AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. ___ / /
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. / /
(Check appropriate box or boxes)
whatifi Funds
(Exact name of Registrant as specified in charter)
790 Eddy Street
San Francisco, CA 94109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (415) 929-5960
whatifi Asset Management, Inc.
790 Eddy Street
San Francisco, CA 94109
(Name and address of agent for service)
Please send copies of all communications to:
David M. Leahy, Esq. Ms. Monica Chandra
Sullivan & Worcester LLP whatifi Asset Management, Inc.
1025 Connecticut Avenue, N.W. 790 Eddy Street
Washington, DC 20036 San Francisco, California 94109
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
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<PAGE>
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, as amended, or until this Registration Statement shall
become effective on such date as the Commission, acting pursuant to Section
8(a), may determine.
It is proposed that this filing will become effective (check appropriate box):
______ Immediately upon filing pursuant to paragraph (b)
______ on (date) pursuant to paragraph (b)
______ 60 days after filing pursuant to paragraph (a)(1)
______ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment. |_|
whatifi FUNDS
whatifi S&P 500 INDEX FUND
whatifi EXTENDED MARKET INDEX FUND
whatifi INTERNATIONAL INDEX FUND
whatifi BOND INDEX FUND
whatifi MONEY MARKET FUND
2
<PAGE>
TABLE OF CONTENTS
PAGE
PLEASE READ THIS PROSPECTUS..................................................
WHO CAN INVEST IN THE FUNDS?.................................................
WHAT IS THE INVESTMENT PHILOSOPHY BEHIND THE whatifi FUNDS?..................
WHAT IS INDEXING.............................................................
WHY INVEST IN INDEX FUNDS?...................................................
WHAT IS A MASTER-FEEDER STRUCTURE?...........................................
Whatifi CHOSE TO EMPLOY A MASTER/FEEDER STRUCTURE IN ORDER TO
OFFER INVESTORS LEADING EDGE ONLINE PRODUCTS AND SERVICES IN
COMBINATION WITH THE COST-EFFICIENCY AND SECURITY OF AN
ESTABLISHED FUND ADVISER LIKE BGFA...........................................
WHAT FUNDS DOES whatifi OFFER?...............................................
WHAT DOES IT MEAN TO DESCRIBE A FUND AS LARGE-CAP,
MID-CAP OR SMALL-CAP?........................................................
FUND PROFILES................................................................
- -whatifi S&P 500 INDEX FUND.......................................
- -whatifi EXTENDED MARKET INDEX FUND...............................
- -whatifi INTERNATIONAL INDEX FUND.................................
- -whatifi BOND INDEX FUND..........................................
- -whatifi MONEY MARKET FUND........................................
MORE INFORMATION ON THE FUNDS................................................
THE FUNDS' MANAGEMENT........................................................
THE FUNDS' STRUCTURE.........................................................
PRICING OF FUND SHARES.......................................................
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<PAGE>
HOW TO BUY AND SELL SHARES OF THE whatifi FUNDS..............................
BUYING A DIVIDEND............................................................
DIVIDENDS, AND OTHER DISTRIBUTIONS...........................................
TAX CONSEQUENCES.............................................................
GLOSSARY (INSIDE BACK COVER).................................................
MORE INFORMATION.............................................................
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
4
<PAGE>
PLEASE READ THIS PROSPECTUS
This Prospectus discusses the investment objective, risks, and strategies of
each of the five whatifi Funds. There are currently four whatifi Index Funds and
the whatifi Money Market Fund. Reading the prospectus will help you to determine
which Funds, if any, in which you would like to invest. Please keep this
prospectus for future reference.
WHO CAN INVEST IN THE FUNDS?
The Funds described in this Prospectus were created for online investors with a
long-term investing outlook. To purchase shares of a Fund, please follow the
instructions on our website, www.whatifi.com. You will also need to complete a
whatifi Funds Account Application and follow the instructions under "How to Buy
and Sell Shares" further on in this Prospectus.
In order to invest in the Funds, you must consent to receive all information
about the Funds electronically, both to open an account and during the time you
own shares of a Fund. If you revoke this consent, fail to maintain an e-mail
account, or close your account, the Funds may, to the extent permitted by the
federal securities laws, redeem your shares, and prohibit any additional
investments by you in the Funds. This would also preclude the reinvestment of
dividends.*
WHAT IS THE INVESTMENT PHILOSOPHY BEHIND THE whatifi FUNDS?
We believe that optimal performance is closely aligned with a practical,
long-term and cost-effective approach to investing. The Funds described in this
Prospectus were created for the intelligent online investor. In combination,
they allow for diversification across different asset classes and, due to their
indexing orientation, cost-effective investing. We do not believe in gimmicks,
stock picking, market timing or day trading. We believe that sound, long-term
investing strategies win the day and look forward to catering to online
investors who share our view.
WHAT IS INDEXING?
Index funds are often described as "passively managed" in that the portfolio
manager looks to the underlying index to determine which securities the fund
should own. For example, in the case of the whatifi S&P 500 Index Fund, the
underlying index is the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500 Index"). The alternative is an "actively managed" approach where
investment decisions relating to
- --------
* The staff of the Securities and Exchange Commission (the "Staff") have
informally indicated their view that the Funds may not involuntarily redeem your
shares if you revoke your consent to receive shareholder documents
electronically or fail to maintain an e-mail account. If the Staff's position on
this issue changes, the Funds intend to involuntarily redeem shares under such
circumstances.
5
<PAGE>
the fund's holdings are based upon the particular methodologies and judgments of
a portfolio manager.
WHY INVEST IN INDEX FUNDS?
Index funds appeal to many investors for a number of reasons:
- - Diversification. Index funds generally invest in a diversified mix of
companies and industries.
- - - Relative consistency. Index funds typically match the performance of
relevant market benchmarks more closely than comparable actively managed funds
do.
- - - Low cost. Index funds do not have many of the expenses of an actively
managed fund -- such as research -- and keep trading activity, and thus
operating expenses to a minimum.
- - - Low realization of capital gains. Because an index fund typically sells
securities only to respond to redemption requests or to adjust the number of
shares it holds to reflect a change in its target index, the fund's turnover
rate -- and thus its realization of taxable capital gains -- is usually very
low.
WHAT IS A MASTER/FEEDER FUND STRUCTURE?
The whatifi Funds are feeder funds investing all of their assets in a
corresponding master fund. A master/feeder structure is a two-tier structure
that consists of a master portfolio investing in securities, and a feeder fund
investing in the master portfolio. Barclays Global Fund Advisors ("BGFA") serves
as the investment adviser to each of the master portfolios in which the Funds
invest. BGFA is a subsidiary of Barclays Global Investors, N.A., the world's
largest institutional investment adviser. As of November 30, 1999, BGFA and its
affiliates provided investment advisory services for over 681.4 billion of
assets.
Whatifi CHOSE TO EMPLOY A MASTER/FEEDER STRUCTURE IN ORDER TO OFFER INVESTORS
LEADING EDGE ONLINE PRODUCTS AND SERVICES IN COMBINATION WITH THE
COST-EFFICIENCY AND SECURITY OF AN ESTABLISHED FUND ADVISER LIKE BGFA
Since the investment characteristics and investment risks of the Funds are
aligned with those of each Fund's corresponding master portfolio, the following
discussion regarding each Fund's investment objective, policies and risks also
includes a description of the investment objective, policies and risks
associated with the investments of each corresponding master portfolio. Each
Fund's performance will correspond to the performance of the related master
portfolio. Like all mutual funds, each Fund is subject to investment risks. You
may lose money if you invest in the Funds.
6
<PAGE>
WHAT FUNDS DOES whatifi OFFER?
whatifi offers three stock index funds, a bond index fund, and a money market
fund. This prospectus provides information about the whatifi Index Funds as well
as the whatifi Money Market Fund. Each Fund seeks to track a different segment
of the U.S.
and international markets:
<TABLE>
<CAPTION>
<S> <C>
FUND SEEKS TO TRACK
whatifi S&P 500 Index Fund Large-cap stocks via the S&P 500 Index
whatifi Extended Market Index Fund Mid- and small-cap stocks via the
Wilshire 4500 Index
whatifi International Index Fund Selected international stocks via the
Morgan Stanley Capital International
("MSCI") EAFE Free Index
whatifi Bond Index Fund Selected U.S. Government and corporate
bonds via the Lehman Brothers
Government/Corporate Bond Index
whatifi Money Market Fund
Provide shareholders
with a high level of
current income, at
the same time
preserving capital
and liquidity, by
investing in
high-quality
short-term
investments.
</TABLE>
WHAT DOES IT MEAN TO DESCRIBE A FUND AS LARGE-CAP, MID-CAP OR SMALL CAP?
In general, whatifi defines large-capitalization (large-cap) funds as those
holding stocks of companies whose outstanding shares have a market value
exceeding $10 billion. Mid-cap funds hold stocks of companies with a market
value between $1 billion and $10 billion. Small-cap funds typically hold stocks
of companies with a market value of less than $1 billion.
FUND PROFILES
This prospectus contains profiles that summarize key features of each Fund.
Following the profiles, you will find important additional information about the
Funds in this prospectus as well as in the Funds' Statement of Additional
Information (the "SAI").
FUND PROFILE -- whatifi S&P 500 INDEX FUND
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<PAGE>
The following profile summarizes important aspects of the whatifi S&P 500 Index
Fund.
INVESTMENT OBJECTIVE
The Fund is a large capitalization fund. Its goal is to track the total return
of the S&P 500 Index. The S&P 500 Index includes the common stocks of 500
leading U.S.
companies from a broad range of industries.
INVESTMENT STRATEGIES
The Fund employs a passive management strategy designed to track the performance
of the Standard & Poor's 500 Composite Stock Price Index*. The Fund does not
invest directly in a portfolio of securities. The Fund seeks to achieve its
investment objective by investing all of its assets in the S&P 500 Index Master
Portfolio ("S&P 500 Portfolio"), a series of Master Investment Portfolios
("MIP"), a registered open-end management investment company advised by BGFA.
The S&P 500 Portfolio invests at least 90% of its assets in the stocks
comprising the S&P 500 Index.
PRIMARY RISKS
The Fund's total return, like stock prices generally, will fluctuate within a
wide range, so an investor could lose money over short or even long periods.
Stock markets tend to move in cycles, with periods of rising prices and periods
of falling prices.
The Fund is also subject to investment style risk, which is the risk that
returns from large-capitalization stocks will trail returns from other asset
classes or the overall stock market. Large-capitalization stocks tend to go
through cycles of doing better (or worse) than the stock market in general.
These periods can and have, in the past, lasted for as long as several years.
PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the annual returns of the Fund and how its
performance has varied from year to year**. The average annual return tables
compare the Fund's
- --------
* "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500(R),"
and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been
licensed by the Adviser for use in connection with the S&P 500 Fund. The S&P 500
Fund is not sponsored, endorsed, sold, or promoted by Standard & Poor's and
Standard & Poor's makes no representation regarding the advisability of
investing in the S&P 500 Fund. ** The Fund did not offer shares to the public
prior to February __, 2000. The Fund's annual returns are based on the annual
returns of each corresponding Master Portfolio, but have not been adjusted to
account for expenses payable at the Fund level. As a result, the annual returns
for the Fund would have been lower than those shown above because the Fund has
higher expenses than its corresponding portfolios.
8
<PAGE>
average annual return with the return of the corresponding index for one and
five years and since inception. The performance of the Fund in the past is not
necessarily an indication of its future performance.
S&P 500 Index Fund
1994 0.98% 1997 33.27%
1995 37.35% 1998 28.61%
1996 22.82% 1999 [____%]
S&P 500 Index Fund Average Annual Total Returns (As of December 31, 1999)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Five Years Since July 2, 1993
S&P 500 Index Fund _____% _____% _____%
S&P 500 Index _____% _____% _____%
</TABLE>
During the period shown in the bar chart, the highest return for a calendar
quarter was ____% (quarter ended _____________ and the lowest return for a
quarter was ____% (quarter ended _______________).
FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based upon those estimated to be incurred in the Fund's first fiscal year
ending December 31, 2000.
