the obligation) by lot or other means deemed equitable by them (a) to call
for redemption by any such Person of a number, or principal amount, of Shares
sufficient to maintain or bring the direct or indirect ownership of Shares into
conformity with the requirements for such qualification and (b) to refuse to
transfer or issue Shares to any Person whose acquisition of Shares in question
would result in such disqualification. The redemption shall be effected at the
redemption price and in the manner provided in this Article IX.
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
SECTION 10.01 LIMITATION OF LIABILITY. A Trustee, when acting in such capacity,
shall not be personally liable to any Person other than the Trust or beneficial
owner for any act, omission or obligation of the Trust or any Trustee. A Trustee
shall not be liable for any act or omission or any conduct whatsoever in his
capacity as Trustee, provided that nothing contained herein or in the Delaware
Act shall protect any Trustee against any liability to the Trust or to
Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder.
SECTION 10.02 INDEMNIFICATION.
(a) Subject to the exceptions and limitations contained in Subsection 10.02(b):
(i) every Person who is, or has been, a Trustee or officer of the Trust
(hereinafter referred to as a "Covered Person") shall be indemnified by the
Trust to the fullest extent permitted by law against liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustee or officer and against amounts
paid or incurred by him in the settlement thereof; (ii) the words "claim,"
"action," "suit," or "proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual or threatened
while in office or thereafter, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
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(b) No indemnification shall be provided hereunder to a Covered Person: (i) who
shall have been adjudicated by a court or body before which the proceeding was
brought (A) to be liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office or (B) not to have acted in good faith in
the reasonable belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination that
such Trustee or officer did not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office, (x) by the court or other body approving the settlement; (y) by at least
a majority of those Trustees who are neither Interested Persons of the Trust nor
are parties to the matter based upon a review of readily available facts (as
opposed to a full trial-type inquiry); or (z) by written opinion of independent
legal counsel based upon a review of readily available facts (as opposed to a
full trial-type inquiry); provided, however, that any Shareholder may, by
appropriate legal proceedings, challenge any such determination by the Trustees
or by independent counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a Person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such a Person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons, and other
Persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a defense to
any claim, action, suit or proceeding of the character described in Subsection
10.02(a) may be paid by the Trust or Series from time to time prior to final
disposition thereof upon receipt of an undertaking by or on behalf of such
Covered Person that such amount will be paid over by him to the Trust or Series
if it is ultimately determined that he is not entitled to indemnification under
this Section 10.02; provided, however, that either (i) such Covered Person shall
have provided appropriate security for such undertaking, (ii) the Trust is
insured against losses arising out of any such advance payments or (iii) either
a majority of the Trustees who are neither Interested Persons of the Trust nor
parties to the matter, or independent legal counsel in a written opinion, shall
have determined, based upon a review of readily available facts (as opposed to a
trial-type inquiry or full investigation), that there is reason to believe that
such Covered Person will be found entitled to indemnification under Section
10.02.
SECTION 10.03 SHAREHOLDERS. In case any Shareholder of any Series shall be held
to be personally liable solely by reason of the Shareholder being or having been
a Shareholder of such Series and not because of the Shareholder's acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
the Shareholder's heirs, executors, administrators or other legal
representatives, or, in the case of Shareholder other than an individual, its
corporate or other general successor) shall be entitled out of the assets
belonging to the applicable Series to be held harmless from and indemnified
against all loss and expense arising from such liability. The Trust, on behalf
of the affected Series, shall, upon request by the Shareholder, assume the
defense of any claim made against the Shareholder for any act or obligation of
the Series and satisfy any judgment thereon from the assets of the Series.
SECTION 10.04 INSURANCE. The Trust may purchase and maintain insurance on behalf
of any Covered Person or employee of the Trust or any Shareholder, including any
Covered Person or employee of the Trust who is or was serving at the request of
the Trust as a Trustee, officer or employee of another Person, against any
liability asserted against him and incurred by him in any such capacity or
arising out of his status as such, whether or not the Trustees would have the
power to indemnify him against such liability.
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ARTICLE XI
OFFICERS
SECTION 11.01 OFFICERS AND APPOINTMENT. The officers of the Trust shall be a
Chairman of the Board of Trustees, a President, a Treasurer and a Secretary,
each to be elected by the Trustees, and such other officers as the Trustees may
from time to time elect. The Trustees may delegate to one or more officers or
committees the power to elect any subordinate officers or agents and to
prescribe their respective terms of office, authorities and duties. It shall not
be necessary for any Trustee or officer to be a holder of Shares. Two or more
offices may be held by a single person except the offices of President and
Secretary. Subject to the provisions of Section 11.04 hereof, the Chairman, the
President, the Treasurer and the Secretary shall each hold office until their
successors are chosen and qualified and all other officers shall hold office at
the pleasure of the Trustees. Each officer may receive such compensation for his
services and reimbursement for his expenses as may be fixed from time to time by
the Trustees.
(a) The Trustees shall appoint from among their number a Chairman of
the Board of Trustees. When present, the Chairman shall preside at
all meetings of the Shareholders and the Trustees, and he may appoint
a Trustee to preside at such meetings in his absence. The Chairman
shall be responsible for the execution of policies established by the
Trustees and the administration of the Trust. The Chairman shall
perform such other duties as the Trustees may from time to time
designate.
(b) The President shall be the chief executive officer of the Trust
and, subject to the direction of the Trustees, shall have general
administration of the business and policies of the Trust. Except as
the Trustees may otherwise order, the President shall have the power
to grant, issue, execute or sign such powers of attorney, proxies,
agreements or other documents as may be deemed advisable or necessary
in the furtherance of the interests of the Trust or any Series. The
President shall also have the power to employ attorneys, accountants
and other advisors and agents and counsel for the Trust. The
President shall perform such duties additional to all of the
foregoing as the Trustees may from time to time designate.
(c) The Treasurer shall be the principal financial and accounting
officer of the Trust. The Treasurer shall deliver all funds and
securities of the Trust which may come into his hands to such Person
as the Trustees shall employ as Custodian. The Treasurer shall make
annual reports regarding the business and condition of the Trust,
which reports shall be preserved in Trust records, and he shall
furnish such other reports regarding the business and condition of
the Trust as the Trustees may from time to time require. The
Treasurer shall perform such additional duties as the Trustees may
from time to time designate.
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(d) The Secretary shall record in books kept for the purpose all
votes and proceedings of the Trustees and the Shareholders at their
respective meetings. The Secretary shall have the custody of the seal
of the Trust. The Secretary shall perform such additional duties as
the Trustees may from time to time designate.
(e) Any Vice President of the Trust shall perform such duties as the
Trustees or the President may from time to time designate. At the
request or in the absence or disability of the President, the Vice
President (or, if there are two or more Vice Presidents, then the
senior of the Vice Presidents present and able to act) may perform
all the duties of the President and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the
President.
(f) Any Assistant Treasurer of the Trust shall perform such duties as
the Trustees or the Treasurer may from time to time designate, and,
in the absence of the Treasurer, the senior Assistant Treasurer,
present and able to act, may perform all the duties of the Treasurer.
(g) Any Assistant Secretary of the Trust shall perform such duties as
the Trustees or the Secretary may from time to time designate, and,
in the absence of the Secretary, the senior Assistant Secretary,
present and able to act, may perform all the duties of the Secretary.
(h) The Trustees from time to time may appoint such officers or
agents as they may deem advisable, each of whom shall have such
title, hold office for such period, have such authority and perform
such duties as the Trustees may determine.
SECTION 11.02 RESIGNATIONS. Any officer of the Trust may resign, notwithstanding
Section 11.01 hereof, by filing a written resignation with the President, the
Trustees or the Secretary, which resignation shall take effect on being so filed
or at such time as may be therein specified.
SECTION 11.03 SURETY BONDS. The Trustees may require any officer or agent of the
Trust to execute a bond (including without limitation, any bond required by
applicable law) to the Trust in such sum and with such surety or sureties as the
Trustees may determine, conditioned upon the faithful performance of his duties
to the Trust including responsibility for negligence and for the accounting of
any of the Trust's property, funds or securities that may come into his hands.
SECTION 11.04 REMOVAL. Any officer may be removed from office by the Trustees
whenever in the judgment of the Trustees the best interest of the Trust will be
served thereby. In addition, any officer or agent appointed in accordance with
the provisions of Subsection 11.01(h) may be removed, either with or without
cause, by any officer upon whom such power of removal shall have been conferred
by the Trustees.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.01 TRUST NOT A PARTNERSHIP. It is hereby expressly declared that a
business trust and not a partnership is created hereby.
SECTION 12.02 TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY. The
exercise by the Trustees of their powers and discretions hereunder in good faith
and with reasonable care under the circumstances then prevailing shall be
binding. Subject to the provisions of Article X hereof, the Trustees shall not
be liable for errors of judgment or mistakes of fact or law. The Trustees may
take advice of counsel or other experts with respect to the meaning and
operation of this Trust Instrument or any other matter, and subject to the
provisions of Article X hereof shall be under no liability for any act or
omission in accordance with such advice or for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is obtained.
SECTION 12.03 REORGANIZATION. Notwithstanding anything else herein, the Trustees
may, without Shareholder approval, unless such approval is required by
applicable law, (i) cause the Trust or any Series to merge or consolidate with
or into one or more entities, if the surviving or resulting entity is the Trust
or another company registered as an open-end, management investment company
under the 1940 Act, or a series thereof, (ii) cause any or all Shares to be
exchanged under or pursuant to any state of federal statute to the extent
permitted by law or (iii) cause the Trust to incorporate or organize under the
laws of any state, commonwealth, territory, dependency, colony or possession of
the United States of America or in any foreign jurisdiction.
Pursuant to and in accordance with the provisions of Section 3815(f) of the
Delaware Act, and notwithstanding anything to the contrary contained in this
Trust Instrument, an agreement of merger or consolidation approved by the
Trustees in accordance with this Section 12.03 may effect any amendment to the
Trust Instrument or effect the adoption of a new trust instrument of the Trust
if it is the surviving or resulting trust in the merger or consolidation.
SECTION 12.04 TERMINATION OF TRUST OR SERIES.
(a) This Trust shall continue without limitation of time but subject to the
provisions of Subsections 12.04(b) and (c).
(b) The Trustees may at any time, in contemplation of the termination of the
Trust or of a Series, subject to a vote of a majority of the Outstanding Shares
of each Series affected by the matter or, if applicable, to a vote of a majority
of the Outstanding Shares of the Trust: (i) sell and convey all or any portion
of the assets of the Trust or the affected Series to another trust, partnership,
association or corporation, or to a separate series of shares thereof, organized
under the laws of any jurisdiction, for adequate consideration which may include
the assumption of all outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Trust of any affected Series, and which may
include shares of beneficial interest, stock or other ownership interest of such
trust, partnership, association or corporation or of a series thereof; or (ii)
sell and convert into money all or any portion of the assets of the Trust or the
affected Series.
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Upon paying or making reasonable provision for the payment of all known
liabilities of all Series or any affected Series in either (i) or (ii), by such
assumption or otherwise, the Trustees shall distribute the remaining proceeds or
assets (as the case may be) ratably among the Shareholders of all Series or the
affected Series subject to Section 2.08 and the preferences, rights and
privileges of each Class of the Series.
(c) The Trustees may take any of the actions specified in subsection (b) above
without approval of the Shareholders of the Trust or any affected Series if the
Trustees, in their sole discretion, determine that the continuation of the Trust
or the Series is not in the best interests of the Trust, the Series, or their
respective Shareholders. In reaching such determination, the Trustees may
consider any factors the Trustees, in their sole discretion, deem to be
appropriate.
(d) At any time that there are no Shares outstanding of any particular Series or
Class previously established and designated, the Trustees may abolish that
Series and the establishment and designation thereof.
(e) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in Subsections 12.04(b) or (c), the Trust or any
affected Series shall terminate and the Trustees and the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title and interest of all parties with respect to the Trust or Series
shall be canceled and discharged. Upon termination of the Trust, following
completion of winding up of its business, the Trustees shall cause a certificate
of cancellation of the Trust's certificate of trust to be filed in accordance
with the Delaware Act, which certificate of cancellation may be signed by any
one Trustee.
SECTION 12.05 DERIVATIVE ACTIONS. Except as required under applicable law, no
derivative action may be brought by Shareholders unless Shareholders owning not
less than one third of the outstanding Share of all Series of the Trust, or of
the affected Series or Classes of the Trust, as the case may be, join in the
bringing of the derivative action.
SECTION 12.06 PARTIES TO CONTRACT. Any contract of the character described in
Sections 6.01 or 6.02 or any contract of the character described in Article VIII
and any other contract may be entered into with any Person, although one or more
of the Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other Person, and no such contract shall be
invalidated or rendered void or voidable by reason of the existence of any
relationship, nor shall any Person holding such relationship be disqualified
from voting on or executing the same in his capacity as Shareholder and/or
Trustee, nor shall any Person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Trust document. The same Person may be
the other party to one or more contracts entered into by the Trust and any
Person may be financially interested or otherwise affiliated with Persons who
are parties to any or all of the contracts entered into by the Trust.
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SECTION 12.07 FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy of
this Trust Instrument and of each amendment hereof or Trust Instrument
supplemental hereto shall be kept at the office of the Trust where it may be
inspected by any Shareholder. Anyone dealing with the Trust may rely on a
certificate by an officer or Trustee of the Trust as to whether or not any such
amendments or supplements have been make and as to any matters in connection
with the Trust hereunder, and with the same effect as if it were the original,
may rely on a copy certified by an officer or Trustee of the Trust to be a copy
of this Trust Instrument or of any such amendment or supplemental Trust
Instrument. In this Trust Instrument or in any such amendment or supplemental
Trust Instrument, references to this Trust Instrument, and all expressions like
"herein," "hereof' and "hereunder," shall be deemed to refer to this Trust
Instrument as amended or affected by any such supplemental Trust Instrument. All
expressions like "his," "he" and "him," shall be deemed to include the feminine
and neuter, as well as masculine, genders. Headings are placed herein for
convenience of reference only and in case of any conflict, the text of this
Trust Instrument, rather than the headings, shall control. This Trust Instrument
may be executed in any number of counterparts each of which shall be deemed an
original.
SECTION 12.08 GOVERNING LAW. The trust set forth in this instrument is made in
the State of Delaware, and the Trust and this Trust Instrument, and the rights
and obligations of the Trustees and Shareholders hereunder, are to be governed
by and construed and administered according to the Delaware Act and the laws of
said State; provided, however, that there shall not be applicable to the Trust,
the Trustees or this Trust Instrument (a) the provisions of Section 3540 of
Title 12 of the Delaware Code or (b) any provisions of the laws (statutory or
common) of the State of Delaware (other than the Delaware Act) pertaining to
trusts which relate to or regulate (i) the filing with any court or governmental
body or agency of trustee accounts or schedules of trustee fees and charges,
(ii) affirmative requirements to post bonds for trustees, officers, agents or
employees of a trust, (iii) the necessity for obtaining court or other
governmental approval concerning the acquisition, holding or disposition of real
or personal property, (iv) fees or other sums payable to trustees, officers,
agents or employees of a trust, (v) the allocation of receipts and expenditures
to income or principal, (vi) restrictions or limitations on the permissible
nature, amount or concentration of trust investments or requirements relating to
the titling, storage or other manner of holding of trust assets, or (vii) the
establishment of fiduciary or other standards of responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of the Trustees set forth or referenced
in this Trust Instrument. The Trust shall be of the type commonly called a
"business trust," and without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a trust under
Delaware law. The Trust specifically reserves the right to exercise any of the
powers or privileges afforded to trusts or actions that may be engaged in by
trusts under the Delaware Act, and the absence of a specific reference herein to
any such power, privilege or action shall not imply that the Trust may not
exercise such power or privilege or take such actions.
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SECTION 12.09 AMENDMENTS. Except as specifically provided herein, the Trustees
may, without shareholder vote, amend or otherwise supplement this Trust
Instrument by making an amendment, a Trust Instrument supplemental hereto or an
amended and restated trust instrument. Shareholders shall have the right to vote
(a) on any amendment which would affect their right to vote granted in Section
7.01 of Article VII, (b) on any amendment to this Section 12.08, (c) on any
amendment as may be required by law and (d) on any amendment submitted to them
by the Trustees. Any amendment required or permitted to be submitted to
Shareholders which, as the Trustees determine, shall affect the Shareholders of
one or more Series or Classes thereof shall be authorized by vote of the
Shareholders of each Series or Class affected and no vote of shareholders of a
Series or Class not affected shall be required. Notwithstanding anything else
herein, any amendment to Article X hereof shall not limit the rights to
indemnification or insurance provided therein with respect to action or omission
of Covered Persons prior to such amendment.
SECTION 12.10 FISCAL YEAR. The fiscal year of the Trust shall end on a specified
date as determined from time to time by the Trustees.
SECTION 12.11 PROVISIONS IN CONFLICT WITH LAW. The provisions of this Trust
Instrument are severable, and if the Trustees shall determine that any of such
provisions is in conflict with any applicable law or regulation, the conflicting
provision shall be deemed never to have constituted a part of this Trust
Instrument; provided, however, that such determination shall not affect any of
the remaining provisions of this Trust Instrument or render invalid or improper
any action taken or omitted prior to such determination. If any provision of
this Trust Instrument shall be held invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall attach only to such
provision in such jurisdiction and shall not in any matter affect such
provisions in any other jurisdiction or any other provision of this Trust
Instrument in any jurisdiction.
SECTION 12.12 EXECUTION VIA FACSIMILE. Execution and delivery of any consent,
waiver, certificate, proxy or other document by Trustees, officers or
Shareholders of the Trust or parties contracting with the Trust may be
accomplished by facsimile or other similar electronic mechanism.
SECTION 12.13 PRINCIPAL OFFICE. The principal office of the Trust shall be
located in Houston, Texas, or such other location as the Trustees may from time
to time determine.
SECTION 12.14 INSPECTION OF BOOKS. The Trustees shall from time to time
determine whether and to what extent, and at what times and places, and under
what conditions and regulations the accounts and books of the Trust or any of
them shall be open to the inspection of Shareholders; and no Shareholder shall
have any right to inspect any account or book or document of the Trust except as
conferred by law or otherwise by the Trustees or by resolution of the
Shareholders.
SECTION 12.15 SEAL. The seal of the Trust shall be circular in form bearing the
inscription: "iMillennium Capital Funds -- 1999 -- THE STATE OF DELAWARE."
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IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the Trust,
have executed this instrument as of date first written above.
MAX BERUEFFY, solely as Trustee and not in his
individual capacity
/s/_________________________________
MICHAEL J. WAGNER, solely as Trustee and not in his
individual capacity
/s/_________________________________
DONNA M. BOUDREAUX, solely as Trustee and not in her
individual capacity
/s/_________________________________
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iMILLENNIUM CAPITAL TRUST
TRUST INSTRUMENT
ANNEX A
Series of the Trust
as of October 28, 1999
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SERIES CREATED CLASS THEREOF DATE
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IMillennium Fund N/A [date created]
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A-1
Exhibit (a)
Form of Administrative Services Agreement
IMILLENNIUM CAPITAL TRUST
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made this ____ day of ___________, [year], by and among iMillennium
Capital Trust, a Delaware business trust, having its principal office and place
of business at 17225 El Camino Real, Suite 415, Houston, Texas 77058, and
American Data Services, Inc., New York corporation having its principal office
and place of business at the Hauppauge Corporate Center, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788 ("ADS").
WHEREAS, the Trust is an open-end management investment company
registered with the United States Securities and Exchange Commission ("SEC")
under Investment Company Act of 1940, as amended (the "1940 Act"), and the
shares of which ("Shares") are registered under the Securities Act of 1933, as
amended (the "1933 Act"); and
WHEREAS, the Trust is authorized to issue Shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets, and is authorized to divide those series into
separate classes; and
WHEREAS, the Trust offers shares in the series as listed in Schedule B
hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 13, being herein referred to as a "Fund," and collectively as the
"Funds") and the Trust offers shares of the classes of each Fund as listed in
Appendix A hereto (each such class together with all other classes subsequently
established by the Trust in a Fund being herein referred to as a "Class," and
collectively as the "Classes"); and
WHEREAS, the Trust desires that ADS perform certain administrative
services for each Fund and Class thereof and ADS is willing to provide those
services on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and ADS hereby agree as follows:
1. APPOINTMENT AND DELIVERY OF DOCUMENTS
(a) APPOINTMENT. The Trust hereby appoints ADS, and ADS hereby agrees,
to act as administrator of the Trust for the period and on the terms set forth
in this Agreement.
(b) DOCUMENT DELIVERY. The Trust has delivered to ADS copies of :
(i) the Trust's Trust Instrument and Bylaws (collectively, as amended
from time to time, "Organic Documents");
<PAGE>
(ii) the Trust's Registration Statement and all amendments thereto
filed with the U.S. Securities and Exchange Commission ("SEC") pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), or the Investment Company
Act of 1940, as amended (the "1940 Act")(the "Registration Statement");
(iii) the current Prospectus and Statement of Additional Information of
each Fund (collectively, as currently in effect and as amended or supplemented,
the "Prospectus");
(iv) each current plan of distribution or similar document adopted by
the Trust under Rule 12b-1 under the 1940 Act ("Plan") and each current
shareholder service plan or similar document adopted by the Trust ("Service
Plan"); and,
(vi) all procedures adopted by the Trust with respect to the Funds such
as procedures relating to Rule 17a-7 transactions, Rule 10f-3 transactions and
repurchase agreements.
(v) TRUST'S DUTY TO UPDATE. The Trust shall promptly furnish ADS with
all amendments or supplements to the foregoing and shall deliver to ADS a
certified copy of the resolution of the Board of Trustees of the Trust (the
"Board") appointing ADS and authorizing the execution and delivery of this
Agreement.
2. DUTIES OF ADS.
(a) IN GENERAL. Subject to the direction and control of the Board, ADS
shall manage all aspects of the Trust's operations with respect to the Funds
except those that are the responsibility of any other service provider hired by
the Trust, all in such manner and to such extent as may be authorized by the
Board.
(b) OFFICERS OF TRUST. ADS shall provide persons suitable to the Board
to serve as officers of the Trust.
(c) OFFICE SPACE. ADS will provide the Fund with the adequate general
office space, communication facilities and personnel to perform the services for
the Fund described in Sections 2 and 3 of this Agreement.
(d) SERVICES. With respect to the Trust or each Fund, as applicable,
ADS shall:
(i) oversee the performance of administrative and professional
services rendered to the Trust by others, including its custodian,
transfer agent and dividend disbursing agent as well as legal,
auditing, shareholder servicing and other services performed for the
Funds, including:
(A) the preparation and maintenance by the Trust's
custodian and transfer and dividend disbursing agent in such
form, for such periods and in such locations as may be
required by applicable United States law, of all documents and
records relating to the operation of the Trust required to be
prepared or maintained by the Trust or its agents pursuant to
applicable law;
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(B) the reconciliation of account information and
balances among the Trust's custodian, transfer agent, dividend
disbursing agent and ADS; and,
(C) the transmission of purchase and redemption
orders for Shares.
(ii) assist the Adviser in monitoring Fund holdings for
compliance with the investment restrictions of each Fund set forth in
the Prospectus or required under the 1940 Act and the Internal Revenue
Code. Responsibility for each Fund's compliance with such restrictions
will remain the responsibility of the Adviser, however.
(iii) prepare and coordinate the printing of semi-annual and
annual financial statements.
(iv) prepare selected management reports for performance and
compliance analyses in a form agreed upon by the Trust, the Adviser and
ADS from time to time.
(v) advise the Trust and the Board on matters concerning the
Trust and its affairs.
(vi) with the cooperation of the counsel to the Trust, the
Adviser, officers of the Trust and other relevant parties, prepare and
disseminate materials for meetings of the Board, including agendas and
selected financial information as agreed upon by the Fund and ADS from
time to time; attend and participate in Board meetings to the extent
requested by the Board; and prepare or cause to be prepared minutes of
the meetings of the Board.