Shareholder Fees (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: _____
Transaction Fees on Purchases: _____
Sales Charge (Load) Imposed on Reinvested Dividends: _____
Redemption Fees: _____
9
<PAGE>
Exchange Fees: _____
Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: 0.__%
12b-1 Distribution Fees: None
Other Expenses: 0.__%
Total Annual Fund Operating Expenses: 0.__%
Fee Waiver and Expense Reimbursement* 0.__%
Net Operating Expenses
- ------------------
* The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to waive a percentage of its
investment advisory fee received from the Funds. The expense limitation and
reimbursement agreement is in effect for an initial term of one year and will be
renewed thereafter automatically for one year terms on an annual basis. The
agreement can be changed, terminated or not renewed by either party only upon
providing thirty days' prior notice.
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Three Years Five Years Ten Years
$------- $------- $------- $-------
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
ADDITIONAL INFORMATION
10
<PAGE>
DIVIDENDS AND CAPITAL GAINS
Dividends, if any, are distributed quarterly in March, June, September, and
December; capital gains, if any, are distributed annually in December.
INVESTMENT ADVISER
whatifi Asset Management, Inc., San Francisco, California
SUITABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
To be supplied by amendment
FUND PROFILE -- whatifi EXTENDED MARKET INDEX FUND
The following profile summarizes important aspects of whatifi Extended Market
Index Fund.
INVESTMENT OBJECTIVE
The Fund is a mid to small cap fund. Its goal is to track the total return of
the Wilshire 4500 Equity Index.* The Wilshire 4500 contains all of the U.S.
common stocks regularly traded on the New York and American Stock Exchanges and
the Nasdaq over-the-counter market, except those stocks included in the S&P 500
Index.
INVESTMENT STRATEGIES
The Fund employs a passive management strategy designed to track the performance
of the Wilshire 4500 Equity Index. The Fund does not invest directly in a
portfolio of securities. The Fund seeks to achieve its investment objective by
investing all of its assets in the Extended Index Portfolio (the "Extended Index
Portfolio"), a series of MIP. The weightings of the Wilshire 4500 Index are
based on each stock's relative total market capitalization (i.e. its market
price times the number of shares outstanding). The Extended Index Portfolio
invests in a representative sample of these securities. Unlike the S&P 500 Index
Portfolio, which invests at least 90% of its assets in the stocks comprising the
S&P 500 Index, the Extended Index Portfolio invests in a representative sample
of the over 6,500 stocks in the Wilshire 4500 Index. Securities are selected for
investment by the Extended Index Portfolio in accordance with their
capitalization, industry sector and valuation among other factors.
11
<PAGE>
PRIMARY RISKS
The Fund's total return, like stock prices generally, will fluctuate within a
wide range, so an investor could lose money over short or even long periods.
Stock markets tend to move in cycles, with periods of rising prices and periods
of falling prices.
The Fund is also subject to investment style risk, which is the chance that
returns from mid- or small-capitalization stocks will trail returns from other
asset classes or the overall stock market. Small-and mid-cap stocks historically
have been more volatile in price than the large-cap stocks that dominate the S&P
500 Index, and perform differently than the overall stock market.
PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the annual returns of the Fund and how its
performance has varied from year to year.* The average annual return tables
compare the Fund's average annual return with the return of the corresponding
index for one and five years and since inception. The performance of the Fund in
the past is not necessarily an indication of its future performance.
Extended Market Index Fund
1994 ___% 1997 ___%
1995 ___% 1998 ___%
1996 ___% 1999 ___%
Extended Market Index Fund Average Annual Total Returns (As of December 31,
1999)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Five Years Since July 2, 1993
Extended Market Index Fund ___% ___% ___%
Wilshire 4500 Index ___% ___% ___%
</TABLE>
During the period shown in the bar chart, the highest return for a calendar
- --------
* The Fund did not offer shares to the public prior to February __, 2000. The
Fund's annual returns are based on the annual returns of each corresponding
Master Portfolio, but have not been adjusted to account for expenses payable at
the Fund level. As a result, the annual returns for the Fund would have been
lower than those shown above because the Fund has higher expenses than its
corresponding portfolios.
12
<PAGE>
quarter was ____% (quarter ended ___________) and the lowest return for a
quarter was ____% (quarter ended September 30, 1990).
FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based upon those estimated to be incurred in the Fund's first fiscal year
ending December 31, 2000.
Shareholder Fees (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: _____
Transaction Fees on Purchases: _____
Sales Charge (Load) Imposed on Reinvested Dividends: _____
Redemption Fees: _____
Exchange Fees: _____
Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: 0.__%
12b-1 Distribution Fees: None
Other Expenses: 0.__%
Total Annual Fund Operating Expenses: 0.__%
Fee Waiver and Expense Reimbursement* 0.__%
Net Operating Expenses 0.__%
- ----------------
* The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to waive a percentage of its
investment advisory fee received from the Funds. The expense limitation and
reimbursement agreement is in effect for an initial term of one year and will be
renewed thereafter automatically for one year terms on an annual basis. The
agreement can be changed, terminated or not renewed by either party only upon
providing thirty days' prior notice.
13
<PAGE>
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Three Years Five Years Ten Years
$------- $------- $------- $-------
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS
Dividends, if any, are distributed quarterly in March, June, September, and
December; capital gains, if any, are distributed annually in December.
INVESTMENT ADVISER
whatifi Asset Management Inc., San Francisco, California
SUITABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
[To be supplied by amendment]
FUND PROFILE -- whatifi INTERNATIONAL INDEX FUND
The following profile summarizes important aspects of whatifi International
Index Fund.
INVESTMENT OBJECTIVE
The Fund is an international market fund that broadly represents the performance
of foreign markets. Its goal is to track the performance of the Morgan Stanley
Capital
14
<PAGE>
International ("MSCI"), Europe, Australia, Far East Free Index (the "EAFE
Index")*. The EAFE Index tracks securities of companies located in Europe,
Australia and the Far East.
INVESTMENT STRATEGIES
The Fund employs a passive management strategy designed to track the EAFE index.
The EAFE Index is made up of stocks of companies located in 15 western European
countries, Australia, New Zealand, Hong Kong, Japan, Malaysia and Singapore. The
International Portfolio invests in a representative sample of these securities.
Securities are selected for investment by the Portfolio in accordance with their
capitalization, industry sector, and valuation, among other factors.
The Fund employs a passive management strategy designed to track the performance
of the EAFE Index. The Fund seeks to achieve its investment objective by
investing all of its assets in the International Index Portfolio (the
"International Portfolio"), a series of MIP. The International Portfolio seeks
to match the total return performance of foreign stock markets by investing in
common stocks included in the EAFE Index.
Under normal market conditions, at least 90% of the value of the International
Portfolio's total assets will be invested in securities comprising the EAFE
Index. The International Portfolio attempts to achieve in both rising and
falling markets, a correlation of at least 95% between the total return of its
net assets before expenses and the total return of the EAFE Index.
PRIMARY RISKS
The Fund's total return, like stock prices generally, will fluctuate within a
wide range, so an investor could lose money over short or even long periods. The
Fund is also subject to investment style risk which is the chance that returns
from international stocks will trail returns from other asset classes or the
overall stock market.
The Fund is subject to country risk, which is the chance that a country's
economy will be hurt by political factors, financial issues or natural
disasters.
The Fund is subject to currency risk, which is the chance that returns will be
hurt by a rise in the value of the U.S. dollar compared to foreign currencies.
- --------
* "Morgan Stanley Capital International, Europe, Australia, Far East Free
Index"(R), EAFE Free Index(R) and "EAFE"(R) are trademarks of Morgan Stanley
Capital International ("MSCI") and have been licensed by the Adviser for use in
connection with the International Index Fund. The International Index Fund is
not sponsored, endorsed, sold, or promoted by MSCI and MSCI makes no
representation regarding the advisability of investing in the International
Fund.
15
<PAGE>
The Fund is subject to investment style risk, which is the chance that returns
from foreign stocks will trail returns from other asset classes or the overall
stock markets.
PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the annual returns of the Fund and how its
performance has varied from year to year.* The average annual return tables
compare the Fund's average annual return with the return of the corresponding
index for one and five years and since inception. The performance of the Fund in
the past is not necessarily an indication of its future performance.
International Index Fund Average Annual Total Return (As of December 31, 1999)
One Year Five Years Since July 2, 1993
International Index Fund ___% ___% ___%
EAFE Free Index ___% ___% ___%
During the period shown in the bar chart, the highest return for a calendar
quarter was ___% (quarter ended ) and the lowest return for a quarter was ___%
(quarter ended ___%).
FEES AND EXPENSES
The following table describes the fees you would pay if you buy and hold shares
of the Fund. The expenses shown under Annual Fund Operating Expenses are
estimates based upon the expenses estimated to be incurred in the fiscal year
ending December 31, 2000.
Shareholder Fees (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: ____
Transaction Fees on Purchases: ____
- --------
* The Fund did not offer shares to the public prior to February __, 2000. The
Fund's annual returns are based on the annual returns of each corresponding
Master Portfolio, but have not been adjusted to account for expenses payable at
the Fund level. As a result, the annual returns for the Fund would have been
lower than those shown above because the Fund has higher expenses than its
corresponding portfolios.
16
<PAGE>
Sales Charge (Load) Imposed on Reinvested Dividends: ____
Redemption Fees: ____
Exchange Fees: ____
Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: 0.__%
12b-1 Distribution Fees: None
Other Expenses: 0.__%
Total Annual Fund Operating Expenses: 0.__%
Fee Waiver and Expense Reimbursement* 0.__%
Net Operating Expenses 0.__%
- ---------------------
*The Adviser has entered into a written expense limitation and
reimbursement agreement with the Trust, under which it has agreed to waive a
percentage of its investment advisory fee received from the Funds. The expense
limitation and reimbursement agreement is in effect for an initial term of one
year and will be renewed thereafter automatically for one year terms on an
annual basis. The agreement can be changed, terminated or not renewed by either
party only upon providing thirty days' prior notice.
The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual funds. It
illustrates the hypothetical expenses that you would incur over various periods
if you invest $10,000 in the Fund. This example assumes that the Fund provides a
return of 5% a year, and that operating expenses remain the same. The results
apply whether or not you redeem your investment at the end of each period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Three Years Five Years Ten Years
$------- $------- $------- $-------
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE.
17
<PAGE>
ACTUAL FUTURE EXPENSES MAY BE HIGHER OR LOWER THAN THOSE
SHOWN.
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS
Dividends, if any, are distributed quarterly in March, June, September, and
December; capital gains, if any, are distributed annually in December.
INVESTMENT ADVISER
whatifi Asset Management, Inc., San Francisco, California
SUITABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
[To be supplied by amendment]
FUND PROFILE -- whatifi BOND INDEX FUND
The following profile summarizes important aspects of whatifi Bond Index Fund.
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide investment results that correspond
to the total return performance of the Lehman Brothers Government/Corporate Bond
Index (the "LB Bond Index").* The LB Bond Index includes approximately 6,500
fixed income securities, including U.S. government securities and investment
grade corporate bonds each with an outstanding market value of at least $25
million and a remaining maturity of greater than one year.
INVESTMENT STRATEGIES
The Fund employs a passive management strategy designed to track the performance
of the LB Bond Index.
- --------
* The Lehman Brothers Corporate Bond Fund Index(R) is a trademark of Lehman
Brothers and has been licensed by the Adviser for use in connection with the
Bond Index Fund. The Bond Index Fund is not sponsored, endorsed, sold or
promoted by Lehman Brothers and Lehman Brothers makes no representation
regarding the advisability of investing in the Bond Index Fund.
18
<PAGE>
The Fund does not invest directly in a portfolio of securities. The Fund seeks
to achieve its investment objective by investing all of its assets in the Bond
Index Master Portfolio ("Bond Portfolio"), a series of Master Investment
Portfolio ("MIP"), a registered open-end management investment company issuing
individual interests in multiple series (each a "Portfolio"). The Bond Portfolio
seeks to replicate the total return of the LB Bond Index. The Portfolio invests
substantially all of its assets in a representative sample of securities that
comprise the LB Index or other securities or instruments that seek to
approximate the performance and investment characteristics of the LB Index.