(vii) determine income and capital gains available for
distribution and calculate distributions required to meet regulatory,
income, and excise tax requirements, to be reviewed by the Fund's
independent public accountants.
(viii) prepare all federal income and excise tax returns and
state income and other tax returns, including any extensions or
amendments thereto as agreed between the Trust and ADS, for review and
signing by the Fund's independent public accountants.
(ix) prepare and maintain the Fund's operating expense budget
to determine proper expense accruals to be charged to the Fund in order
to calculate it's daily net asset value.
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(x) in consultation with counsel for the Trust, assist in and
oversee the preparation, filing, printing and where applicable,
dissemination to shareholders of the following:
(A) amendments to the Trust's Registration Statement
on Form N-1A;
(B) periodic reports to the Funds' shareholders and
the Commission, including but not limited to annual reports
and semi-annual reports;
(C) notices pursuant to Rule 24f-2;
(D) proxy materials; and
(E) reports to the SEC on Form N-SAR.
(xi) ADS will coordinate the Fund's annual audit by:
(A) assisting the Fund's independent auditors in any
requested review of the Fund's accounts and records;
(B) providing appropriate financial schedules as
requested by the Trust's independent public accountants; and,
(C) providing office facilities as may be required.
(xii) In consultation with the Trust's outside counsel,
coordinate any examinations conducted by the SEC or other regulatory
agencies, and as appropriate will respond to requests for records or
other information during the course of such examinations.
(xiii) after consultation with counsel for the Trust and the
investment adviser, determine the jurisdictions in which Shares of the
Fund shall be registered or qualified for sale; register, or prepare
applicable filings with respect to, the Shares with the various state
and other securities commissions, provided that all fees for the
registration of Shares or for qualifying or continuing the
qualification of the Funds shall be paid by the Fund.
(xiv) monitor sales of Shares and register Shares with the
SEC.
(xv) oversee the calculation of performance data for
dissemination to information services covering the investment company
industry, for sales literature of the Trust and other appropriate
purposes.
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(xvi) prepare, or cause to be prepared, expense and financial
reports, including Fund budgets, expense reports, pro-forma financial
statements, expense and profit/loss projections and fee waiver/expense
reimbursement projections on a periodic basis.
(xvii) authorize the payment of Trust expenses and pay, from
Trust assets, all bills of the Trust.
(xviii) assist the Trust in the selection of other service
providers, such as independent accountants, law firms and proxy
solicitors.
(xix) provide such other services and assistance relating to
the affairs of the Trust as the Trust may, from time to time,
reasonably request provided, that ADS need not begin performing any
such task except upon 65 days' notice and pursuant to mutually
acceptable compensation agreements.
(e) RESPONSIBILITY FOR COMPLIANCE WITH APPLICABLE LAW. Except with
respect to ADS's duties as set forth in this Section 2 and except as otherwise
specifically provided herein, the Trust assumes all responsibility for ensuring
that it complies with all applicable requirements of the 1933 Act, the 1940 Act
and any laws, rules and regulations of governmental authorities with
jurisdiction over the Trust.
(f) ACCESS TO INFORMATION. In order for ADS to perform the services
required by this Section 2, the Trust (i) shall cause all service providers to
the Trust to furnish any and all information to ADS, and assist ADS as may be
required and (ii) shall ensure that ADS has access to all records and documents
maintained by the Trust or any service provider to the Trust.
(g) ADS AS INDEPENDENT CONTRACTOR. ADS shall, for all purposes herein,
be deemed to be an independent contractor and shall, unless otherwise expressly
provided or authorized, have no authority to act for or represent the Fund in
any way or otherwise be deemed an agent of the Fund.
3. COMPENSATION OF ADS.
(a) FEES. For the services provided by ADS pursuant to this Agreement,
the Trust, on behalf of each Fund, agrees to pay ADS the fees set forth in
Schedule A. Fees will begin to accrue for each Fund on the latter of the date of
this Agreement or the date of commencement of operations of the Fund.
(b) EXPENSES. In addition to the fees paid under subsection (a), the
Trust agrees to reimburse ADS for out-of-pocket expenses or advances incurred by
ADS for the items set out in the Schedule A attached hereto. In addition, the
Trust will reimburse any other expenses incurred by ADS at the request or with
the consent of the Trust.
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(c) FEE CHANGES. The fees, out-of pocket expenses and advances
identified in the foregoing subsections (a) and (b) above may be changed from
time to time subject to mutual written agreement between the Trust and ADS.
4. EXPENSES ASSUMED AS ADMINISTRATOR.
Except as specifically otherwise stated in this Agreement, ADS shall
pay all expenses incurred by it in performing its services and duties as
Administrator. The Trust will bear all other expenses incurred in the operation
of the Funds (other than those borne by the Adviser) including taxes, interest,
brokerage fees and commissions, if any, fees of Trustees who are not officers,
directors, partners, employees or holders of five percent or more of the
outstanding voting securities of the Adviser or ADS or any of their affiliates,
Securities and Exchange Commission fees and state blue sky registration or
qualification fees, advisory fees, charges of custodians, transfer and dividend
disbursing agents' fees, payments under the Plans, certain insurance premiums,
outside auditing and legal expenses, costs of maintaining corporate existence,
costs attributable to shareholder services, including without limitation
telephone and personnel expenses, costs of preparing and printing Prospectuses
for regulatory purposes, costs of shareholders' reports and Trust meetings and
any extraordinary expenses
5. STANDARD OF CARE, INDEMNIFICATION AND RELIANCE
(a) STANDARD OF CARE. ADS shall be under no duty to take any action
except as specifically set forth herein or as may be specifically agreed to by
ADS in writing. ADS shall use its best judgment and efforts in rendering the
services described in this Agreement. ADS shall not be liable to the Trust or
any of the Trust's shareholders for any action or inaction of ADS relating to
any event whatsoever in the absence of bad faith, willful misfeasance or gross
negligence in the performance of ADS's duties or obligations under this
Agreement or by reason of ADS's reckless disregard of its duties and obligations
under this Agreement.
(b) INDEMNIFICATION BY THE TRUST. The Trust agrees to indemnify and
hold harmless ADS, its employees, agents, directors, officers and managers and
any person who controls ADS within the meaning of section 15 of the Securities
Act or section 20 of the Securities Exchange Act of 1934, as amended, ("ADS
Indemnitees") against and from any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses of every nature and character arising out of or in any way
related to ADS's actions taken or failures to act with respect to a Fund that
are consistent with the standard of care set forth in Section 3(a) or based, if
applicable, on good faith reliance upon an item described in Section 3(d)(a
"Claim"). The Trust shall not be required to indemnify any ADS Indemnitee if,
prior to confessing any Claim against the ADS Indemnitee, ADS or the ADS
Indemnitee does not give the Trust written notice of and reasonable opportunity
to defend against the claim in its own name or in the name of the ADS
Indemnitee.
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(c) INDEMNIFICATION BY ADS. ADS agrees to indemnify and hold harmless
the Trust, its employees, agents, trustees and officers against and from any and
all claims, demands, actions, suits, judgments, liabilities, losses, damages,
costs, charges, reasonable counsel fees and other expenses of every nature and
character arising out of ADS's actions taken or failures to act with respect to
a Fund that are not consistent with the standard of care set forth in Section
3(a). ADS shall not be required to indemnify the Trust if, prior to confessing
any Claim against the Trust, the Trust does not give ADS written notice of and
reasonable opportunity to defend against the claim in its own name or in the
name of the Trust.
(d) RELIANCE UPON INSTRUCTIONS. An ADS Indemnitee shall not be liable
for any action taken or failure to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be counsel
to the Trust or counsel to ADS, and upon statements of accountants,
brokers and other persons reasonably believed in good faith by ADS to
be expert in the matters upon which they are consulted;
(ii) any oral instruction which it receives and which it
reasonably believes in good faith was transmitted by the person or
persons authorized by the Board to give such oral instruction. ADS
shall have no duty or obligation to make any inquiry or effort of
certification of such oral instruction;
(iii) any written instruction or certified copy of any
resolution of the Board, and ADS may rely upon the genuineness of any
such document or copy thereof reasonably believed in good faith by ADS
to have been validly executed; or
(iv) any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement, instrument,
report, notice, consent, order, or other document reasonably believed
in good faith by ADS to be genuine and to have been signed or presented
by the Trust or other proper party or parties;
and no ADS Indemnitee shall be under any duty or obligation to inquire into the
validity or invalidity or authority or lack thereof of any statement, oral or
written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which ADS reasonably believes in good faith to
be genuine.
(e) ERRORS OF OTHER SERVICE PROVIDERS. ADS shall not be liable for the
errors of other service providers to the Trust, including the errors of pricing
services (other than to pursue all reasonable claims against the pricing service
based on the pricing services' standard contracts entered into by ADS) and
errors in information provided by an investment adviser (including prices and
pricing formulas and the untimely transmission of trade information), custodian
or transfer agent to the Trust.
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<PAGE>
6. ADDITIONAL FUNDS AND CLASSES
In the event that the Corporation establishes one or more series of Shares
or one or more classes of Shares after the effectiveness of this
Agreement, such series of Shares or classes of Shares, as the case may
be, shall become Funds and Classes under this Agreement. ADS or the
Corporation may elect not to make any such series or classes subject to
this Agreement.
7. ACTIVITIES OF ADS.
(a) SERVICES TO OTHERS. ADS shall be free to render similar services to
others so long as its services hereinunder are not impaired thereby.
(b) SUBCONTRACTORS. ADS may subcontract any or all of its
responsibilities pursuant to this Agreement to one or more corporations, trusts,
firms, individuals or associations, which may be affiliated persons of ADS, who
agree to comply with the terms of this Agreement; provided, that any such
subcontracting shall not relieve ADS of its responsibilities hereunder. ADS may
pay those persons for their services, but no such payment will increase ADS's
compensation from the Trust.
8. RECORDS.
ADS shall maintain records relating to its services, such as journals,
ledger accounts and other records, as are required to be maintained under the
1940 Act and Rule 31a-1 thereunder. The books and records pertaining to the
Corporation that are in possession of ADS shall be the property of the
Corporation. The Corporation, or the Corporation's authorized representatives,
shall have access to such books and records at all times during ADS's normal
business hours. Upon the reasonable request of the Corporation, copies of any
such books and records shall be provided promptly by ADS to the Corporation or
the Corporation's authorized representatives. In the event the Corporation
designates a successor that assumes any of ADS's obligations hereunder, ADS
shall, at the expense and direction of the Corporation, transfer to such
successor all relevant books, records and other data established or maintained
by ADS under this Agreement.
9. REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS OF ADS. ADS represents and warrants to the Trust that:
(i) it is a corporation duly organized and existing and in good
standing under the laws of the State of New York;
(ii) it is duly qualified to carry on its business in the State of New
York;
(iii) it is empowered under applicable laws and by its Article of
Incorporation and Bylaws to enter into this Agreement and perform its duties
under this Agreement; and,
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<PAGE>
(iv) it has access to the necessary facilities, equipment, and
personnel to perform its duties and obligations under this Agreement.
(b) REPRESENTATIONS OF THE TRUST. The Trust represents and warrants to ADS that
(i) it is a business trust duly organized and existing and in good
standing under the laws of [Massachusetts/Delaware];
(ii) it is empowered under applicable laws and by its Organic Documents
to enter into and perform this Agreement;
(iii) all proceedings required by said Organic Documents have been
taken to authorize it to enter into and perform this Agreement;
(iv) it is an open-end management investment company registered under
the Investment Company Act of 1940; and,
(v) a registration statement under the Securities Act of 1933 is
currently or will become effective and will remain effective, and appropriate
state securities law filings as required, have been or will be made and will
continue to be made, with respect to all Shares of the Fund being offered for
sale.
10. CONFIDENTIALITY
ADS agrees to treat all records and other information related to the
Trust as proprietary information of the Trust, respectively, and, on behalf of
itself and its employees, to keep confidential all such information, except that
ADS may:
(a) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC;
(b) provide information typically supplied in the investment company
industry to companies that track or report price, performance or other
information regarding investment companies; and
(c) release such other information as approved in writing by the Trust
or the Adviser, as the case may be, which approval shall not be unreasonably
withheld and may not be withheld where ADS may be exposed to civil or criminal
contempt proceedings for failure to release the information, when requested to
divulge such information by duly constituted authorities or when so requested by
the Trust or the Adviser.
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<PAGE>
11. EFFECTIVENESS, DURATION, AND TERMINATION
(a) EFFECTIVE DATE. This Agreement shall become effective on the date
first above written.
(b) DURATION. This Agreement shall remain in effect for a period of
three (3) years from the date of its effectiveness and shall continue in effect
for successive twelve-month periods; provided that such continuance is
specifically approved at least annually by the Board and by a majority of the
Trustees who are not parties to this Agreement or interested persons of any such
party.
(c) TERMINATION FOR CAUSE. In the event of a material breach of this
Agreement by any of the parties, the non-breaching party or parties shall notify
the breaching party or parties in writing of such breach and upon receipt of
such notice, the breaching party or parties shall have 45 days to remedy the
breach. If said breach is not remedied to the reasonable satisfaction of the
non-breaching party or parties, a non-breaching party may thereafter terminate
this Agreement immediately. Compensation due ADS and unpaid by the Adviser upon
such termination shall be immediately due and payable upon, and notwithstanding,
such termination. If after such termination for so long as ADS, with the written
consent of the Trust and the Adviser, in fact continues to perform any one or
more of the services contemplated by this Agreement, the provisions of this
Agreement, including without limitation, the provisions dealing with
indemnification, shall continue in full force and effect.
(d) PAYMENT TO ADS UPON TERMINATION. If at any time during the initial
or any subsequent term of this Agreement, ADS is replaced as administrator for
any reason other than for a material breach of this Agreement which ADS does not
cure within a reasonable time, or a Fund is merged into or sells all (or
substantially all) of its assets to another fund or family of funds for which
ADS does not serve as transfer agent, then the Adviser shall, immediately upon
demand by ADS, make a one time cash payment equal to the net present value of
the revenues ADS would have earned during the remainder of the initial or
subsequent term of the Agreement, as the case may be, at the fee rate in effect
at the time of such event (including any applicable minimum). For purposes of
this paragraph, the present value of the revenues shall be determined by
applying a 5.00% discount rate, and the asset figure used to calculate the fee
due ADS hereunder shall be the highest monthly average assets of the Fund at any
time during the 12 months immediately preceding the termination of ADS (or the
merger or sale of assets) of the Fund.
(e) PAYMENT OF OUT-OF-POCKET EXPENSES UPON TERMINATION. If this
Agreement is terminated with respect to a Fund or Funds, ADS shall be entitled
to collect from the Adviser, in addition to the compensation described under
Sections 4 and 11(d) hereof, the amount of all of ADS's reasonable cash
disbursements for services in connection with ADS's' activities in effecting
such termination, including without limitation, the delivery to the Trust and/or
its designees of the Trust's property, records, instruments and documents, or
any copies thereof. Subsequent to such termination, for a reasonable fee, ADS
will provide the Trust with reasonable access to all Trust documents or records,
if any, remaining in its possession. Should the Trust or the Adviser exercise
its right to terminate, all out-of-pocket expenses associated with the movement
of records and material will be borne by the Adviser. Additionally, ADS reserves
the right to charge for any other reasonable costs and expenses associated with
such termination.
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<PAGE>
(f) SURVIVAL OF CERTAIN OBLIGAITONS. The obligations of Sections 4, 5
and 10 shall survive any termination of this Agreement
12. ASSIGNMENT
This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by a party without the prior written consent
of the other parties.
13. FORCE MAJEURE
ADS shall not be responsible or liable for any failure or delay in
performance of its obligations under this Agreement arising out of or caused,
directly or indirectly, by circumstances beyond its reasonable control
including, without limitation, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdowns, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply.
14. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The trustees of the Trust and the shareholders of each Fund shall not
be liable for any obligations of the Trust or of the Funds under this Agreement,
and ADS agrees that, in asserting any rights or claims under this Agreement, it
shall look only to the assets and property of the Trust or the Fund to which
ADS's rights or claims relate in settlement of such rights or claims, and not to
the trustees of the Trust or the shareholders of the Funds.
15. MISCELLANEOUS
(a) AMENDMENTS. Except for amendments to Schedule B to add new Funds
and Classes in accordance with Section ___, no provisions of this Agreement may
be amended or modified in any manner except by a written agreement properly
authorized and executed by all parties hereto.
(b) CHOICE OF LAW. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York. If the applicable law of the State of New York or any of the provisions
herein, conflict with the applicable provisions of the 1940 Act, the latter
shall control.
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<PAGE>
(c) REFERENCES TO LAW. References to any law in this Agreement shall be
deemed to include reference to the applicable rules and regulations promulgated
under authority of the law and all official interpretations of such law or rules
or regulations.
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
(e) COUNTERPARTS. The parties may execute this Agreement on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) SEVERABILITY. If any part, term or provision of this Agreement is
held to be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held to be
illegal or invalid.
(g) HEADINGS. Section and paragraph headings in this Agreement are
included for convenience only and are not to be used to construe or interpret
this Agreement.
(h) NOTICES. All notices and other communications hereunder shall be in
writing, shall be deemed to have been given when received or when sent by telex
or facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Trust: To ADS:
[Name] Michael Miola
[Title] President
[Name of Trust] American Data Services, Inc.
[Street] 150 Motor Parkway, Suite 900
[City, State, Zip] Hauppauge, NY 11788
(i) BUSINESS DAYS. Nothing contained in this Agreement is intended to
or shall require ADS, in any capacity hereunder, to perform any functions or
duties on any day other than a Fund Business Day as defined in the Prospectus
for the Fund. Functions or duties normally scheduled to be performed on any day
which is not a Fund Business Day shall be performed on, and as of, the next Fund
Business Day, unless otherwise required by law.
(j) DISTINCTION OF FUNDS. Notwithstanding any other provision of this
Agreement, the parties agree that the assets and liabilities of each Fund of the
Trust are separate and distinct from the assets and liabilities of each other
Fund and that no Fund shall be liable or shall be charged for any debt,
obligation or liability of any other Fund, whether arising under this Agreement
or otherwise.
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<PAGE>
(l) NON-LIABILITY OF AFFILIATES. No affiliated person (as that term is
defined in the 1940 Act), employee, agent, director, officer or manager of ADS
shall be liable at law or in equity for ADS's obligations under this Agreement.
(m) CONSEQUENTIAL DAMAGES. No party to this Agreement shall be liable
to the other parties for consequential damages under any provision of this
Agreement.
(n) REPRESENTATION OF SIGNATORIES. Each of the undersigned expressly
warrants and represents that they have full power and authority to sign this
Agreement on behalf of the party indicated and that their signature will bind
the party indicated to the terms hereof
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
[Name of Trust] AMERICAN DATA SERVICES, INC.
By: __________________________________ By: ___________________________
[Name], [Title] Michael Miola, President
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<PAGE>
iMILLENNIUM CAPITAL TRUST
ADMINISTRATION AGREEMENT
SCHEDULE A
FEES AND SURCHARGES
A-1
<PAGE>
iMILLENNIUM CAPITAL TRUST
ADMINISTRATION AGREEMENT
SCHEDULE B
FUNDS AND CLASSES
OF THE TRUST AS OF OCTOBER 28, 1999
Name of Fund Classes
IMillennium Fund N/A
B-1
Exhibit (h)(2)
Form of Transfer Agency Agreement
iMILLENNIUM CAPITAL TRUST
TRANSFER AGENCY AGREEMENT
AGREEMENT made this ____ day of ___________, [year], by and among iMillennium
Capital Trust, a Delaware business trust, having its principal office and place
of business at 17225 El Camino Real, Suite 415, Houston, Texas 77058, and
American Data Services, Inc., New York corporation having its principal office
and place of business at the Hauppauge Corporate Center, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788 ("ADS").
WHEREAS, the Trust is an open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares ("Shares") in separate
series, with each such series representing interests in a separate portfolio of
securities and other assets, and is authorized to divide those series into
separate classes; and
WHEREAS, the Trust offers shares in the series as listed in Schedule B
hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 13, being herein referred to as a "Fund," and collectively as the
"Funds") and the Trust offers shares of the classes of each Fund as listed in
Appendix A hereto (each such class together with all other classes subsequently
established by the Trust in a Fund being herein referred to as a "Class," and
collectively as the "Classes"); and
WHEREAS, ADS is a corporation experienced in providing transfer agency
and related services to mutual funds and possesses facilities sufficient to
provide such services; and
WHEREAS, the desires to appoint ADS as its transfer agent and dividend
disbursing agent for each Fund and Class thereof and ADS desires to accept such
appointment on the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and ADS hereby agree as follows:
1. APPOINTMENT AND DELIVERY OF DOCUMENTS
(a) Appointment. The Trust, on behalf of the Funds, hereby appoints ADS
to act as, and ADS agrees to act as, (i) transfer agent for the authorized and
issued shares of beneficial interest stock of the Trust representing interests
in each of the respective Funds and Classes thereof ("Shares"), (ii) dividend
disbursing agent and (iii) agent in connection with any accumulation,
open-account or similar plans provided to the registered owners of shares of any
of the Funds ("Shareholders") and set out in the currently effective
prospectuses and statements of additional information of the applicable Fund,
including, without limitation, any periodic investment plan or periodic
withdrawal program.
<PAGE>
(b) DOCUMENT DELIVERY. The Trust has delivered to ADS copies of:
(i) the Trust's Trust Instrument and Bylaws (collectively, as
amended from time to time, "Organic Documents");
(ii) the Trust's Registration Statement and all amendments
thereto filed with the U.S. Securities and Exchange Commission ("SEC")
pursuant to the Securities Act of 1933, as amended (the "1933 Act"), or
the Investment Company Act of 1940, as amended (the "1940 Act")(the
"Registration Statement");
(iii) the current Prospectus and Statement of Additional
Information of each Fund (collectively, as currently in effect and as
amended or supplemented, the "Prospectus"); and,
(iv) each current plan of distribution or similar document
adopted by the Trust under Rule 12b-1 under the 1940 Act ("Plan") and
each current shareholder service plan or similar document adopted by
the Trust ("Service Plan").
(v) TRUST'S DUTY TO UPDATE. The Trust shall promptly furnish
ADS with all amendments or supplements to the foregoing and shall deliver to ADS
a certified copy of the resolution of the Board of Trustees of the Trust (the
"Board") appointing ADS and authorizing the execution and delivery of this
Agreement.
2. DUTIES OF ADS AND THE TRUST
(a) TRANSFER AGENCY SERVICES. In accordance with procedures established
from time to time by agreement between the Trust on behalf of each of the Funds,
as applicable, and ADS, ADS will perform the following services:
(i) provide the services of a transfer agent, dividend
disbursing agent and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal program)
that are customary for open-end management investment companies
including:
(A) maintaining all Shareholder accounts;
(B) preparing Shareholder meeting lists;
(C) mailing Shareholder reports and prospectuses to
current Shareholders;
(D) withholding taxes on U.S. resident and
non-resident alien accounts;
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<PAGE>
(E) preparing and filing U.S. Treasury Department
Forms 1099 and other appropriate forms required by federal
authorities with respect to distributions for Shareholders;
(F) preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts; and,
(G) providing account information in response to
inquiries from Shareholders.