Under normal market conditions, the Bond Portfolio will invest at least 65% of
its assets in fixed income securities. Securities are selected for investment by
the Bond Portfolio based on various factors, including, among others, the
relative proportion of such securities in the LB Bond Index, credit quality,
issuer sector, maturity structure, coupon rates, and callability.
Under normal market conditions, the Bond Portfolio invests at least 90% of its
total assets in securities that are believed to represent the investment
characteristics of the LB Bond Index. The Bond Portfolio attempts to achieve, in
both rising and falling markets, a correlation of at least 95% between the total
return of the Bond Portfolio's net assets and the total return of the LB Bond
Index. A correlation of 100% would mean the total return of the Bond Portfolio's
assets would increase and decrease exactly the same as the LB Bond Index.
PRIMARY RISKS
The Fund is subject to several risks, any of which could cause investors to lose
money.
The Fund is subject to interest rate risk, which is the chance that
bond prices overall will decline over short or even long periods due to rising
interest rates. Interest rate risk should be least for shorter-term bonds, and
greater for longer-term bonds.
The Fund is subject to income risk, which is the chance that falling
interest rates will cause the Fund's income to decline. Income risk is generally
higher for short-term bonds, and lower for long-term bonds.
The Fund is subject to credit risk, which is the chance that a bond
issuer will fail to pay interest and principal in a timely manner, reducing the
Fund's return. Credit risk should be low for the Fund.
The Fund is subject to prepayment risk, which is the chance that during
periods of falling interest rates, a mortgage-backed bond issuer will repay a
higher-yielding bond before its maturity date. Forced to reinvest the
unanticipated proceeds at lower rates, the Fund would experience a decline in
income and lose the opportunity for additional price appreciation associated
with falling rates.
19
<PAGE>
PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund.* The bar chart shows the annual returns of the Fund and how its
performance has varied from year to year. The average annual return tables
compare the Fund's average annual return with the return of the corresponding
index for one and five years and since inception. The performance of the Fund in
the past is not necessarily an indication of its future performance.
Bond Index Fund
1994 -3.53% 1997 10.00%
1995 19.03% 1998 9.57%
1996 2.36% 1999 ___%
Bond Index Fund Average Annual Total Returns (As of December 31, 1999)
One Year Five Years Since July 2, 1993
Bond Index Fund ____% ____% ____%
LB Bond Index ____% ____% ____%
During the period shown in the bar chart, the highest return for a calendar
quarter was ____% (quarter ended _______________) and the lowest return for a
quarter was - ____% (quarter ended _______________).
FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are estimates for the expenses expected to be incurred in the Fund's first
fiscal year ending December 31, 2000.
Shareholder Fees (fees paid directly from your investment)
- --------
* The Fund did not offer shares to the public prior to February 2000. The Fund's
annual returns are based on the annual returns of its corresponding Master
Portfolio, but have not been adjusted to account for expenses payable at the
Fund level. As a result, the annual returns for the Fund would have been lower
than those shown above because the Fund has higher expenses than its
corresponding Portfolio.
20
<PAGE>
Sales Charge (Load) Imposed on Purchases: ____
Transaction Fees on Purchases: ____
Sales Charge (Load) Imposed on Reinvested Dividends: ____
Redemption Fees: ____
Exchange Fees: ____
Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: 0.__%
12b-1 Distribution Fees: None
Other Expenses: 0.__%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.__%
Fee Waiver and Expense Reimbursement* 0.__%
Net Operating Expenses 0.__%
- ----------------
*The Adviser has entered into a written expense limitation and
reimbursement agreement with the Trust, under which it has agreed to waive a
percentage of its investment advisory fee received from the Funds. The expense
limitation and reimbursement agreement is in effect for an initial term of one
year and will be renewed thereafter automatically for one year terms on an
annual basis. The agreement can be changed, terminated or not renewed by either
party only upon providing thirty days' prior notice.
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Three Years Five Years Ten Years
$------- $------- $------- $-------
</TABLE>
21
<PAGE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS
Dividends, if any, are declared daily and distributed monthly.
INVESTMENT ADVISER
whatifi Asset Management, Inc., San Francisco, California
SUITABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
[To be supplied by amendment]
FUND PROFILE -- whatifi Money Market FUND
The following profile summarizes the significant aspects of whatifi Money Market
Fund.
INVESTMENT OBJECTIVE
The Fund seeks to provide shareholders with a high level of current income, at
the same time preserving capital and liquidity, by investing in high-quality
short-term investments.
INVESTMENT STRATEGIES
The Fund seeks to achieve its investment objective by investing all of its
assets in the Money Market Portfolio (the "Money Market Portfolio"), a series of
MIP, which, in turn, invests its assets in U.S. dollar-denominated, high-quality
money market instruments with maturities of 397 days or less, and a
dollar-weighted average portfolio maturity of 90 days or less. The Money Market
Portfolio investments include obligations of the U.S. Government, its agencies
and instrumentalities (including government-sponsored enterprises), and high
quality debt obligations such as obligations of domestic and foreign banks,
commercial paper, corporate notes and repurchase agreements that represent
minimal credit risk. "High quality" investments are investments rated in the top
two rating categories by the requisite National Ratings Self Regulatory
Organization
22
<PAGE>
("NRSRO") or, if unrated, determined by BGFA to be of comparable quality to such
rated securities under guidelines adopted by the Fund's Board of Trustees and
the Money Market Portfolio's Board of Trustees.
PRIMARY RISKS
While the Fund seeks to preserve the value of your investment at $1 per share,
there is no guarantee that the Fund will be able to do so. It is possible to
lose money by investing in the Fund.
The Fund is subject to interest rate risk, which is the risk that when
interest rates rise the value of the debt instruments in which the Money Market
Portfolio invests will go down. On the other hand, if interest rates fall, the
value of the Money Market Portfolio's investments may rise.
The Fund is subject to credit risk, which is the risk that issuers of
the debt instruments in which the Fund (through its investments in the Money
Market Portfolio) invests may default on the payment of principal and/or
interest. The Fund might not be able to maintain a stable net asset value of
$1.00 per share. The Fund could lose money if the issuer of a fixed-income
security owned by the Money Market Portfolio were unable or unwilling to meet
its financial obligations.
PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year since
the Fund's inception. The table shows how the Fund's average annual returns for
one and five calendar years and since inception compare with the rate for
3-month U.S. Treasury Bills. Please remember that the Fund's past performance
does not indicate how it will perform in the future.
1993 _____% 1996 _____% 1999 _____%
1994 _____% 1997 _____%
1995 _____% 1998 _____%
During the period shown in the bar chart, the highest return for a calendar
quarter was ___% (quarter ended ____________) and the lowest return for a
quarter was ___% (quarter ended _______________).
23
<PAGE>
One Year Five Years Since July 2, 1993
whatifi Money Market Fund _____% _____% _____%
Treasury Bills (3 month) _____% _____% _____%
FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
estimates for the Fund's first fiscal period ending December 31, 2000.
Shareholder Fees (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: ____
Transaction Fees on Purchases: ____
Sales Charge (Load) Imposed on Reinvested Dividends: ____
Redemption Fees: ____
Exchange Fees: ____
Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: 0.__%
12b-1 Distribution Fees: None
Other Expenses: 0.__%
Total Annual Fund Operating Expenses: 0.__%
Fee Waiver and Expense Reimbursement 0.__%
Net Operating Expenses 0.__%
- ----------------------
* The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to waive a percentage of its
investment advisory fee received from the Funds. The expense limitation and
24
<PAGE>
reimbursement agreement is in effect for an initial term of one year and will be
renewed thereafter automatically for one year terms on an annual basis. The
agreement can be changed, terminated or not renewed by either party only upon
providing thirty days' prior notice.
The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Three Years Five Years Ten Years
$------- $------- $------- $-------
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS
Dividends, if any, are declared daily and distributed monthly.
INVESTMENT ADVISER
whatifi Asset Management, Inc., San Francisco, California
SUITABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
[To be supplied by amendment]
MORE INFORMATION ON THE PORTFOLIOS AND THE FUNDS
The following sections of the prospectus discuss other important features of the
Index Funds and the Money Market Fund.
25
<PAGE>
The S&P 500 Fund. The Fund seeks to approximate as closely as practicable,
before fees and expenses the capitalization-weighted total return rate of a
benchmark index that measures the investment return of large-capitalization
stocks. "Capitalization-weighted total rate of return" means that each stock in
the index contributes to the index in the same proportion as the value of its
shares. Accordingly, if the shares of Company A are worth twice as much as the
shares of Company B, Company A's return will count twice as much as Company B's
in calculating the index's overall return.
The S&P 500 Portfolio seeks to provide investment results that correspond,
before fees and expenses, to the total return of the publicly traded common
stocks, in the aggregate, as represented by the S&P 500 Index. The S&P 500
Portfolio invests substantially all of its assets in the same stocks and in
substantially the same percentages as the S&P 500 Index.
Under normal market conditions, the S&P 500 Portfolio will invest at least 90%
of its assets in the stocks comprising the S&P 500 Index. The S&P 500 Portfolio
attempts to achieve, in both rising and falling markets, a correlation of at
least 95% between the capitalization-weighted total return of its assets and
that of the S&P 500 Index. A correlation of 100% would mean the total return of
the S&P 500 Portfolio's assets would increase and decrease in exactly the same
way as the S&P 500 Index.
The International Index Fund. The Fund is subject to foreign investment risk.
The International Portfolio invests substantially all of its assets in foreign
securities. This means the International Portfolio can be affected by the risks
of foreign investing, including changes in currency exchange rates and the costs
of converting currencies; foreign government controls on foreign investment;
repatriation of capital, and currency and exchange; foreign taxes, inadequate
supervision and regulation of some foreign markets; volatility from lack of
liquidity; different settlement practices or delayed settlements in some
markets; difficulty in obtaining complete and accurate information about foreign
companies; less strict accounting, auditing and financing reporting standards
than those in the U.S.; political, economic and social instability; and
difficulties in enforcing legal rights outside the U.S. The western European
countries in the EAFE Index are Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland and the United Kingdom,
In addition, many foreign countries are less prepared than the U.S. to properly
process and calculate information related to dates from and after January 1,
2000, which could result in difficulty pricing foreign investments and failure
by foreign issuers to pay timely dividends, interest or principal. All of these
factors can make foreign investments, especially those in emerging markets, more
volatile and potentially less liquid than U.S.
investments.
The Fund is subject to small company investing risk. The value of securities of
smaller, less well-known issuers can be more volatile than that of larger
issuers and can react
26
<PAGE>
differently to issuer, political, market and economic developments than the
market as a whole and other types of stocks. Smaller issuers can have more
limited product lines, markets and financial resources.
The Costs of Investing
Costs are an important consideration in choosing in which mutual fund you will
invest because you pay the costs of operating a fund, plus any transaction costs
associated with the fund's buying and selling of securities. These costs can
erode a gross income or capital appreciation a fund achieves. Even seemingly
small differences in fund expenses can, over time, have a dramatic effect on a
fund's performance.
Indexing Methods
In seeking to track a particular index, a fund generally uses one of
two methods to select stocks. Some index funds hold each stock found in their
target indexes in about the same proportions as represented in the indexes
themselves. This is called a "replication" method. For example, if 5% of the S&P
500 Index were made up of the stock of a specific company, a fund tracking that
index would invest about 5% of its assets in that company. The whatifi S&P 500
uses this method of indexing.
Because it would be very expensive to buy and sell all of the
securities held in certain indexes (the Wilshire 4500 Index, the EAFE Free Index
and the LB Bond Index), funds such as the whatifi Extended Market Index Fund,
the whatifi International Index Fund and the whatifi Bond Index Fund, use a
"sampling" technique. Using a sophisticated computer program, these funds invest
in a representative sample of stocks from their target index that will resemble
the full index in terms of industry weightings, market capitalization,
price/earnings ratio, dividend yield, and other characteristics. For instance,
if 10% of the Wilshire 4500 Index were made up of utility stocks, the Extended
Market Index Fund can be expected to invest about 10% of its assets in some --
but not all -- of such utility stocks. The particular utility stocks selected by
the Fund, as a group, would have investment characteristics similar to those of
the utility stocks in the Index.
Costs and Market-timing
Some investors try to profit from a strategy called market-timing -- switching
money into investments when the investor expects prices to rise, and taking
money out when the investor expects prices to fall. As money is shifted in and
out of a fund, the fund incurs expenses for buying and selling securities. These
costs are borne by all fund shareholders, including the long-term investors who
do not generate the costs. Accordingly, the Funds have adopted the following
policies, among others, designed to discourage short-term trading:
27
<PAGE>
--Each Fund reserves the right to reject any purchase request --
including exchanges from other whatifi Funds -- that it regards as
disruptive to the efficient management of the Fund. A purchase request
could be rejected because of the timing of the investment or because of
a history of excessive trading by the investor.
--The Funds charge a transaction fee on purchases.
--There is a limit on the number of times you can exchange into and
out of a Fund.
--Online exchanges are not permitted for non-IRA accounts.
THE whatifi INDEX FUNDS DO NOT PERMIT MARKET-TIMING. DO NOT INVEST IN
THESE FUNDS IF YOU ARE A MARKET-TIMER.
Turnover Rate
Before investing in a mutual fund, you should review its turnover rate. This
gives an indication of how transaction costs could affect the fund's future
returns. In general, the greater the volume of buying and selling by the fund,
the greater the impact that brokerage commissions and other transaction costs
will have on the fund's return. Also, funds with high turnover rates may be more
likely to generate capital gains that must be distributed to shareholders as
income subject to taxes. The average turnover rate for passively managed
domestic equity index funds investing in common stocks is roughly 20%; for all
domestic stock funds, the average turnover rate is approximately 85%, according
to Morningstar, Inc. The average turnover rate for passively managed domestic
bond index funds is roughly __%; for all domestic bond funds, the average
turnover rate is approximately __%, accordingly to Morningstar, Inc. (A turnover
rate of 100% would occur if a fund sold and replaced securities valued at 100%
of its net assets within a one-year period.)
In general, a passively managed fund sells securities only to respond to
redemption requests or to adjust the number of shares held to reflect a change
in the fund's target index. Turnover rates for large-cap stock index funds tend
to be very low because large-cap indexes, such as the S&P 500, typically do not
change much from year to year. Turnover rates for other stock index funds and
bond funds tend to be higher (although still relatively low, compared to
actively managed funds) because the indexes they track are more likely to change
as a result of mergers, acquisitions, business failures, or growth of companies
than a larger-cap index.
Investment Strategies
As with all mutual funds, there is no assurance that the Funds will achieve
their respective investment objectives. The investment strategies of the Funds
are not fundamental and may be changed without approval of a Fund's
shareholders. A Fund
28
<PAGE>
may withdraw its investment in a Portfolio only if the Trust's Board of Trustees
determines that such action is in the best interests of the Fund and its
shareholders. If there is a change in the investment objective and strategies of
a Fund, a shareholder should consider whether the Fund remains an appropriate
investment in view of the shareholder's then current financial position and
needs.
The S&P Index Fund, the Extended Index Fund, the International Index Fund and
the Bond Fund (the "Index Funds"): The investment adviser of the S&P 500
Portfolio, the Extended Index Portfolio, the International Index Portfolio and
the Bond Index Portfolio (together, the "Index Portfolios") does not actively
manage the assets of each Portfolio, but seeks to achieve returns corresponding
to the Portfolios' respective benchmark indexes. The Index Portfolios are
managed by use of an "indexing" investment approach to determine which
securities are to be purchased or sold to replicate, to the extent feasible, the
investment characteristics of the S&P 500 Index, the Wilshire 4500 Index, the
EAFE Index, the LB Bond Index through computerized, quantitative techniques. The
Index Portfolios cannot own all the securities that make up their respective
market indexes in perfect correlation to the indexes. The Index Portfolios seek
to track their respective market indexes during down markets as well as during
up markets. As a result, the returns of the Index Portfolios will be directly
affected by the volatility of the securities making up their respective market
indexes.
Each Index Portfolio may invest up to 10% of its total assets in high quality
money market instruments to provide liquidity to meet redemption requests or to
facilitate investment in the stocks in the S&P 500 Index, the Wilshire 4500
Index or the EAFE Free Index.
Each Index Portfolio may use derivative instruments in order to: (i) simulate
full investment in its corresponding index while retaining a cash balance for
portfolio management purposes; (ii) facilitate trading; (iii) reduce transaction
costs; or (iv) seek higher investment returns when such instruments are priced
more attractively than the stocks in its corresponding index. Such derivatives
include the purchase and sale of futures contracts and options on the S&P 500
Index, the Wilshire 4500 Index, the EAFE Free Index and the LB Bond Index
futures contracts.
The Money Market Fund and Money Market Portfolio emphasize safety of principal
and high credit quality. The investment policies of the Fund and the Portfolio
prohibit the purchase of many types of floating-rate instruments, commonly
referred to as derivatives, that are considered to be potentially volatile. The
Money Market Portfolio, however, may invest in high-quality asset-backed
securities and variable and floating rate obligations, which are considered to
be derivative instruments. The Money Market Fund (through its investments in the
Money Market Portfolio) may only invest in floating-rate securities that bear
interest at a rate that resets quarterly or more frequently, and that resets
based on changes in standard money market rate indices such as U.S. Government
Treasury bills and London Interbank Offered Rate, among others. Floating and
variable rate instruments are subject to interest rate and credit risks.
29
<PAGE>
Investment Risks
An investment in the Funds is subject to investment risks, including the loss of
the principal amount invested. The performance per share of the Funds and the
Portfolios will change daily based on various factors, including, but not
limited to, the quality of the instruments held by each Portfolio, national and
international economic conditions and general market conditions.
The Funds are also subject to index fund risk. The Index Funds are not actively
managed and invest (through their investments in the corresponding Portfolios)
in the securities included in the relevant Index regardless of the investment
merits of such securities. As such, the Index Fund cannot in any meaningful way
modify their investment strategies to respond to changes in the economy and may
be particularly susceptible to general market declines. The Index Funds ability
to track the performance of the their Index will also be affected by, among
other things, transaction costs, the fees and expenses of the Fund and the
corresponding Portfolio, changes in the composition of the corresponding Index
or the assets of the corresponding Portfolio, and the timing, frequency and
amount of investor purchases and redemptions of the Fund and the S&P 500
Portfolio. Each 500 Portfolio must maintain cash balances to pay redemptions
made by its shareholders and to pay its own expenses. This may affect the
overall performance of the Fund.
Derivatives: Derivatives are financial instruments whose values are "derived"
from prices of other securities or specified assets, indices, or rates. The use
of derivatives is a specialized investment technique. There can be no guarantee
that the use of derivatives will increase the return of a Fund, or protect its
assets from declining in value. A Fund's investments in derivative instruments
can significantly increase its exposure to market risk or the credit risk of the
counterparty. Derivative instruments can also involve the risk of mispricing or
improper valuation and the risk that changes in the value of the derivative
instruments may not correlate perfectly with a Fund's corresponding index. In
fact, the use of derivative instruments may adversely impact the value of the
Funds' assets, which may reduce the return you receive on your investment.
The Index Funds' use of derivative instruments may affect the Funds' ability to
track their respective indexes less closely if the derivatives do not perform as
expected, or if the derivative instruments are timed incorrectly or are executed
under adverse market conditions.
The Money Market Portfolio may invest in high-quality asset-backed securities.
Asset-backed securities represent interests in "pools" of assets in which
payments of both interest and principal on the securities are made monthly, thus
in effect "passing through" monthly payments made by the individual borrowers on
the assets that underlie the securities. The value of these instruments are
sensitive to changes in interest rates and general market conditions. The value
of asset-backed securities is also affected by the creditworthiness of the
individual borrowers.
30
<PAGE>
Securities Lending: Each Portfolio in which the Funds invest may lend a portion
of its securities to certain financial institutions in order to earn income.
These loans are fully collateralized. However, if the institution defaults, the
Funds' performance could be reduced.
Year 2000: Like other mutual funds, financial and business organizations and
individuals around the world, the Funds could be adversely affected if the
computer systems used by their investment adviser, the Funds' other service
providers, or persons with whom they deal, do not properly process and calculate
date-related information and data on and after January 1, 2000. This possibility
is commonly known as the "Year 2000 Problem." All operations of the Funds are
computer reliant. The Funds' and the investment adviser are currently Year 2000
compliant, and the service providers to the Funds and the Portfolios have
indicated that they are or expect to be Year 2000 compliant. There can be no
assurance that the Funds or the Portfolios will not experience any problems as a
result of the Year 2000 Problem. In addition, because the Year 2000 Problem
affects virtually all organizations, the companies or entities in which each of
the Portfolios invest also could be adversely impacted by the Year 2000 Problem,
especially foreign entities, which may be less prepared for the Year 2000. The
extent of such impact cannot be predicted.
THE FUNDS' MANAGEMENT
Investment Advisers. Under investment advisory agreements with the Funds,
whatifi Asset Management, Inc., a registered investment adviser, provides
investment advisory services to the Funds. The Adviser is a wholly owned
subsidiary of whatifi.com Corporation and is located at 790 Eddy Street, San
Francisco, California 94109. The Adviser is newly formed and has no prior
experience as an investment adviser.
The Adviser provides various financial services to on-line investors. Through
the world wide web, the Adviser offers access to your whatifi Fund account
virtually anywhere, at any time.
Subject to general supervision of the Trust's Board of Trustees and in
accordance with the investment objective, policies and restrictions of each
Fund, the Adviser provides the Funds with investment guidance, policy direction
and monitoring of each of the Portfolios in which each Fund invests. The Adviser
may in the future manage cash and money market instruments for cash flow
purposes. The Adviser also provides or arranges for administration, transfer
agency, custody and all other services needed for the Funds to function. For its
investment advisory services, each Fund pays the Adviser an investment advisory
fee at an annual rate, after fee waivers and expense reimbursements, equal to
the following percentage of each Fund's average daily net assets:
31
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Contractual Rate
(as a percentage
of average daily After Fee Waiver and Expense Reimbursement
Fund net assets) (as a percentage of average daily net assets) *
---% ---%
S&P 500 Index Fund ___% ___%
Extended Market Index
Fund ___% ___%
International Index Fund ___% ___%
Bond Index Fund ___% ___%
Money Market Fund ___% ___%
</TABLE>
Out of the fee received by the Adviser, the Adviser pays all expenses of
managing and operating the Funds except brokerage expenses, taxes, interest,
fees and expenses of the independent trustees (including legal counsel fees),
and extraordinary expenses. A portion of the investment advisory fee may be paid
by the Adviser to unaffiliated third parties who provide recordkeeping and
administrative services that would otherwise be performed by an affiliate of the
Adviser. BGFA is the investment adviser for each Portfolio. BGFA is a direct
subsidiary of Barclays Global Investors, N.A. which, in turn, is an indirect
subsidiary of Barclays Bank PLC. BGFA is located at 45 Fremont Street, San
Francisco, California 94105. BGFA has provided asset management, administration
and investment advisory services for over 25 years. As of November 30, 1999,
BGFA and its affiliates provided investment advisory services for over $687
billion of assets. BGFA receives a fee from each Portfolio at an annual rate
equal to the following percentage of each Portfolio's average daily net assets:
Percentage of
Portfolio Average Daily Net Assets
S&P 500 Portfolio 0.05%
Bond Portfolio 0.08%
- --------
* The Adviser has entered into a written expense limitation and
reimbursement agreement with the Trust, under which it has agreed to waive a
percentage of its investment advisory fee received from the Funds. The expense
limitation and reimbursement agreement is in effect for an initial term of one
year and will be renewed thereafter automatically for one year terms on an
annual basis. The agreement can be changed, terminated or not renewed by either
party only upon providing thirty days' prior notice.
32
<PAGE>
Extended Index Portfolio 0.08%
International Index Portfolio 0.15%*
Money Market Portfolio 0.10%
Each Fund bears a pro rata portion of the investment advisory fees paid by its
corresponding Portfolio, as well as certain other fees paid by each Portfolio,
such as accounting, legal, and Securities and Exchange Commission ("SEC")
registration fees.