(ii) Receive for acceptance, orders for the purchase of Shares, and promptly
deliver payment and appropriate documentation therefore to the
Custodian of the Fund authorized by the Board of Directors of the Fund
(the "Custodian"); or, in the case of a Fund's operating in a
master-feeder or fund of funds structure, to the transfer agent or
interest-holder recordkeeper for the master portfolios in which the
Fund invests;
(iii) pursuant to purchase orders, issue the appropriate
number of Shares and hold such Shares in the appropriate Shareholder
account;
(iv) receive for acceptance redemption requests and deliver
the appropriate documentation therefor to the Custodian or, in the case
of Fund's operating in a master-feeder or fund of funds structure, to
the transfer agent or interest-holder recordkeeper for the master
portfolios in which the Fund invests;
(v) as and when it receives monies paid to it by the Custodian
with respect to any redemption, pay the redemption proceeds as required
by the Prospectus pursuant to which the redeemed Shares were offered
and as instructed by the redeeming Shareholders;
(vi) effect transfers of Shares upon receipt of appropriate
instructions from Shareholders;
(vii) prepare and transmit to Shareholders (or credit the
appropriate Shareholder accounts) payments for all distributions
declared by the Trust with respect to Shares;
(viii) issue share certificates and replacement share
certificates for those share certificates alleged to have been lost,
stolen, or destroyed upon receipt by ADS of indemnification
satisfactory to ADS and protecting ADS and the Trust and, at the option
of ADS, issue replacement certificates in place of mutilated share
certificates upon presentation thereof without requiring
indemnification;
(ix) receive from Shareholders or debit Shareholder accounts
for sales commissions, including contingent deferred, deferred and
other sales charges, and service fees (i.e., wire redemption charges)
and prepare and transmit payments to underwriters, selected dealers and
others for commissions and service fees received;
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<PAGE>
(x) track shareholder accounts by financial intermediary
source and otherwise as requested by the Trust and provide periodic
reporting to the Trust or its administrator or other agent;
(xi) maintain records of account for and provide reports and
statements to the Trust and Shareholders as to the foregoing;
(xii) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number of shares
of the Fund which are authorized, based upon data provided to it by the
Fund, and issued and outstanding.
(xiii) provide a system which will enable the Trust to
calculate the total number of Shares of each Fund and Class thereof
sold in each State.
(b) Other Services. ADS shall provide the following additional services
on behalf of the Trust and such other services agreed to in writing by the Trust
and ADS:
(i) monitor and make appropriate filings with respect to the escheatment
laws of the various states and territories of the United States; and
(c) BLUE SKY MATTERS. The Trust or its administrator or other agent
(i) shall identify to ADS in writing those transactions and
assets to be treated as exempt from reporting for each state and
territory of the United States and for each foreign jurisdiction
(collectively "States"); and
(ii) shall monitor the sales activity with respect to
Shareholders domiciled or resident in each State.
(d) SAFEKEEPING. ADS shall establish and maintain facilities and
procedures reasonably acceptable to the Trust for the safekeeping, control,
preparation and use of share certificates, check forms, and facsimile signature
imprinting devices. ADS shall establish and maintain facilities and procedures
reasonably acceptable to the Trust for safekeeping of all records maintained by
ADS pursuant to this Agreement.
(e) COOPERATION WITH ACCOUNTANTS. ADS shall cooperate with each Fund's
independent public accountants and shall take reasonable action to make all
necessary information available to the accountants for the performance of the
accountants' duties.
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<PAGE>
(f) RESPONSIBILITY FOR COMPLIANCE WITH LAW.
(i) IN GENERAL. Except with respect to ADS's duties as set
forth in this Section 2 and except as otherwise specifically provided
herein, the Trust assumes all responsibility for ensuring that the
Trust complies with all applicable requirements of the Securities Act,
the 1940 Act and any laws, rules and regulations of governmental
authorities with jurisdiction over the Trust. All references to any law
in this Agreement shall be deemed to include reference to the
applicable rules and regulations promulgated under authority of the law
and all official interpretations of such law or rules or regulations.
(ii) ISSUANCE OF SHARES. The responsibility of ADS for the
Trust's state registration status is solely limited to the reporting of
transactions to the Trust, and ADS shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the issue or sale
of such Shares, which functions shall be the sole responsibility of the
Trust or its administrator or other agent.
3. RECORDKEEPING
(a) PREDECESSOR RECORDS. Prior to the commencement of ADS's
responsibilities under this Agreement, if applicable, the Trust shall deliver or
cause to be delivered over to ADS:
(i) an accurate list of Shareholders of the Trust, showing
each Shareholder's address of record, number of Shares owned and
whether such Shares are represented by outstanding share certificates
and
(ii) all Shareholder records, files, and other materials
necessary or appropriate for proper performance of the functions
assumed by ADS under this Agreement (collectively referred to as the
"Materials"). The Trust shall on behalf of each applicable Fund or
Class indemnify and hold ADS harmless from and against any and all
losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any error, omission,
inaccuracy or other deficiency of the Materials, or out of the failure
of the Trust to provide any portion of the Materials or to provide any
information in the Trust's possession or control reasonably needed by
ADS to perform the services described in this Agreement.
(b) RECORDKEEPING. ADS shall keep records relating to the services to
be performed under this Agreement, in the form and manner as it may deem
advisable and as required by applicable law. To the extent required by Section
31 of the 1940 Act, and the rules thereunder, ADS agrees that all such records
prepared or maintained by ADS relating to the services to be performed by ADS
under this Agreement are the property of the Trust and will be preserved,
maintained and made available in accordance with Section 31 of the 1940 Act and
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<PAGE>
the rules thereunder, and will be surrendered promptly to the Trust on and in
accordance with the Trust's request. The Trust and the Trust's authorized
representatives shall have access to ADS's records relating to the services to
be performed under this Agreement at all times during ADS's normal business
hours. Upon the reasonable request of the Trust, copies of any such records
shall be provided promptly by ADS to the Trust or its authorized
representatives.
(c) INSPECTION OF RECORDS BY OTHERS. In case of any requests or demands
for the inspection of the Shareholder records of the Fund, ADS will endeavor to
notify the Fund and to secure instructions from an authorized officer of the
Fund as to such inspection. ADS reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person, and shall promptly notify the Fund of any unusual request to inspect or
copy the shareholder records of the Fund or the receipt of any other unusual
request to inspect, copy or produce the records of the Fund.
4. ISSUANCE AND TRANSFER OF SHARES
(a) ISSUANCE OF SHARES. ADS shall make original issues of Shares of
each Fund and Class thereof in accordance with the Trust's then current
prospectus only upon receipt of
(i) instructions requesting the issuance,
(ii) a certified copy of a resolution of the Board
authorizing the issuance,
(iii) necessary funds for the payment of any original issue
tax applicable to such Shares, and
(iv) an opinion of the Trust's counsel as to the legality and
validity of the issuance, which opinion may provide that it is
contingent upon the filing by the Trust of an appropriate notice with
the SEC, as required by Section 24 of the 1940 Act or the rules
thereunder. If such opinion is contingent upon a filing under Section
24 of the 1940 Act, the Trust shall indemnify ADS for any liability
arising from the failure of the Trust to comply with that section or
the rules thereunder.
(b) Transfer of Shares. Transfers of Shares of each Fund and Class
thereof shall be registered on the Shareholder records maintained by ADS. In
registering transfers of Shares, ADS may rely upon the Uniform Commercial Code
as in effect in the State of New York or any other statutes that, in the opinion
of ADS's counsel, protect ADS and the Trust from liability arising from:
(i) not requiring complete documentation;
(ii) registering a transfer without an adverse claim inquiry;
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<PAGE>
(iii) delaying registration for purposes of such inquiry; or,
(iv) refusing registration whenever an adverse claim requires
such refusal. As Transfer Agent, ADS will be responsible for delivery to the
transferor and transferee of such documentation as is required by the Uniform
Commercial Code.
5. SHARE CERTIFICATES
(a) SURCHARGE FOR ISSUANCE OF SHARE CERTIFICATIONS. If the Trust issues
share certificates, the Trust shall pay the surcharge for issuance of
certificates set forth in Schedule A, item (f).
(b) PROCEDURES FOR ISSUANCE OF CERTIFICATES. In the event the Trust
elects to issue share certificates, the following provisions shall apply:
(i) CERTIFICATES. The Trust shall furnish to ADS a supply of
blank share certificates of each Fund and Class thereof and, from time
to time, will renew such supply upon ADS's request. Blank share
certificates shall be signed manually or by facsimile signatures of
officers of the Trust authorized to sign by the Organic Documents of
the Trust and, if required by the Organic Documents, shall bear the
Trust's seal or a facsimile thereof. Unless otherwise directed by the
Trust, ADS may issue or register Share certificates reflecting the
manual or facsimile signature of an officer who has died, resigned or
been removed by the Trust.
(ii) ENDORSEMENT; TRANSPORTATION. New Share certificates shall
be issued by ADS upon surrender of outstanding Share certificates in
the form deemed by ADS to be properly endorsed for transfer and
satisfactory evidence of compliance with all applicable laws relating
to the payment or collection of taxes. ADS shall forward Share
certificates in "non-negotiable" form by first-class or registered
mail, or by whatever means ADS deems equally reliable and expeditious.
ADS shall not mail Share certificates in "negotiable" form unless
requested in writing by the Trust and fully indemnified by the Trust to
ADS's satisfaction.
6. SHARE PURCHASES; ELIGIBILITY TO RECEIVE DISTRIBUTIONS
(a) PURCHASE ORDERS. Shares shall be issued in accordance with the
terms of a Fund's or Class' prospectus after ADS or its agent receives either:
(i)(A) an instruction directing investment in a Fund or Class,
(B) a check (other than a third party check) or a wire or other
electronic payment in the amount designated in the instruction and (C),
in the case of an initial purchase, a completed account application;
or,
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<PAGE>
(ii) the information required for purchases pursuant to a
selected dealer agreement, processing organization agreement, or a
similar contract with a financial intermediary.
(b) Distribution Eligibility. Shares issued in a Fund after receipt of
a completed purchase order shall be eligible to receive distributions of the
Fund at the time specified in the prospectus pursuant to which the Shares are
offered.
(c) Determination of Federal Funds. Shareholder payments shall be
considered Federal Funds no later than on the day indicated below unless other
times are noted in the prospectus of the applicable Class or Fund:
(i) for a wire received, at the time of the receipt of the
wire;
(ii) for a check drawn on a member bank of the Federal Reserve
System, on the second Fund Business Day following receipt of the check;
and
(iii) for a check drawn on an institution that is not a member
of the Federal Reserve System, at such time as ADS is credited with
Federal Funds with respect to that check.
7. COMPENSATION OF ADS
(a) Fees. For the services provided by ADS pursuant to this Agreement,
the Trust, on behalf of each Fund, agrees to pay ADS the fees set forth in
Schedule A. Fees will begin to accrue for each Fund on the latter of the date of
this Agreement or the date of commencement of operations of the Fund.
(b) Expenses. In addition to the fees paid under subsection (a), the
Trust agrees to reimburse ADS for out-of-pocket expenses or advances incurred by
ADS for the items set out in the Schedule A attached hereto. In addition, the
Trust will reimburse any other expenses incurred by ADS at the request or with
the consent of the Trust.
(c) Fee Changes. The fees, out-of pocket expenses and advances
identified in the foregoing subsections (a) and (b) above may be changed from
time to time subject to mutual written agreement between the Trust and ADS.
8. REPRESENTATIONS AND WARRANTIES
(a) Representations of ADS. ADS represents and warrants to the Trust
that:
(i) it is a corporation duly organized and existing and in
good standing under the laws of the State of New York;
(ii) it is duly qualified to carry on its business in the
State of New York;
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<PAGE>
(iii) it is empowered under applicable laws and by its Article
of Incorporation and Bylaws to enter into this Agreement and perform
its duties under this Agreement;
(iv) it has access to the necessary facilities, equipment, and personnel to
perform its duties and obligations under this Agreement; and,
(iv) it is registered as a transfer agent under Section 17A of
the Securities Exchange Act of 1934 and shall continue to be registered
throughout the remainder of this Agreement.
(b) REPRESENTATIONS OF THE TRUST. The Trust represents and warrants to
ADS that:
(i) it is a business trust duly organized and existing and in
good standing under the laws of [Massachusetts/Delaware];
(ii) it is empowered under applicable laws and by its Organic
Documents to enter into and perform this Agreement;
(iii) all proceedings required by said Organic Documents have
been taken to authorize it to enter into and perform this Agreement;
(iv) it is an open-end management investment company
registered under the Investment Company Act of 1940; and,
(v) a registration statement under the Securities Act of 1933
is currently or will become effective and will remain effective, and appropriate
state securities law filings as required, have been or will be made and will
continue to be made, with respect to all Shares of the Fund being offered for
sale.
9. STANDARD OF CARE, INDEMNIFICATION AND RELIANCE
(a) STANDARD OF CARE. ADS shall be under no duty to take any action
except as specifically set forth herein or as may be specifically agreed to by
ADS in writing. ADS shall use its best judgment and efforts in rendering the
services described in this Agreement. ADS shall not be liable to the Trust or
any of the Trust's shareholders for any action or inaction of ADS relating to
any event whatsoever in the absence of bad faith, willful misfeasance or gross
negligence in the performance of ADS's duties or obligations under this
Agreement or by reason of ADS's reckless disregard of its duties and obligations
under this Agreement.
(b) INDEMNIFICATION OF ADS. ADS shall not be responsible for, and the
Trust shall on behalf of each applicable Fund or Class thereof indemnify and
hold ADS harmless from and against, any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liability arising out of or
attributable to:
(i) all actions of ADS or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such
actions are taken in good faith and without gross negligence or willful
misconduct; the Trust's lack of good faith or the Trust's gross
negligence or willful misconduct;
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<PAGE>
(ii) the reliance on or use by ADS or its agents or
subcontractors of information, records or documents which (i) are
received by ADS or its agents or subcontractors and furnished to it by
or on behalf of the Fund, and (ii) have been prepared or maintained by
the Trust or any other person or firm on behalf of the Trust, including
but not limited to any previous transfer agent or registrar;
(iii) the reasonable reliance on, or the carrying out by ADS
or its agents or subcontractors of, any instructions or requests of the
Trust on behalf of the applicable Fund;
(iv) the Fund's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Fund's lack good faith, gross
negligence or willful misconduct or which arise out of the breach of
any representation or warranty of the Fund hereunder and,
(v) the offer or sale of Shares in violation of any
requirement under the Federal securities laws or regulations or the
securities laws or regulations of any State that such Shares be
registered in such State or in violation of any stop order or other
determination or ruling by any federal agency or any State with respect
to the offer or sale of such Shares in such State.
(c) INDEMNIFICATION OF THE TRUST. ADS shall indemnify and hold the
Trust and each Fund or Class thereof harmless from and against any and all
losses, damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributed to any action or failure or omission to
act by ADS as a result of ADS's lack of good faith, gross negligence or willful
misconduct with respect to the services performed under or in connection with
this Agreement.
(d) RELIANCE. At any time ADS may apply to any officer of the Trust for
instructions, and may consult with legal counsel to the Trust or to ADS with
respect to any matter arising in connection with the services to be performed by
ADS under this Agreement, and ADS and its agents or subcontractors shall not be
liable and shall be indemnified by the Trust on behalf of the applicable Fund
for any action taken or omitted by it in reasonable reliance upon such
instructions or upon the advice of such counsel. ADS, its agents and
subcontractors shall be protected and indemnified in acting upon
(i) any paper or document furnished by or on behalf of the
Trust, reasonably believed by ADS to be genuine and to have been signed
by the proper person or persons;
(ii) any instruction, information, data, records or documents
provided ADS or its agents or subcontractors by machine readable input,
telex, CRT data entry or other similar means authorized by the Trust;
and,
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<PAGE>
(iii) any authorization, instruction, approval, item or set of
data, or information of any kind transmitted to ADS in person or by
telephone, vocal telegram or other electronic means, reasonably
believed by ADS to be genuine and to have been given by the proper
person or persons. ADS shall not be held to have notice of any change
of authority of any person, until receipt of written notice thereof
from the Trust. ADS, its agents and subcontractors shall also be
protected and indemnified in recognizing share certificates which are
reasonably believed to bear the proper manual or facsimile signatures
of the officers of the Trust, and the proper countersignature of any
former transfer agent or former registrar or of a co-transfer agent or
co-registrar of the Trust.
(d) RELIANCE ON ELECTRONIC INSTRUCTIONS. If the Trust has the ability
to originate electronic instructions to ADS in order to (i) effect the transfer
or movement of cash or Shares or (ii) transmit Shareholder information or other
information, then in such event ADS shall be entitled to rely on the validity
and authenticity of such instruction without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by ADS from time to time.
(e) USE OF FUND/SERV AND NETWORKING. The Trust has authorized or in the
future may authorize ADS to act as a "Mutual Fund Services Member" for the Trust
or various Funds and Classes. Fund/SERV and Networking are services sponsored by
the National Securities Clearing Corporation ("NSCC") and as used herein have
the meanings as set forth in the then current edition of NSCC RULES AND
PROCEDURES published by NSCC or such other similar publication as may exist from
time to time. The Trust shall indemnify and hold ADS harmless from and against
any and all losses, damages, costs, charges, reasonable counsel fees, payments,
expenses and liability arising directly or indirectly out of or attributed to
any action or failure or omission to act by NSCC.
(f) NOTIFICATION OF CLAIMS. In order that the indemnification
provisions contained in this Section shall apply, upon the assertion of a claim
for which either party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments concerning
such claim. The party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense of such claim
or to defend against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
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<PAGE>
10. CONFIDENTIALITY
ADS and the Trust agree that all books, records, information, and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person, except
that ADS may:
(a) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC; and
(b) release such other information as approved in writing by the Trust
which approval shall not be unreasonably withheld and may not be withheld where
ADS may be exposed to civil or criminal contempt proceedings for failure to
release the information, when requested to divulge such information by duly
constituted authorities or when so requested by the Trust or the Adviser.
11. EFFECTIVENESS, DURATION, AND TERMINATION
(a) EFFECTIVE DATE. This Agreement shall become effective on the date
first above written.
(b) TERM. This Agreement shall remain in effect for a period of three
(3) years from the date of its effectiveness and shall continue in effect for
successive twelve-month periods; provided that such continuance is specifically
approved at least annually by the Board and by a majority of the Directors who
are not parties to this Agreement or interested persons of any such party.
(c) TERMINATION FOR CAUSE. In the event of a material breach of this
Agreement by either party, the non-breaching part shall notify the breaching
party in writing of such breach and upon receipt of such notice, the breaching
party shall by 45 days to remedy the breach. If said breach is not remedied to
the reasonable satisfaction of the non-breaching party, the non-breaching party
may thereafter terminate this Agreement immediately. Compensation due ADS and
unpaid by the Trust upon such termination shall be immediately due and payable
upon, and notwithstanding, such termination. If after such termination for so
long as ADS, with the written consent of the Trust, in fact continues to perform
any one or more of the services contemplated by this Agreement, the provisions
of this Agreement, including without limitation, the provisions dealing with
indemnification, shall continue in full force and effect.
(d) PAYMENT UPON TERMINATION. If at any time during the initial or any
subsequent term of this Agreement, ADS is replaced as transfer agent or dividend
disbursing agent for any reason other than for a material breach of this
Agreement which ADS does not cure within a reasonable time, or a Fund is merged
into or sells all (or substantially all) of its assets to another fund or family
of funds for which ADS does not serve as transfer agent or dividend disbursing
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<PAGE>
agent, then the Fund shall, immediately upon demand by ADS, make a one time cash
payment equal to the net present value of the revenues ADS would have earned
during the remainder of the initial or subsequent term of the Agreement, as the
case may be, at the fee rate in effect at the time of such event (including any
applicable minimum). For purposes of this paragraph, the present value of the
revenues shall be determined by applying a 5.00% discount rate, and the asset
figure used to calculate the fee due ADS hereunder shall be the highest monthly
average assets of the Fund at any time during the 12 months immediately
preceding the termination of ADS (or the merger or sale of assets) of the Fund.
(e) REIMBURSEMENT OF ADS'S EXPENSES. If this Agreement is terminated with
respect to a Fund or Funds, ADS shall be entitled to collect from the
Fund or Funds, in addition to the compensation described under Sections
4 and 11(d) hereof, the amount of all of ADS's reasonable cash
disbursements for services in connection with ADS's activities in
effecting such termination, including without limitation, the delivery
to the Trust and/or its designees of the Trust's property, records,
instruments and documents, or any copies thereof. Subsequent to such
termination, for a reasonable fee, ADS will provide the Trust with
reasonable access to all Trust documents or records, if any, remaining
in its possession. Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be borne by the Fund. Additionally, ADS reserves the
right to charge for any other reasonable costs and expenses associated
with such termination.
(e) SURVIVAL OF CERTAIN OBLIGATIONS. The obligations of Sections 8, 10
and 11 shall survive any termination of this Agreement
12. ADDITIONAL FUNDS AND CLASSES.
If the Trust establishes one or more series of Shares or one or more
classes of Shares after the effectiveness of this Agreement, such series of
Shares or classes of Shares, as the case may be, shall become Funds and Classes
under this Agreement; provided, however, that either ADS or the Trust may elect
not to make and such series or classes subject to this Agreement.
13. ASSIGNMENT
Except as otherwise provided in this Agreement, neither this Agreement
nor any rights or obligations under this Agreement may be assigned by either
party without the written consent of the other party. This Agreement shall inure
to the benefit of and be binding upon the parties and their respective permitted
successors and assigns. ADS may, without further consent on the part of the
Trust, subcontract for the performance hereof with any entity, including
affiliated persons of ADS; provided however, that ADS shall be as fully
responsible to the Trust for the acts and omissions of any subcontractor as ADS
is for its own acts and omissions.
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<PAGE>
14. TAXES
ADS shall not be liable for any taxes, assessments or governmental
charges that may be levied or assessed on any basis whatsoever in connection
with the Trust or any Shareholder or any purchase of Shares, excluding taxes
assessed against ADS for compensation received by it under this Agreement.
15. MISCELLANEOUS
(a) AMENDMENTS. No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized and
executed by both parties hereto.
(b) CHOICE OF LAW. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
(c) REFERENCES TO LAW. References to any law in this Agreement shall be
deemed to include reference to the applicable rules and regulations promulgated
under authority of the law and all official interpretations of such law or rules
or regulations.
(d) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
(e) COUNTERPARTS. The parties may execute this Agreement on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(f) SEVERABILITY. If any part, term or provision of this Agreement is
held to be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held to be
illegal or invalid.
(g) HEADINGS. Section and paragraph headings in this Agreement are
included for convenience only and are not to be used to construe or interpret
this Agreement.
(h) NOTICES. All notices and other communications hereunder shall be in
writing, shall be deemed to have been given when received or when sent by telex
or facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
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<PAGE>
To the Trust: To ADS:
[Name] Michael Miola
[Title] President
[Name of Trust] American Data Services, Inc.
[Street] 150 Motor Parkway, Suite 900
[City, State, Zip] Hauppauge, NY 11788
(i) BUSINESS DAYS. Nothing contained in this Agreement is intended to
or shall require ADS, in any capacity hereunder, to perform any functions or
duties on any day other than a Fund Business Day as defined in the Prospectus
for the Fund. Functions or duties normally scheduled to be performed on any day
which is not a Fund Business Day shall be performed on, and as of, the next Fund
Business Day, unless otherwise required by law.
(j) DISTINCTION OF FUNDS. Notwithstanding any other provision of this
Agreement, the parties agree that the assets and liabilities of each Fund of the
Trust are separate and distinct from the assets and liabilities of each other
Fund and that no Fund shall be liable or shall be charged for any debt,
obligation or liability of any other Fund, whether arising under this Agreement
or otherwise.
(l) NON-LIABILITY OF AFFILIATES. No affiliated person (as that term is
defined in the 1940 Act), employee, agent, director, officer or manager of ADS
shall be liable at law or in equity for ADS's obligations under this Agreement.
(m) CONSEQUENTIAL DAMAGES. No party to this Agreement shall be liable
to the other parties for consequential damages under any provision of this
Agreement.
(n) REPRESENTATION OF SIGNATORIES. Each of the undersigned expressly
warrants and represents that they have full power and authority to sign this
Agreement on behalf of the party indicated and that their signature will bind
the party indicated to the terms hereof
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized persons,
as of the day and year first above written.