The Funds' SAI contains detailed information about the Fund's investment
adviser, administrator, and other service providers.
THE FUNDS' STRUCTURE
Each Fund is a separate series of whatifi Funds. The S&P 500 Index Fund, the
Extended Market Index Fund, the International Index Fund, the Bond Index Fund,
and the Money Market Fund seek to achieve their investment objectives by
investing all of a Fund's assets in the corresponding S&P 500 Portfolio, the
Extended Index Portfolio, the International Index Portfolio, the Bond Portfolio,
and the Money Market Portfolio, respectively. The Index Portfolios and the Money
Market Portfolio are each a series of MIP, a separate open-end investment
company with the same investment objective as the corresponding Fund. This
structure is referred to as a "master/feeder" structure because one fund (the
"feeder" fund) (i.e., the Funds) invests all of its assets in a second fund (the
"master fund") (i.e., the Portfolios). In addition to selling its shares to a
Fund, each corresponding Portfolio has sold and is expected to continue to sell
its shares to certain other mutual funds (i.e. other feeder funds) or other
investors. The expenses paid by these other feeder mutual funds and investors
may differ from the expenses paid by a Fund. Accordingly, the returns received
by shareholders of other mutual funds or other accredited investors may differ
from those received by shareholders of the Funds.
The whatifi Funds' Trustees believe that, as other investors invest their assets
in the Portfolios, certain economic efficiencies may be realized with respect to
each Portfolio. For example, fixed expenses that otherwise would have been borne
solely by a Fund (and the other existing interest-holders in its corresponding
Portfolio) would be spread across a larger asset base as more mutual funds or
other accredited investors invest in a Portfolio. If a mutual fund or other
investor withdraws its investment from a Portfolio, the economic efficiencies
that the Trustees believe could be available through investment in a Portfolio
may not be fully realized.
Each Fund may be asked to vote on matters concerning its corresponding
Portfolio. Except as permitted by the SEC, whenever a Fund is requested to vote
on a matter
- --------
* After assets reach $1 billion the fee payable to BGFA will decline to 0.10% of
the International Index Fund's average daily net assets.
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concerning a Portfolio, that Fund will hold a meeting of its shareholders, and,
at the meeting of investors in the Portfolio, will cast all of its votes in the
same proportion as the votes of the Fund's shareholders.
A Fund may withdraw its investments in the corresponding Portfolio if the Board
determines that it is in the best interests of the Fund and its shareholders to
do so. In connection with any such withdrawal, the Board would consider what
action might be taken, including the investment of all the assets of the Fund in
another pooled investment vehicle having the same investment objective as the
Fund, direct management of the Fund or other pooled investment entity by the
Adviser or the hiring of an investment sub-adviser to manage the Fund's assets.
Investment of the Funds' assets in the Portfolios is not a fundamental policy of
the Funds and a shareholder vote is not required for a Fund to withdraw its
investment from a Portfolio.
PRICING OF FUND SHARES
The Funds are no-load funds. This means you may purchase or sell shares directly
at a Fund's net asset value ("NAV") determined after the Fund receives your
request to purchase shares in proper form. A request is received in proper form
if it is placed [To Be Supplied] and specifies the number of shares or dollar
amount of shares to be purchased or redeemed. If the Fund receives such request
prior to the close of the NYSE on a day on which the NYSE is open, your share
price will be the NAV determined that day. Shares will not be priced on days on
which the NYSE is closed for trading. Each Fund's investment in its
corresponding Portfolio is valued based on the Fund's ownership interest in the
net assets of the Master Portfolio. A Fund's NAV per share is calculated by
taking the value of each Fund's net assets and dividing by the number of shares
outstanding. Expenses are accrued daily and applied when determining the Fund's
NAV. The NAV for each Fund is determined as of the close of trading on the floor
of the NYSE (generally 4:00 p.m., Eastern Time), each day the NYSE is open. Each
Fund reserves the right to change the time at which purchases and redemptions
are priced if the NYSE closes at a time other than 4:00 p.m. Eastern Time or if
an emergency exists. The NYSE is closed on national holidays and on Good Friday.
Each Portfolio calculates its NAV on the same day and at the same time as its
corresponding Fund. Each Portfolio's investments are valued each day the NYSE is
open for business. Each Index Portfolio's assets are valued by using available
market quotations or at fair value as determined in good faith by the Board of
Trustees of MIP. Bonds and notes with remaining maturities of 60 days or less
are valued at amortized cost. The Money Market Portfolio values its securities
at amortized cost to account for any premiums or discounts above or below the
face value of the securities that Portfolio buys. The amortized cost method does
not reflect daily fluctuations in market value.
HOW TO BUY AND SELL SHARES OF THE whatifi FUNDS
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On-Line Investor Requirements
The Funds are available only to on-line investors. Each Fund requires its
shareholders to consent to receive all shareholder information about the Fund
electronically. Shareholder information includes, but is not limited to,
prospectuses, financial reports, confirmations, proxy solicitations, and
financial statements. Shareholders may also receive other correspondence from
whatifi Funds through their e-mail account. By purchasing shares of a Fund, you
certify that you have access to the Internet and a current e-mail account, and
you acknowledge that you have the sole responsibility for providing a correct
and operational e-mail address. You may incur costs for on-line access to
shareholder documents and for maintaining an e-mail account.
If you rescind your consent to receive shareholder information electronically,
fail to maintain an e-mail account, or close your account, the Funds may, to the
extent permitted by the federal securities laws, redeem your position in the
Funds and will prohibit additional investments in the Funds, including the
reinvestment of dividends.* Prior to revoking your consent, you will be reminded
of the Fund's involuntary redemption policy. If the Funds involuntarily redeem
your shares, you may experience adverse tax consequences. If your shares are
involuntarily redeemed, you will receive paper copies of all shareholder
information until all of your shares have been redeemed and the proceeds have
been credited to your account, or you re-establish your consent and e-mail
account.
Account Requirements
To open your account, you must complete and submit a whatifi Funds Account
Application (the "Application"). The Application is available on the Adviser's
website at www.whatifi.com. While you may submit the Application electronically,
you must also complete, sign and return by mail or fax a completed Application.
You can access an online application through multiple electronic gateways on the
Internet, including: WebTV, Prodigy, AT&T Worldnet, Microsoft Investor, by GO on
CompuServe, and with the keyword "whatifi" on America Online. For more
information on how to access account information and/or applications
electronically, please refer to our online assistant at www.whatifi.com
available 24 hours a day or call 1-800-___- ____ between 5:00 a.m. and 6 p.m.
(Pacific Time), Monday through Friday.
- --------
* The Staff has informally indicated its view that the Funds may not voluntarily
redeem your shares if you revoke your consent to receive shareholder documents
electronically or fail to maintain an e-mail account. If the Staff's position on
this issue changes, the Funds intend to involuntarily redeem your shares under
such circumstances. The Fund reserves the right to deliver paper-based documents
in certain circumstances, at no cost to shareholders.
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You may open your account using the following forms of payment: check, money
order, or transfer. If by check or money order, make payable to whatifi Funds
and mail to whatifi Funds, [Address to be supplied by amendment]
After your account is opened, the Funds will contact you with an account number
so that you can begin to wire funds. Send wired funds to:
c/o whatifi Funds
ABA#______________
A/C#___________ for further credit to (your name and account number)
Once you open your account, you will be subject to general account requirements
as described in the Application, and will have access to all the electronic
financial services offered over the Internet by the Adviser, including the
opportunity to invest in the Funds.
Placing an Order
You can begin purchasing shares of the Funds as soon as you open and fund your
account. Since a Fund's net asset value changes daily, your purchase price will
be the next NAV determined after a Fund receives and accepts your purchase
order.
You can place orders to purchase or redeem Fund shares by accessing the website
at www.whatifi.com. At the time you log-on to the website, you will be requested
to enter your personal identification password so that each transaction is
secure. By clicking on the appropriate mutual fund order buttons, you can place
an order to purchase or redeem shares in a Fund. When you first purchase shares
in a Fund, you will be asked: (1) to consent to receive all Fund documentation
electronically; and (2) to affirm that you have read the prospectus. The
prospectus is available for viewing and printing on our website. If you do not
consent to receive all Fund documentation electronically you will not be able to
purchase shares of a Fund. Notice of trade confirmations will be sent
electronically to the e-mail address you provided when you opened your account.
Minimum Investment Requirements
For your initial investment in a Fund [To be supplied by amendment]
To buy additional shares of a Fund
Continuing minimum investment
To invest in a Fund for your IRA, Roth IRA,
or one-person SEP account
To invest in a Fund for your Education IRA account
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To invest in a Fund for your UGMA/UTMA account
To invest in a Fund for your SIMPLE, SEP-IRA, Profit Sharing or Money
Purchase Pension Plan, or 401(k) account
Your shares may be automatically redeemed if, as a result of selling shares, you
no longer meet a Fund's minimum balance requirements. Before taking such action
a Fund would notify you and give you at least 30 days to purchase more shares to
bring your investment in the Fund to at least $___________. After your account
is established you may use any of the methods described below to buy or sell
shares. You can sell only shares of the Funds that you own. Accordingly, you
cannot "short" shares of a Fund.
Accessing Account Information
Please refer to our website at www.whatifi.com.
Redemptions
You can access money invested in a Fund at any time by selling some or all of
your shares back to the Fund. When a Fund receives your redemption request, your
shares will be redeemed and the proceeds will be credited to you. This usually
occurs the business day following the transaction.
Redemption Delays. In order to receive payment on redeemed shares, you must wait
until the funds you used to buy the shares have cleared (e.g., if you purchased
shares of a Fund by check, until your check has cleared). This delay may take up
to fifteen (15) days from the date of purchase. The right of redemption may be
suspended during any period in which (i) trading on the NYSE is restricted, as
determined by the SEC, or the NYSE is closed for other than weekends and
holidays; (ii) the SEC has permitted such suspension by order; or (iii) an
emergency as determined by the SEC exists, making disposal of portfolio
securities or valuation of net assets of the Funds not reasonably practicable.
Redemption Fee. The Funds do not currently impose a redemption fee. The Index
Funds can experience substantial price fluctuations and are intended for
long-term investors. Short-term "market timers" who engage in frequent purchases
and redemptions, however, can disrupt a Fund's investment program and create
additional transaction costs that are borne by all shareholders.
Limits on Account Activity
Because excessive account transactions can disrupt management of a Fund and
increase the Fund's costs for all shareholders, the whatifi Funds limit account
activity as follows:
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- You may make no more than ___ substantive "round trips" through any
Index Fund during any 12-month period.
- Your round trips through an Index Fund must be at least 30 days
apart.
- An Index Fund may refuse a share purchase at any time for any reason.
- The Funds may revoke an investor's telephone exchange privilege at
any time, for any reason.
A "round trip" is a redemption from an Index Fund followed by a purchase back
into the Index Fund. Also, "round trip" covers transactions accomplished by any
combination of methods, including transactions conducted by check, wire, or
exchange to/from another Fund. "Substantive" means a dollar amount that an Index
Fund determines, in its sole discretion, could adversely affect the management
of the Index Fund.
Amending Your Application
For your protection, you will be required to submit an amended Application if
you desire to change certain information provided in your initial Application.
The amended Application is designed to protect you and the Funds against
fraudulent transactions by unauthorized persons. The Funds will require you to
amend your Application under the following circumstances:
-If you transfer the ownership of your account to another person or
organization.
-If you add or change your name or add or remove an owner on your
account.
-If you add or change the beneficiary on your transfer-on-death
account.
BUYING A DIVIDEND
Unless you are investing through a tax-deferred retirement account (such as an
IRA), it is not to your advantage to buy shares of a fund shortly before it
makes a distribution, because doing so can cost you money in taxes. This is
known as "buying a dividend." For example: on December 15, you invest $5,000,
buying 250 shares for $20 each. If the fund pays a distribution of $1 per share
on December 16, its share price would drop to $19 (not counting market change).
You still have only $5,000 (250 shares x $19 = $4,750 in share value, plus 250
shares x $1 = $250 in distributions), but you owe tax on the $250 distribution
you received--even if you reinvest it in more shares. To avoid "buying a
dividend," check a fund's distribution schedule before you invest.
DIVIDENDS AND OTHER DISTRIBUTIONS
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The S&P 500 Index Fund, the Extended Market Index Fund and the International
Index Fund intend to pay dividends from their net investment income quarterly
and distribute capital gains, if any, annually. The Bond Index Fund and the
Money Market Fund intend to declare dividends daily and distribute them monthly.
The Bond Index Fund and the Money Market Fund will distribute capital gains, if
any, at least annually. The Funds may make additional distributions as
necessary.
Unless you choose otherwise, all your dividends and capital gain distributions
will be automatically reinvested in additional Fund shares. Shares are purchased
at the net asset value determined on the reinvestment date. If you revoke your
consent to receive shareholder information electronically, or fail to maintain
an e-mail account, you will not be permitted to reinvest your dividends in
additional Fund shares.
TAX CONSEQUENCES
The following information is intended to be a general summary for U.S.
taxpayers. Please refer to the Funds' SAI for more information. You should rely
on your own tax adviser for advice about the federal, state and local tax
consequences related to any investment in the Funds. Each Fund generally will
not have to pay income tax on amounts it distributes to you; however, you will
be taxed on distributions you receive.
The S&P 500 Index Fund, the Extended Market Index Fund and the International
Index Fund will each distribute substantially all of their income and gains to
their shareholders each year. The Bond Index Fund and the Money Market Fund will
distribute dividends monthly. If a Fund declares a dividend in October, November
or December of any year but pays it in January of the next year, you may be
taxed on the dividend as if you received it in the previous year.
You will generally be taxed on dividends you receive from a Fund, regardless of
whether they are paid to you in cash or are reinvested in additional Fund
shares. If a Fund designates a dividend as a capital gain distribution, you will
pay tax on that dividend at the long-term capital gains tax rate, regardless of
how long you have held your Fund shares.
If you invest through a tax-deferred retirement account, such as an IRA, you
generally will not have to pay tax on dividends until they are distributed from
the account. These accounts are subject to various tax rules. You should consult
your tax adviser about investment through a tax-deferred account.
There may be tax consequences to you if you dispose of your Fund shares, for
example, through redemption, exchange or sale. You will generally have a capital
gain or loss from a disposition. The amount of the gain or loss and the rate of
tax will depend primarily upon how much you paid for the shares of the Fund, how
much you sold them for, and how long you held them.
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<PAGE>
Each Fund will send you a report each year that will show you which dividends
must be treated as ordinary income and which (if any) are long-term capital
gain.
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax, but
is a method by which the IRS ensures that it will collect taxes otherwise due.
Any amounts withheld may be credited against your U.S.
federal income tax liability.
GLOSSARY OF INVESTMENT TERMS
ACTIVE MANAGEMENT
An investment approach that seeks to exceed the average returns of the financial
markets. Active managers rely on research, market forecasts, and their judgment
in buying and selling securities.
CAPITAL GAINS DISTRIBUTION
Payment to mutual fund shareholders of gains realized on securities that the
fund has sold at a profit, less any realized losses.
CASH RESERVES
Cash deposits, short-term bank deposits, and money market instruments which
include U.S. Treasury bills, bank certificates of deposit (CDs), repurchase
agreements, commercial paper, and banker's acceptances.
COMMON STOCK
A security representing ownership rights in a corporation. A stockholder is
entitled to share in the company's profits, some of which may be paid out as
dividends.
DIVIDEND INCOME
Payment to shareholders of income from interest or dividends generated by a
fund's investments.
DOLLAR-COST AVERAGING
Investing equal amounts of money at regular intervals on an ongoing basis. This
technique ensures that an investor buys fewer shares when prices are high and
more shares when prices are low.
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EXPENSE RATIO
The percentage of a fund's average net assets used to pay its expenses. The
expense ratio includes management fees, administrative fees, and any 12b-1
distribution fees (i.e. fees paid by the a mutual fund to promote the sale of
its shares).
INDEX
An unmanaged group of securities whose overall performance is used as a standard
to measure investment performance.
INVESTMENT ADVISER
An entity that makes the day-to-day decisions regarding a fund's investments.
MUTUAL FUND
An investment company that pools the money of many people and invests it in a
variety of securities in an effort to achieve a specific objective over time.
NET ASSET VALUE (NAV)
The market value of a mutual fund's total assets, less liabilities, divided by
the number of shares outstanding. The value of a single share is called its
share value or share price.
PASSIVE MANAGEMENT
A low-cost investment strategy in which a mutual fund attempts to match --
rather than outperform -- a particular stock or bond market index. Also known as
indexing.
PRINCIPAL
The amount of money you put into an investment.
SECURITIES
Stocks, bonds, money market instruments, and other investment vehicles.
TOTAL RETURN
A percentage change, over a specified time period, in a mutual fund's net asset
value, with the ending net asset value adjusted to account for the reinvestment
of all distributions of dividends and capital gains.
VOLATILITY
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The fluctuation in value of a mutual fund or other security. The greater a
fund's volatility, the wider the fluctuations between its high and low prices.
YIELD
Income (interest or dividends) earned by an investment, expresses as a
percentage of the investment's price.
MORE INFORMATION
The SAI contains more information on each Fund. The SAI is incorporated into
this Prospectus by reference. Further information about the Funds' investments
will be available in the Funds' annual and semi-annual reports. In a Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance during
its fiscal year.
Additional information, including the SAI and the most recent annual and
semi-annual reports (when available), may be obtained without charge at our
website (www.whatifi.com). Shareholders will be alerted by e-mail when a
prospectus amendment, annual or semi-annual report is available. Shareholders
may also call the toll-free number listed below for additional information or
with any questions.
Further information about the Funds (including the SAI) can also be reviewed and
copied at the SEC's Public Reference Room in Washington, D.C. You may call
1-800-SEC-0330 for information about the operations of the Public Reference
Room. Reports and other information about the Funds are also available on the
SEC's website (http://www.sec.gov) or copies can be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
D.C. 20549-6009.
whatifi Asset Management, Inc.
790 Eddy Street
San Francisco, California 94109
Toll-Free: 1-800-___-_____
http://www.whatifi.com
Investment Company Act file No.: 811-______
42
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
whatifi Funds
whatifi S&P 500 Index Fund
whatifi Extended Market Index Fund
whatifi International Index Fund
whatifi Bond Index Fund
whatifi Money Market Fund
February __, 2000
This Statement of Additional Information (the "SAI") is not a prospectus and
should be read together with the Prospectus for the whatifi S&P 500 Index Fund
(the "S&P 500 Index Fund"), the whatifi Extended Market Index Fund (the
"Extended Market Index Fund"), the whatifi International Index Fund (the
"International Index Fund"), the whatifi Bond Index Fund, (the "Bond Index Fund"
(collectively, the "Index Funds"), and the whatifi Money Market Fund (the "Money
Market Fund" (collectively with the Index Funds, the "Funds") dated February __,
2000.
To obtain a copy of the Funds' Prospectus and the Funds' most recent
shareholders' report (when issued) free of charge, please access our Website
online (www.whatifi.com) via e-mail. The Funds are for on-line investors only.
Only investors who consent to receive all information about the Funds
electronically may invest in any of the Funds.
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TABLE OF CONTENTS
Page
THE FUNDS...................................................................
INVESTMENT STRATEGIES AND RISKS.............................................
FUND POLICIES...............................................................
PORTFOLIO POLICIES..........................................................
TRUSTEES AND OFFICERS.......................................................
INVESTMENT MANAGEMENT.......................................................
SERVICE PROVIDERS...........................................................
PORTFOLIO TRANSACTIONS AND BROKERAGE SELECTION..............................
ORGANIZATION, DIVIDEND AND VOTING RIGHTS....................................
SHAREHOLDER INFORMATION.....................................................
TAXATION....................................................................
MASTER PORTFOLIO ORGANIZATION...............................................
PERFORMANCE INFORMATION.....................................................
FINANCIAL STATEMENTS........................................................
APPENDIX....................................................................
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THE FUNDS
Each of the Funds is a diversified series of whatifi Funds (the "Trust"). The
Trust is organized as a Delaware business trust and was formed on December 15,
1999. Each of the Funds is classified as a diversified open-end, management
investment company.
The S&P 500 Index Fund. The S&P 500 Index Fund seeks to approximate as closely
as practicable, before fees and expenses, the capitalization-weighted total rate
of return* of Standard & Poor's 500 Composite Stock Price Index (the "S&P 500
Index")**. The S&P 500 Index currently represents about 75% of the market
capitalization of all publicly traded common stocks in the United States. The
S&P 500 Index includes 500 established companies representing different sectors
of the U.S. economy (including industrial, utilities, financial, and
transportation) selected by Standard & Poor's. The S&P 500 Index Fund seeks to
achieve its objective by investing in the S&P 500 Index Master Portfolio ("S&P
500 Portfolio"), a series of Master Investment Portfolio ("MIP"), a registered
open-end management investment company issuing shares in multiple series (each a
"Portfolio"). The S&P 500 Portfolio seeks to provide investment results that
correspond (before fees and expenses) to the total return of the publicly traded
common stocks, in the aggregate, as represented by the S&P 500 Index. To do so,
the S&P 500 Portfolio invests substantially all of its assets in the same stocks
and in substantially the same percentages as the S&P 500 Index.
The Extended Market Index Fund. The Fund is a mid to small cap fund. Its goal is
to track the total return of the Wilshire 4500 Equity Index. The Wilshire 4500
contains all of the U.S. common stocks regularly traded on the New York and
American Stock Exchanges and the Nasdaq over-the-counter market, except those
stocks included in the S&P 500 Index.
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* "Capitalization-weighted total rate of return" means that each stock in the
index contributes to the index in the same proportion as the value of its
shares. Accordingly, if the shares of Company A are worth twice as much as the
shares of Company B, Company A's return will count twice as much as Company B's
in calculating the index's overall return. ** "Standard & Poor's(R)," "S&P(R),"
"S&P 500(R)," "Standard & Poor's 500(R)," and "500" are trademarks of The
McGraw-Hill Companies, Inc. and have been licensed by the Adviser for use in
connection with the S&P 500 Index Fund. The S&P 500 Index Fund is not sponsored,
endorsed, sold, or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the S&P 500 Index
Fund.
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The Fund employs a passive management strategy designed to track the performance
of the Wilshire 4500 Equity Index*. The Fund does not invest directly in a
portfolio of securities. The Fund seeks to achieve its investment objective by
investing all of its assets in the Extended Index Portfolio (the "Extended Index
Portfolio"), a series of MIP. The weightings of the Wilshire 4500 Index are
based on each stock's relative total market capitalization (i.e. its market
price times the number of shares outstanding). The Extended Index Portfolio
invests in a representative sample of these securities. Unlike the S&P 500 Index
Portfolio, which invests at least 90% of its assets in the stocks comprising the
S&P 500 Index, the Extended Index Portfolio invests in a representative sample
of the over 6,500 stocks in the Wilshire 4500 Index. Securities are selected for
investment by the Extended Index Portfolio in accordance with their
capitalization, industry sector and valuation among other factors.
The International Index Fund. The International Index Fund seeks to approximate
as closely as practicable, before fees and expenses, the total return
performance of foreign stock markets by investing in common stocks included in
the Morgan Stanley Capital International Europe, Austria, Far East Fee Index
(The "EAFE Index")**. The EAFE Index is a capitalization-weighted index that
currently includes stocks of companies located in 15 European countries
(Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United
Kingdom), Australia, New Zealand, Hong Kong, Japan, Malaysia and Singapore. The
EAFE Index broadly represents the performance of foreign stock markets. The
weightings of stock in the EAFE Index are based on each stock's relative total
market capitalization; that is, its market price per share times the number of
shares outstanding. The International Portfolio invests in a representative
sample of these securities. Securities are selected for investment by the
International Portfolio in accordance with their capitalization, industry sector
and valuation, among other factors.
The International Fund does not invest directly in a portfolio of securities.