[Name of Trust] AMERICAN DATA SERVICES, INC.
By: _______________________________________ By: ___________________________
[Name], [Title] Michael Miola, President
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<PAGE>
iMILLENNIUM CAPITAL TRUST
TRANSFER AGENCY AGREEMENT
SCHEDULE A
FEES
A-1
<PAGE>
iMILLENNIUM CAPITAL TRUST
TRANSFER AGENCY AGREEMENT
SCHEDULE B
FUNDS AND CLASSES TO BE SERVICED UNDER THIS AGREEMENT
1.
B-1
Exhibit (h)(2)
Form of Fund Accounting Agreement
iMILLENNIUM CAPITAL TRUST
FUND ACCOUNTING AGREEMENT
AGREEMENT made this ____ day of ___________, [year], by and among iMillennium
Capital Trust, a Delaware business trust, having its principal office and place
of business at 17225 El Camino Real, Suite 415, Houston, Texas 77058, and
American Data Services, Inc., New York corporation having its principal office
and place of business at the Hauppauge Corporate Center, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788 ("ADS").
WHEREAS, the Trust is an open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares ("Shares") in separate
series, with each such series representing interests in a separate portfolio of
securities and other assets, and is authorized to divide those series into
separate classes; and
WHEREAS, the Trust offers Shares in the series listed in Appendix A
hereto (each such series, together with all other series subsequently
established by the Trust and made subject to this Agreement in accordance with
Section 13, being herein referred to as a "Fund," and collectively as the
"Funds") and the Trust offers shares of the classes of each Fund as listed in
Appendix A hereto (each such class together with all other classes subsequently
established by the Trust in a Fund being herein referred to as a "Class," and
collectively as the "Classes"); and
WHEREAS, the Trust desires that ADS provide fund accounting services
for each Fund and Class thereof and ADS is willing to provide those services on
the terms and conditions set forth in this Agreement;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Trust and ADS hereby agree as follows:
1. APPOINTMENT AND DELIVERY OF DOCUMENTS
(a) APPOINTMENT. The Trust hereby appoints ADS, and ADS hereby agrees,
to act as fund accountant of the Trust for the period and on the terms set forth
in this Agreement.
(b) DOCUMENT DELIVERY. In connection therewith, the Trust has delivered
to ADS copies of:
(i) the Trust's Trust Instrument and Bylaws (collectively, as
amended from time to time, "Organic Documents");
<PAGE>
(ii) the Trust's Registration Statement and all amendments
thereto filed with the U.S. Securities and Exchange Commission ("SEC")
pursuant to the Securities Act of 1933, as amended (the "1933 Act"), or
the Investment Company Act of 1940, as amended (the "1940 Act")(the
"Registration Statement");
(iii) the Trust's notification of registration under the 1940
Act on Form N-8A as filed with the SEC;
(iv) the Trust's current Prospectus and Statement of
Additional Information for each Fund (collectively, as currently in
effect and as amended or supplemented, the "Prospectus"),
(vi) all procedures adopted by the Trust with respect to the
Funds' securities transactions, valuation of portfolio securities, and
calculation of net asset value ("NAV") the Funds.
(c) Trust's Duty to Update. The Trust shall promptly furnish ADS with
all amendments or supplements to the foregoing and shall deliver to ADS a
certified copy of the resolution of the Board of Trustees of the Trust (the
"Board") appointing ADS and authorizing the execution and delivery of this
Agreement.
2. DUTIES OF ADS AND THE TRUST
(a) Services. ADS may from time to time adopt procedures, or or modify
its procedures, to implement the terms of this Section. With respect to each
Fund, ADS shall perform the following services:
(i) calculate the net asset value per share with the frequency
prescribed in each Fund's then-current Prospectus;
(ii) calculate each item of income, expense, deduction,
credit, gain and loss, if any, as required by the Trust and in
conformance with generally accepted accounting practice ("GAAP"), the
SEC's Regulation S-X (or any successor regulation) and the Internal
Revenue Code of 1986, as amended (or any successor laws)(the "Code");
(iii) maintain each Fund's general ledger and record all
income, expenses, capital share activity and security transactions of
each Fund;
(iv) calculate the yield, effective yield, tax equivalent
yield and total return for each Fund, and each Class thereof, as
applicable, and such other measure of performance as may be agreed upon
between the parties hereto;
(v) provide the Trust and the Adviser with the following
reports (A) a current security position report, (B) a summary report of
transactions and pending maturities (including the principal, cost, and
accrued interest on each portfolio security in maturity date order),
and (C) a current cash position and projection report;
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<PAGE>
(vi) prepare and record, as of each time when the net asset
value of a Fund is calculated or as otherwise directed by the Trust,
either (A) a valuation of the assets of the Fund (unless otherwise
specified in or in accordance with this Agreement, based upon the use
of outside services normally used and contracted for this purpose by
ADS in the case of securities for which information and market price or
yield quotations are readily available and based upon evaluations
conducted in accordance with the Trust's instructions in the case of
all other assets) or (B) a calculation confirming that the market value
of the Fund's assets does not deviate from the amortized cost value of
those assets by more than a specified percentage;
(vii) make such adjustments over such periods as ADS deems
necessary to reflect over-accruals or under-accruals of estimated
expenses or income;
(viii) request any necessary information from the Trust's
adviser, administrator, transfer agent and distributor in order to
prepare, and prepare, the Trust's Form N-SAR;
(ix) provide appropriate records to assist the Trust's
independent accountants and, upon approval of the Trust, any regulatory
body in any requested review of the Trust's books and records
maintained by ADS;
(x) draft for review by the Trust's auditors semi-annual and
annual financial statements and oversee the production of these
financial statements and any related report to the Trust's shareholders
prepared by the Trust or its investment advisers;
(xi) file the Funds' semi-annual financial statements with the
SEC or ensure that the Funds' semi-annual financial statements are
filed with the SEC;
(xii) provide information typically supplied in the investment
company industry to companies that track or report price, performance
or other information with respect to investment companies;
(xiii) provide the Trust, its administrator, or counsel with
the data requested by the Trust that is required to update the Trust's
registration statement;
(xiv) provide the Trust or independent accountants with all
information requested with respect to the preparation of the Trust's
income, excise and other tax returns;
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<PAGE>
(xv) prepare for review by the Trust's auditors all Federal
income and excise tax returns and state income and other tax returns,
including any extensions or amendments, each as agreed between the
Trust and ADS;
(xvi) produce quarterly compliance reports for investment
advisers to the Trust and the Board and provide information to the
Trust's administrator, investment advisers and other appropriate
persons with respect to questions of Fund compliance;
(xvii) determine the amount of distributions to shareholders
as necessary to, among other things, maintain the qualification of each
Fund as a regulated investment company under the Code, and prepare and
distribute to appropriate parties notices announcing the declaration of
dividends and other distributions to shareholders;
(xviii) transmit to and receive from each Fund's transfer
agent appropriate data to on a daily basis and daily reconcile Shares
outstanding and other data with the transfer agent;
(xiv) periodically reconcile all appropriate data with each
Fund's custodian;
(xv) verify investment trade tickets when received from an
investment adviser and maintain individual ledgers and historical tax
lots for each security; and
(xvi) perform such other recordkeeping, reporting and other
tasks as may be specified from time to time in the procedures adopted
by the Board; provided, that ADS need not begin performing any such
task except upon 65 days' notice and pursuant to mutually acceptable
compensation agreements.
(b) BOOKS AND RECORDS. ADS shall prepare and maintain on behalf of the
Trust the following books and records of each Fund, and each Class thereof,
pursuant to Rule 31a-1 under the 1940 Act (the "Rule"):
(i) Journals containing an itemized daily record in detail of
all purchases and sales of securities, all receipts and disbursements
of cash and all other debits and credits, as required by subsection
(b)(1) of the Rule;
(ii) Journals and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts, as required
by subsection (b)(2) of the Rule (but not including the ledgers
required by subsection (b)(2)(iv);
(iii) A record of each brokerage order given by or on behalf
of the Trust for, or in connection with, the purchase or sale of
securities, and all other portfolio purchases or sales, as required by
subsections (b)(5) and (b)(6) of the Rule;
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<PAGE>
(iv) A record of all options, if any, in which the Trust has
any direct or indirect interest or which the Trust has granted or
guaranteed and a record of any contractual commitments to purchase,
sell, receive or deliver any property as required by subsection (b)(7)
of the Rule;
(v) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8) of the Rule; and
(vi) Other records required by the Rule or any successor rule
or pursuant to interpretations thereof to be kept by open-end
management investment companies, but limited to those provisions of the
Rule applicable to portfolio transactions and as agreed upon between
the parties hereto.
(c) MAINTENANCE OF AND ACCESS TO RECORDS. The books and records
maintained pursuant to Section 2(b) shall be prepared and maintained in such
form, for such periods and in such locations as may be required by the 1940 Act.
The books and records pertaining to the Trust that are in possession of ADS
shall be the property of the Trust. The Trust, or its authorized
representatives, shall have access to such books and records at all times during
ADS's normal business hours. Upon the reasonable request of the Trust, copies of
any such books and records shall be provided promptly by ADS to the Trust or the
Trust's authorized representatives at the Trust's expense. In the event the
Trust designates a successor that shall assume any of ADS's obligations
hereunder, ADS shall, at the expense and direction of the Trust, transfer to
such successor all relevant books, records and other data established or
maintained by ADS under this Agreement.
(d) INSPECTION OF RECORDS. In case of any requests or demands for the
inspection of the records of the Trust maintained by ADS, ADS will endeavor to
notify the Trust and to secure instructions from an authorized officer of the
Trust as to such inspection. ADS shall abide by the Trust's instructions for
granting or denying the inspection; provided, however, that ADS may grant the
inspection without instructions if ADS is advised by counsel to ADS that failure
to do so will result in liability to ADS.
4. COMPENSATION OF ADS
(a) FEES. For the services provided by ADS pursuant to this Agreement,
the Trust, on behalf of each Fund, agrees to pay ADS the fees set forth in
Schedule A. Fees will begin to accrue for each Fund on the latter of the date of
this Agreement or the date of commencement of operations of the Fund.
(b) EXPENSES. In addition to the fees paid under subsection (a), the
Trust agrees to reimburse ADS for out-of-pocket expenses or advances incurred by
ADS for the items set out in the Schedule A attached hereto. In addition, the
Trust will reimburse any other expenses incurred by ADS at the request or with
the consent of the Trust.
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(c) FEE CHANGES. The fees, out-of pocket expenses and advances
identified in the foregoing subsections (a) and (b) above may be changed from
time to time subject to mutual written agreement between the Trust and ADS.
5. REPRESENTATIONS AND WARRANTIES
(a) REPRESENTATIONS OF ADS. ADS represents and warrants to the Trust
that:
(i) it is a corporation duly organized and existing and in
good standing under the laws of the State of New York;
(ii) it is duly qualified to carry on its business in the
State of New York;
(iii) it is empowered under applicable laws and by its Article
of Incorporation and Bylaws to enter into this Agreement and perform
its duties under this Agreement; and,
(iv) it has access to the necessary facilities, equipment, and personnel to
perform its duties and obligations under this Agreement.
(b) REPRESENTATIONS OF THE TRUST. The Trust represents and warrants to
ADS that:
(i) it is a business trust duly organized and existing and in
good standing under the laws of [Massachusetts/Delaware];
(ii) it is empowered under applicable laws and by its Organic
Documents to enter into and perform this Agreement;
(iii) all proceedings required by said Organic Documents have
been taken to authorize it to enter into and perform this Agreement;
(iv) it is an open-end management investment company
registered under the Investment Company Act of 1940; and,
(v) a registration statement under the Securities Act of 1933
is currently or will become effective and will remain effective, and
appropriate state securities law filings as required, have been or will
be made and will continue to be made, with respect to all Shares of the
Fund being offered for sale.