The International Fund seeks to achieve its investment objective by investing
all of its assets in the International Index Portfolio (the "International
Portfolio"), a series of MIP. The
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* The Wilshire 4500 Index(R) and related marks are trademarks of Wilshire
Associates, Inc. ("Wilshire Associates") and has been licensed by the Adviser
for use in connection with the Extended Index Fund. The Extended Index Fund is
not sponsored, endorsed, sold, or promoted by Wilshire Associates and Wilshire
Associates makes no representation regarding the advisability of investing in
the Extended Index Fund. ** Morgan Stanley Capital International, Europe,
Australia, Far East Free Index"(R), EAFE Free Index(R) and "EAFE"(R) are
trademarks of Morgan Stanley Capital International ("MSCI") and have been
licensed by the Adviser for use in connection with the International Index Fund.
The International Index Fund is not sponsored, endorsed, sold, or promoted by
MSCI and MSCI makes no representation regarding the advisability of investing in
the International Fund.
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International Portfolio seeks to match the total return performance of foreign
stock markets by investing in common stocks included in the EAFE Index.
No attempt is made to manage the portfolio of the International Portfolio using
economic, financial and market analysis. The International Portfolio is managed
by determining which securities are to be purchased or sold to match, to the
extent feasible, the capitalization range and returns of the EAFE index. Under
normal market conditions, at least 90% of the value of the International
Portfolio's total assets is invested in securities comprising the EAFE Index.
The International Portfolio attempts to achieve, in both rising and falling
markets, a correlation of at least 95% between the total return of its net
assets before expenses and the total return of the EAFE Index.
The Bond Index Fund. The Bond Index Fund seeks to approximate as closely as
practicable, before fees and expenses, the total rate of return of the U.S.
market for issued and outstanding U.S. government and high-grade corporate bonds
as measured by the Lehman Brothers Government/Corporate Bond Index ("the LB Bond
Index").* The LB Bond Index includes approximately 6,500 fixed-income
securities, including U.S. Government securities and investment grade corporate
bonds, each with an outstanding market value of at least $25 million and
remaining maturity of greater than one year. seeks to achieve its investment
objective by investing all of its assets in the Bond Index Master Portfolio
("the Bond Portfolio"), a series of MIP. The Bond Portfolio seeks to replicate
the total return of the LB Bond Index. The Bond Portfolio invests substantially
all of its assets in a representative sample of the securities that comprise the
Bond Index, or securities or other instruments that seek to approximate the
performance and investment characteristics of the LB Bond Index.
The Money Market Fund. The Money Market Fund seeks to provide shareholders of
the Fund with a high level of current income, while preserving capital and
liquidity. The Money Market Fund invests all of its assets in the Money Market
Portfolio ("Money Market Portfolio"), a series of MIP, which, in turn, invests
its assets in U.S. dollar-denominated, high-quality money market instruments
with maturities of 397 days or less, and a dollar-weighted average portfolio
maturity of 90 days or less. The Money Market Portfolio, the LB Bond Portfolio,
the S&P 500 Portfolio, the Extended Market Portfolio and the International
Portfolio are collectively referred to herein as the "Portfolios".
Master Investment Portfolio. MIP is an open-end management investment company
organized as a Delaware business trust. The policy of each of the Funds to
invest all of its assets in a Portfolio of MIP is not a fundamental policy of
any of the Funds and a
- --------
* The Lehman Brothers Government/Corporate Bond Fund Index(R) is a trademark of
Lehman Brothers and has been licensed by the Adviser for use in connection with
the Bond Index Fund. The Bond Index Fund is not sponsored, endorsed, sold or
promoted by Lehman Brothers and Lehman Brothers makes no representation
regarding the advisability of investing in the Bond Index Fund.
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<PAGE>
shareholder vote is not required for any Fund to withdraw its investment from
the Portfolio in which it invests.
The investment objective of each of the Funds is not fundamental and,
accordingly, can be changed without shareholder approval; however, such a change
would not be made without prior notice to shareholders.
INVESTMENT STRATEGIES AND RISKS
Since each Fund invests all its assets in its corresponding Master Portfolio,
the investment characteristics and investment risks of a Fund correspond to
those of the Master Portfolio in which the Fund invests. The following
supplements the discussion in the Prospectus of the principal investment
strategies, policies and risks that pertain to the Portfolios and, accordingly,
to the Funds that invest in the Portfolios. In addition to discussing the
principal risks of investing in the Portfolios and the Funds, this section also
describes the non-principal risks of such investments. These investment
strategies and policies may be changed without shareholder approval unless
otherwise noted and apply to all of the Portfolios unless otherwise noted.
Futures Contracts and Options Transactions. The S&P 500, Extended Market,
International and Bond Portfolios may use futures as a substitute for a
comparable market position in the underlying securities.
A futures contract is an agreement between two parties, to exchange a commodity
or financial instrument at a specific price on a specific date in the future. An
option transaction generally involves a right, which may or may not be
exercised, to buy or sell a commodity or financial instrument at a particular
price on a specified future date. Futures contracts and options are standardized
and traded on exchanges, where the exchange serves as the ultimate counterparty
for all contracts. The primary credit risk with futures contracts is the
creditworthiness of the exchange. Futures contracts are also subject to market
risk (i.e., exposure to adverse price changes).
Upon exercise of an option on a futures contract, the writer of the option
delivers to the holder of the option the futures position and the balance in the
writer's futures margin account, which represents the amount by which the market
price of the futures contract exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
The potential loss related to the purchase of options on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because the
value of the option is fixed at the time of sale, there are no daily cash
payments to reflect changes in the value of the underlying contract; however,
the value of the option does change daily and that change would be reflected in
the net asset value of the relevant Portfolio.
Although the S&P 500, the Extended Market, the International and Bond Portfolios
intend to purchase or sell futures contracts only if there is an active market
for such contracts, no assurance can be given that a liquid market will exist
for any particular
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contract at any particular time. Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or trading
may be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting these Portfolios to substantial losses. If it is not
possible, or if a Portfolio determines not to close a futures position in
anticipation of adverse price movements, the Portfolio will be required to make
daily cash payments on variation margin.
The S&P 500, Extended Market, and International Portfolios may invest in stock
index futures and options on stock index futures as a substitute for a
comparable market position in the underlying securities. A stock index future
obligates the seller to deliver (and the purchaser to take), effectively, an
amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of
the underlying stocks in the index is made. With respect to stock indices that
are permitted investments, the Portfolios intend to purchase and sell futures
contracts on the stock index for which they can obtain the best price with
consideration also given to liquidity. There can be no assurance that a liquid
market will exist at the time when a Portfolio seeks to close out a futures
contract or a futures option position. Lack of a liquid market may prevent
liquidation of an unfavorable position.
Interest-Rate Futures Contracts and Options on Interest-Rate Futures Contracts.
The Bond Portfolio may invest in interest-rate futures contracts and options on
interest-rate futures contracts as a substitute for a comparable market position
in the underlying securities. The Bond Portfolio may also sell options on
interest-rate futures contracts as part of closing purchase transactions to
terminate their options positions. No assurance can be made that such closing
transactions can be effected or on the degree of correlation between price
movements in the options on interest rate futures or price movements in the Bond
Portfolio's securities which are the subject of the transactions.
Interest-Rate and Index Swaps. The Bond Portfolio may enter into interest-rate
and index swaps. Interest-rate swaps involve the exchange by the Bond Portfolio
with another party of their respective commitments to pay or receive interest
(for example, an exchange of floating-rate payments or fixed-rate payments).
Index swaps involve the exchange by the Bond Portfolio with another party of
cash flows based upon the performance of an index of securities or a portion of
an index of securities that usually include dividends or income. In each case,
the exchange commitments can involve payments to be made in the same currency or
in different currencies. The Bond Portfolio will usually enter into swaps on a
net basis. In so doing, the two payment streams are netted out, with the Bond
Portfolio receiving or paying, as the case may be, only the net amount of the
two payments. If the Bond Portfolio enters into a swap, it must maintain a
segregated account on a gross basis, unless the contract provides for a
segregated account on a net basis. If there is a default by the other party, the
Bond
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Portfolio has contractual remedies pursuant to the agreements related to the
transaction.
The use of interest-rate and index swaps is a very specialized activity. It
involves investment techniques and risks different from those used in connection
with ordinary portfolio security transactions. There is no limit, except as
provided below, on the amount of swap transactions that may be entered into by
the Bond Portfolio. These transactions generally do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to swaps generally is limited to the net amount of principal.
Accordingly, the risk of loss with respect to swaps generally is limited to the
net amount of payments that the Bond Portfolio is contractually obligated to
make. There is also a risk of a default by the other party to a swap, in which
case the Bond Portfolio may not receive the net amount of payments that the Bond
Portfolio contractually is entitled to receive.
The S&P 500, Extended Market, International and Bond Portfolios' futures
transactions must constitute permissible transactions under regulations of the
Commodity Futures Trading Commission ("CFTC"). In addition, these Portfolios may
not engage in futures transactions if the sum of the amount of initial margin
deposits and premiums paid for unexpired options on futures contracts, other
than those contracts entered into for bona fide hedging purposes, would exceed
5% of the liquidation value of these Portfolios' assets, after taking into
account unrealized profits and unrealized losses on such contracts; provided,
however, that in the case of an option on a futures contract that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% liquidation limit. Pursuant to regulations and/or published
positions of the Securities and Exchange Commission ("SEC"), the S&P 500,
Extended Market, International and Bond Portfolios may be required to segregate
cash or high quality money market instruments in connection with their futures
transactions in an amount generally equal to the entire value of the underlying
security.
Future Developments. The S&P 500, Extended Market, International and Bond
Portfolios may take advantage of opportunities in the area of options and
futures contracts and options on futures contracts and any other derivative
investments which are not presently contemplated for use by such Portfolios or
which are not currently available but which may be developed, to the extent such
opportunities are consistent with the respective Portfolio's investment
objective and legally permissible for that Portfolio. Before entering into such
transactions or making any such investment, the Index Funds will provide
appropriate disclosure in their prospectus.
Forward Commitments, When-Issued Purchases and Delayed-Delivery Transactions.
The Portfolios may purchase or sell securities on a when-issued or
delayed-delivery basis and make contracts to purchase or sell securities for a
fixed price at a future date beyond customary settlement time. Securities
purchased or sold on a when-issued, delayed-delivery or forward commitment basis
involve a risk of loss if the value of the security to be purchased declines, or
the value of the security to be sold increases, before the settlement date.
Although the Portfolios will usually purchase securities with
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the intention of acquiring them, the Portfolios may dispose of securities
purchased on a when-issued, delayed-delivery or a forward commitment basis
before settlement when deemed appropriate by the Portfolio's investment advisor.
When-issued securities are subject to market fluctuation and no income accrues
to the purchaser during the period before the securities are paid for and
delivered on the settlement date. The purchase price and the interest rate that
will be received on debt securities are fixed at the time the purchaser enters
into the commitment.
Securities purchased on a when-issued or forward commitment basis may expose the
Portfolios to risk because they may experience fluctuations in value prior to
their actual delivery. Purchasing a security on a when-issued basis can involve
a risk that the market price at the time of delivery may be lower than the
agreed-upon purchase price, in which case there could be an unrealized loss at
the time of delivery. None of the Portfolios currently intend to invest more
than 5% of its assets in when-issued securities during the coming year. Each
Portfolio will establish a segregated account in which it will maintain cash or
liquid securities in an amount at least equal in value to that Portfolio's
commitments to purchase when-issued securities. If the value of these assets
declines, that Portfolio will place additional liquid assets in the account on a
daily basis so that the value of the assets in the account is equal to the
amount of such commitments. Because the Money Market Portfolio will set aside
cash and other high quality liquid debt securities as described above, the
liquidity of the Money Market Portfolio's investment portfolio may decrease as
the proportion of securities in the Money Market Portfolio's portfolio purchased
on a when-issued or forward commitment basis increases. The value of the
securities underlying a when-issued purchase or a forward commitment to purchase
securities, and any subsequent fluctuations in their value, is taken into
account when determining the Money Market Portfolio's net asset value starting
on the day the Money Market Portfolio agrees to purchase the securities. When
the Money Market Portfolio makes a forward commitment to sell securities it
owns, the proceeds to be received upon settlement are not reflected in the Money
Market Portfolio's net asset value as long as the commitment remains in effect.