6. STANDARD OF CARE, INDEMNIFICATION AND RELIANCE
(a) STANDARD OF CARE. ADS shall be under no duty to take any action
except as specifically set forth herein or as may be specifically agreed to by
ADS in writing. ADS shall use its best judgment and efforts in rendering the
services described in this Agreement. ADS shall not be liable to the Trust or
any of the Trust's shareholders for any action or inaction of ADS relating to
any event whatsoever in the absence of bad faith, willful misfeasance or gross
negligence in the performance of ADS's duties or obligations under this
Agreement or by reason of ADS's reckless disregard of its duties and obligations
under this Agreement.
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(b) INDEMNIFICATION OF ADS. The Trust agrees to indemnify and hold
harmless ADS, its employees, agents, directors, officers and managers and any
person who controls ADS within the meaning of section 15 of the Securities Act
or section 20 of the Securities Exchange Act of 1934, as amended, ("ADS
Indemnitees") against and from any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges, reasonable counsel fees
and other expenses of every nature and character arising out of or in any way
related to ADS's actions taken or failures to act with respect to a Fund that
are consistent with the standard of care set forth in Section 3(a) or based, if
applicable, on good faith reliance upon an item described in Section 3(c)(a
"Claim"). The Trust shall not be required to indemnify any ADS Indemnitee if,
prior to confessing any Claim against the ADS Indemnitee, ADS or the ADS
Indemnitee does not give the Trust written notice of and reasonable opportunity
to defend against the claim in its own name or in the name of the ADS
Indemnitee.
(c) RELIANCE. An ADS Indemnitee shall not be liable for any action
taken or failure to act in good faith reliance upon:
(i) the advice of the Trust or of counsel, who may be counsel
to the Trust or counsel to ADS;
(ii) any oral instruction which it receives and which it
reasonably believes in good faith was transmitted by the person or
persons authorized by the Board to give such oral instruction (ADS
shall have no duty or obligation to make any inquiry or effort of
certification of such oral instruction.);
(iii) any written instruction or certified copy of any
resolution of the Board, and ADS may rely upon the genuineness of any
such document or copy thereof reasonably believed in good faith by ADS
to have been validly executed; or
(iv) any signature, instruction, request, letter of
transmittal, certificate, opinion of counsel, statement, instrument,
report, notice, consent, order, or other document reasonably believed
in good faith by ADS to be genuine and to have been signed or presented
by the Trust or other proper party or parties;
and no ADS Indemnitee shall be under any duty or obligation to inquire into the
validity or invalidity or authority or lack thereof of any statement, oral or
written instruction, resolution, signature, request, letter of transmittal,
certificate, opinion of counsel, instrument, report, notice, consent, order, or
any other document or instrument which ADS reasonably believes in good faith to
be genuine.
(d) ERRORS OF OTHERS. ADS shall not be liable for the errors of other
service providers to the Trust, including the errors of pricing services (other
than to pursue all reasonable claims against the pricing service based on the
pricing services' standard contracts entered into by ADS) and errors in
information provided by an investment adviser (including prices and pricing
formulas and the untimely transmission of trade information), custodian or
transfer agent to the Trust.
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(e) NAV ERRORS. With respect to Funds which do not value their assets
in accordance with Rule 2a-7 under the 1940 Act, notwithstanding anything to the
contrary in this Agreement, ADS shall not be liable to the Trust or any
shareholder of the Trust for (i) any loss to the Trust if an NAV Difference for
which ADS would otherwise be liable under this Agreement is less than or equal
to 0.001 (1/10 of 1%) or (ii) any loss to a shareholder of the Trust if the NAV
Difference for which ADS would otherwise be liable under this Agreement is less
than or equal to 0.005 (1/2 of 1%) or if the loss in the shareholder's account
with the Trust is less than or equal to $10. Any loss for which ADS is
determined to be liable hereunder shall be reduced by the amount of gain which
inures to shareholders, whether to be collected by the Trust or not.
(f) DEFINITION OF "NAV DIFFERENCE." For purposes of this Agreement, (i)
the NAV Difference shall mean the difference between the NAV at which a
shareholder purchase or redemption should have been effected ("Recalculated
NAV") and the NAV at which the purchase or redemption is effected, divided by
the Recalculated NAV, (ii) NAV Differences and any ADS liability therefrom are
to be calculated each time a Fund's (or class's) NAV is calculated, (iii) in
calculating any NAV Difference for which ADS would otherwise be liable under
this Agreement for a particular NAV error, Fund losses and gains shall be netted
and (iv) in calculating any NAV Difference for which ADS would otherwise be
liable under this Agreement for a particular NAV error that continues for a
period covering more than one NAV determination, Fund losses and gains for the
period shall be netted.
(c) INDEMNIFICATION OF THE TRUST. ADS shall indemnify and hold the
Trust and each Fund or Class thereof harmless from and against any and all
losses, damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising out of or attributed to any action or failure or omission to
act by ADS as a result of ADS's lack of good faith, gross negligence or willful
misconduct with respect to the services performed under or in connection with
this Agreement.
(f) NOTIFICATION OF CLAIMS. In order that the indemnification
provisions contained in this Section shall apply, upon the assertion of a claim
for which either party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments concerning
such claim. The party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense of such claim
or to defend against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
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7. CONFIDENTIALITY
ADS and the Trust agree that all books, records, information, and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential, and shall not be voluntarily disclosed to any other person, except
that ADS may:
(a) prepare or assist in the preparation of periodic reports to
shareholders and regulatory bodies such as the SEC; and
(b) release such other information as approved in writing by the Trust
which approval shall not be unreasonably withheld and may not be withheld where
ADS may be exposed to civil or criminal contempt proceedings for failure to
release the information, when requested to divulge such information by duly
constituted authorities or when so requested by the Trust or the Adviser.
8. EFFECTIVENESS, DURATION, AND TERMINATION
(a) EFFECTIVE DATE. This Agreement shall become effective on the date
first above written.
(b) TERM. This Agreement shall remain in effect for a period of three
(3) years from the date of its effectiveness and shall continue in effect for
successive twelve-month periods; provided that such continuance is specifically
approved at least annually by the Board and by a majority of the Directors who
are not parties to this Agreement or interested persons of any such party.
(c) TERMINATION FOR CAUSE. In the event of a material breach of this
Agreement by either party, the non-breaching part shall notify the breaching
party in writing of such breach and upon receipt of such notice, the breaching
party shall by 45 days to remedy the breach. If said breach is not remedied to
the reasonable satisfaction of the non-breaching party, the non-breaching party
may thereafter terminate this Agreement immediately. Compensation due ADS and
unpaid by the Trust upon such termination shall be immediately due and payable
upon, and notwithstanding, such termination. If after such termination for so
long as ADS, with the written consent of the Trust, in fact continues to perform
any one or more of the services contemplated by this Agreement, the provisions
of this Agreement, including without limitation, the provisions dealing with
indemnification, shall continue in full force and effect.
(d) PAYMENT UPON TERMINATION. If at any time during the initial or any
subsequent term of this Agreement, ADS is replaced as fund accountant for any
reason other than for a material breach of this Agreement which ADS does not
cure within a reasonable time, or a Fund is merged into or sells all (or
substantially all) of its assets to another fund or family of funds for which
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ADS does not serve as fund accountant, then the Fund shall, immediately upon
demand by ADS, make a one time cash payment equal to the net present value of
the revenues ADS would have earned during the remainder of the initial or
subsequent term of the Agreement, as the case may be, at the fee rate in effect
at the time of such event (including any applicable minimum). For purposes of
this paragraph, the present value of the revenues shall be determined by
applying a 5.00% discount rate, and the asset figure used to calculate the fee
due ADS hereunder shall be the highest monthly average assets of the Fund at any
time during the 12 months immediately preceding the termination of ADS (or the
merger or sale of assets) of the Fund.
(e) REIMBURSEMENT OF ADS'S EXPENSES. If this Agreement is terminated with
respect to a Fund or Funds, ADS shall be entitled to collect from the
Fund or Funds, in addition to the compensation described under Sections
4 and 11(d) hereof, the amount of all of ADS's reasonable cash
disbursements for services in connection with ADS's activities in
effecting such termination, including without limitation, the delivery
to the Trust and/or its designees of the Trust's property, records,
instruments and documents, or any copies thereof. Subsequent to such
termination, for a reasonable fee, ADS will provide the Trust with
reasonable access to all Trust documents or records, if any, remaining
in its possession. Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be borne by the Fund. Additionally, ADS reserves the
right to charge for any other reasonable costs and expenses associated
with such termination.
(e) SURVIVAL OF CERTAIN OBLIGATIONS. The obligations of Sections 8, 10
and 11 shall survive any termination of this Agreement
9. ADDITIONAL FUNDS AND CLASSES.
If the Trust establishes one or more series of Shares or one or more
classes of Shares after the effectiveness of this Agreement, such series of
Shares or classes of Shares, as the case may be, shall become Funds and Classes
under this Agreement; provided, however, that either ADS or the Trust may elect
not to make and such series or classes subject to this Agreement.
10. ASSIGNMENT
Except as otherwise provided in this Agreement, neither this Agreement
nor any rights or obligations under this Agreement may be assigned by either
party without the written consent of the other party. This Agreement shall inure
to the benefit of and be binding upon the parties and their respective permitted
successors and assigns. ADS may, without further consent on the part of the
Trust, subcontract for the performance hereof with any entity, including
affiliated persons of ADS; provided however, that ADS shall be as fully
responsible to the Trust for the acts and omissions of any subcontractor as ADS
is for its own acts and omissions.
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11. MISCELLANEOUS
(a) AMENDMENTS. No provisions of this Agreement may be amended or
modified in any manner except by a written agreement properly authorized and
executed by both parties hereto.
(b) CHOICE OF LAW. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
(c) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
(d) COUNTERPARTS. The parties may execute this Agreement on any number
of counterparts, and all of the counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) SEVERABILITY. If any part, term or provision of this Agreement is
held to be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held to be
illegal or invalid.
(f) HEADINGS. Section and paragraph headings in this Agreement are
included for convenience only and are not to be used to construe or interpret
this Agreement.
(g) NOTICES. All notices and other communications hereunder shall be in
writing, shall be deemed to have been given when received or when sent by telex
or facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To ADS:
[Name] Michael Miola
[Title] President
[Name of Trust] American Data Services, Inc.
[Street] 150 Motor Parkway, Suite 900
[City, State, Zip] Hauppauge, NY 11788
(h) BUSINESS DAYS. Nothing contained in this Agreement is intended to
or shall require ADS, in any capacity hereunder, to perform any functions or
duties on any day other than a Fund Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Fund Business Day shall be
performed on, and as of, the next Fund Business Day, unless otherwise required
by law.
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(i) DISTINCTION OF FUNDS. Notwithstanding any other provision of this
Agreement, the parties agree that the assets and liabilities of each Fund of the
Trust are separate and distinct from the assets and liabilities of each other
Fund and that no Fund shall be liable or shall be charged for any debt,
obligation or liability of any other Fund, whether arising under this Agreement
or otherwise.
(j) CONSEQUENTIAL DAMAGES. Neither party to this Agreement shall be
liable to the other party for consequential damages under any provision of this
Agreement or for any act or failure to act hereunder.
(k) NONLIABILITY OF AFFILIATES. No affiliated person (as that term is
defined in the 1940 Act), employee, agent, director, officer or manager of ADS
shall be liable at law or in equity for ADS's obligations under this Agreement.
(l) REPRESENTATION OF SIGNATORIES. Each of the undersigned expressly
warrants and represents that they have full power and authority to sign this
Agreement on behalf of the party indicated and that their signature will bind
the party indicated to the terms hereof
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized persons,
as of the day and year first above written.
[Name of Trust] AMERICAN DATA SERVICES, INC.
By: ________________________________ By: ______________________________
[Name], [Title] Michael Miola, President
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Exhibit (h)(3)
Form of Fund Accounting Agreement
iMILLENNIUM CAPITAL TRUST
FUND ACCOUNTING AGREEMENT
SCHEDULE A
FEES AND ACCOUNT CHARGES
A-1
<PAGE>
iMILLENIUM CAPITAL TRUST
FUND ACCOUNTING AGREEMENT
SCHEDULE B
FUNDS AND CLASSES TO BE SERVICED UNDER THIS AGREEMENT
B-1