Short-Term Instruments and Temporary Investments. Although the Money Market
Portfolio will primarily invest in money market instruments, the other
Portfolios may also invest in high-quality money market instruments on an
ongoing basis to provide liquidity or for temporary purposes when there is an
unexpected level of shareholder purchases or redemptions. The instruments in
which the Portfolios may invest include: (i) short-term obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities (including
government-sponsored enterprises); (ii) negotiable certificates of deposit
("CDs"), banker's acceptances, fixed time deposits and other obligations of
domestic banks (including foreign branches) that have more than $1 billion in
total assets at the time of investment and that are members of the Federal
Reserve System or are examined by the Comptroller of the Currency or whose
deposits are insured by the Federal Deposit Insurance Corporation. ("FDIC");
(iii) commercial paper rated at the date of purchase "Prime-1" by Moody's or
"A-1+" or "A-1" by S&P, or, if unrated, of comparable quality as determined by
the Portfolio's investment adviser;
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(iv) non-convertible corporate debt securities (e.g., bonds and debentures) with
remaining maturities at the date of purchase of not more than one year that are
rated at least "Aa" by Moody's or "AA" by S&P; (v) repurchase agreements; and
(vi) short-term, U.S. dollar-denominated obligations of foreign banks (including
U.S. branches) that, at the time of investment have more than $10 billion, or
the equivalent in other currencies, in total assets and that, in the opinion of
the Portfolio's investment adviser, are of comparable quality to obligations of
U.S. banks which may be purchased by the Portfolios.
Bank Obligations. The Portfolios may invest in bank obligations, including CDs,
time deposits, banker's acceptances and other short-term obligations of domestic
banks, foreign subsidiaries of domestic banks, foreign branches of domestic
banks, and domestic and foreign branches of foreign banks, domestic savings and
loan associations and other banking institutions.
CDs are negotiable certificates evidencing the obligation of a bank to repay
funds deposited with it for a specified period of time. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Time deposits which may be held by the
Portfolios are not insured by the Bank Insurance Fund or the Savings Association
Insurance Fund administered by the FDIC. Banker's acceptances are credit
instruments evidencing the obligation of a bank to pay a draft drawn on it by a
customer. These instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. The other
short-term obligations may include uninsured, direct obligations, bearing fixed,
floating- or variable-interest rates.
Investments in foreign obligations involve certain considerations that are not
typically associated with investing in domestic obligations. There may be less
publicly available information about a foreign issuer than about a domestic
issuer. Foreign issuers also are not generally subject to uniform accounting,
auditing and financial reporting standards or governmental supervision
comparable to those applicable to domestic issuers. In addition, with respect to
certain foreign countries, taxes may be withheld at the source under foreign
income tax laws, and there is a possibility of expropriation or confiscatory
taxation, political or social instability or diplomatic developments that could
adversely affect investments in, the liquidity of, and the ability to enforce
contractual obligations with respect to, securities of issuers located in those
countries. The Money Market Portfolio may invest up to 25% of its assets in
foreign obligations.
Obligations of foreign banks and foreign branches of U.S. banks involve somewhat
different investment risks from those affecting obligations of U.S. banks,
including the possibilities that liquidity could be impaired because of future
political and economic developments; the obligations may be less marketable than
comparable obligations of U.S. banks; a foreign jurisdiction might impose
withholding taxes on interest income payable on those obligations; foreign
deposits may be seized or nationalized; foreign governmental restrictions (such
as foreign exchange controls) may be adopted which might adversely affect the
payment of principal and interest on those obligations; and
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the selection of those obligations may be more difficult because there may be
less publicly available information concerning foreign banks. In addition, the
accounting, auditing and financial reporting standards, practices and
requirements applicable to foreign banks may differ from those applicable to
U.S. banks. In that connection, foreign banks are not subject to examination by
an U.S. Government agency or instrumentality.
Commercial Paper and Short-Term Corporate Debt Instruments. In addition to the
Money Market Portfolio which will generally invest in these types of
instruments, the S&P 500, the Extended Market, the International and Bond
Portfolios may invest in commercial paper (including variable amount master
demand notes), which consists of short-term, unsecured promissory notes issued
by corporations to finance short-term credit needs. Commercial paper is usually
sold on a discount basis and has a maturity at the time of issuance not
exceeding nine months. Variable amount master demand notes are demand
obligations that permit the investment of fluctuating amounts at varying market
rates of interest pursuant to arrangements between the issuer and a commercial
bank acting as agent for the payee of such notes whereby both parties have the
right to vary the amount of the outstanding indebtedness on the notes. The
investment adviser to the Portfolios monitors on an ongoing basis the ability of
an issuer of a demand instrument to pay principal and interest on demand.
The Portfolios also may invest in non-convertible corporate debt securities
(e.g., bonds and debentures) with not more than one year remaining to maturity
at the date of settlement. The Portfolios will invest only in such corporate
bonds and debentures that are rated at the time of purchase at least "Aa" by
Moody's or "AA" by S&P. Subsequent to its purchase by a Portfolio, an issuer of
securities may cease to be rated or its rating may be reduced below the minimum
rating required for purchase by the Portfolio. The investment adviser to the
Portfolios will consider such an event in determining whether a Portfolio should
continue to hold the obligation. To the extent a Portfolio continues to hold
such obligations, it may be subject to additional risk of default.
To the extent the ratings given by Moody's or S&P may change as a result of
changes in such organizations or their rating systems, the Portfolios will
attempt to use comparable ratings as standards for investments in accordance
with the investment policies contained in its Prospectus and in this SAI. The
ratings of Moody's and S&P and other nationally recognized statistical rating
organizations are more fully described in the Appendix to this SAI.
Repurchase Agreements. All of the Portfolios may enter into repurchase
agreements. These are where the seller of a security to a Portfolio agrees to
repurchase that security from the Portfolio at a mutually-agreed upon time and
price. The period of maturity is usually short, often overnight or for a few
days, although it may extend over a number of months. Each of the Portfolios may
enter into repurchase agreements only with respect to securities that could
otherwise be purchased by the respective Portfolio, including government
securities and mortgage-related securities, regardless of their remaining
maturities, and requires that additional securities be deposited with the
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custodian if the value of the securities purchased should decrease below the
repurchase price.
The Portfolios may incur a loss on a repurchase transaction if the seller
defaults and the value of the underlying collateral declines or is otherwise
limited or if receipt of the security or collateral is delayed. The Portfolio's
custodian has custody of, and holds in segregated accounts, securities acquired
as collateral by each of the Portfolios under a repurchase agreement. Repurchase
agreements are loans by the Portfolios. All repurchase transactions must be 100%
collateralized.
The Portfolios limit their investments in repurchase agreements to selected
creditworthy securities dealers or domestic banks or other recognized financial
institutions. The Portfolios' adviser monitors on an ongoing basis the value of
the collateral to assure that it always equals or exceeds the repurchase price.
Floating - and Variable-Rate Obligations. Each Portfolio may purchase
floating-rate and variable-rate obligations as described in the Prospectus. The
Portfolios may purchase debt instruments with interest rates that are
periodically adjusted at specified intervals or whenever a benchmark rate or
index changes. These adjustments generally limit the increase or decrease in the
amount of interest received on the debt instruments. The Portfolios may purchase
floating- and variable-rate demand notes and bonds. These are obligations
ordinarily having maturities in excess of thirteen months, but which permit the
holder to demand payment of principal at any time, or at specified intervals not
exceeding thirteen months. Variable-rate demand notes include master demand
notes that are obligations that permit a Portfolio to invest fluctuating
amounts, which may change daily without penalty, pursuant to direct arrangements
between the Portfolio, as lender, and the borrower.
Floating - and variable-rate instruments are subject to interest-rate risk and
credit risk. The issuer of such obligations ordinarily has a corresponding
right, after a given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest upon a specified
number of day's notice to the holders of such obligations. The interest rate on
a floating-rate demand obligation is based on a known leading rate, such as a
bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable-rate demand obligation is adjusted
automatically at specified intervals. Such obligations are often secured by
letters of credit or other credit support arrangements provided by banks. Since
these obligations are direct lending arrangements between the lender and
borrower, such instruments generally will not be traded. There generally is no
established secondary market for these obligations, although they are redeemable
at face value. Where these obligations are not secured by letters of credit or
other credit support arrangements, a Portfolio's right to redeem is dependent on
the ability of the borrower to pay principal and interest on demand. Such
obligations frequently are not rated by credit rating agencies and a Portfolio
may invest in obligations which are not so rated only if BGFA determines that at
the time of investment the obligations are of comparable quality to the other
obligations in which the Portfolio may invest. BGFA, on behalf of the
Portfolios,
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considers on an ongoing basis the creditworthiness of the issuers of the
floating- and variable-rate demand obligations in the Portfolios' portfolio. No
Portfolio will invest more than 10% of the value of its total net assets in
floating- or variable-rate demand obligations whose demand feature is not
exercisable within seven days. Such obligations may be treated as liquid,
provided that an active secondary market exists
Loans of Portfolio Securities. The S&P 500, Extended Market, International and
Bond Portfolios may lend securities from their portfolios to brokers, dealers
and financial institutions in order to increase the return on their portfolios.
The value of the loaned securities may not exceed one-third of a Portfolio's
total assets. Loans of portfolio securities are fully collateralized based on
values that are marked-to-market daily. No Portfolio will enter into any
portfolio security lending arrangement having a duration of longer than one
year. The principal risk of portfolio lending is potential default or insolvency
of the borrower. In either of these cases, a Portfolio could experience delays
in recovering securities or collateral or could lose all or part of the value of
the loaned securities. The S&P 500, Extended Market, International and Bond
Portfolios may pay reasonable administrative and custodial fees in connection
with loans of portfolio securities and may pay a portion of the interest or fee
earned thereon to the borrower or a placing broker.
The Money Market Portfolio may lend its securities to brokers, dealers and
financial institutions, provided (1) the loan is secured continuously by
collateral consisting of cash, U.S. Government securities or an irrevocable
letter of credit which is marked to market daily to ensure that each loan is
fully collateralized; (2) the Money Market Portfolio may at any time recall the
loan and obtain the return of the securities loaned within five business days;
(3) the Money Market Portfolio will receive any interest or dividends paid on
the securities loaned; and (4) the aggregate market value of securities loaned
will not at any time exceed one-third of the total assets of the Money Market
Portfolio. The Money Market Portfolio may earn income in connection with
securities loans either through the reinvestment of the cash collateral or the
payment of fees by the borrower. The Money Market Portfolio does not currently
intend to lend its portfolio securities.
In determining whether to lend a security to a particular broker, dealer or
financial institution, the Portfolio's investment adviser considers all relevant
facts and circumstances, including the size, creditworthiness and reputation of
the broker, dealer, or financial institution. Any loans of portfolio securities
are fully collateralized and marked to market daily. The Portfolios will not
enter into any portfolio security lending arrangement having a duration of
longer than one year. Any securities that a Portfolio may receive as collateral
will not become part of the Portfolio's investment portfolio at the time of the
loan and, in the event of a default by the borrower, the Portfolio will, if
permitted by law, dispose of such collateral except for such part thereof that
is a security in which the Portfolio is permitted to invest. During the time
securities are on loan, the borrower will pay the Portfolio any accrued income
on those securities, and the Portfolio may invest the cash collateral and earn
income or receive an agreed upon fee from a borrower that has delivered
cash-equivalent collateral.
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Investment Company Securities. The S&P 500, Extended Market, International and
Bond Portfolios may invest in securities issued by other open-end management
investment companies which principally invest in securities of the type in which
such Portfolio invests. Under the 1940 Act, a Portfolio's investment in such
securities currently is limited to, subject to certain exceptions, (i) 3% of the
total voting stock of any one investment company, (ii) 5% of that Portfolio's
net assets with respect to any one investment company and (iii) 10% of that
Portfolio's net assets in the aggregate. Investments in the securities of other
investment companies generally will involve duplication of investment advisory
fees and certain other expenses. These Portfolios may also purchase shares of
exchange-listed closed-end funds.
Illiquid Securities. To the extent that such investments are consistent with its
respective investment objective, the S&P 500, Extended Market, International and
Bond Portfolios may invest up to 15% of the value of their respective net assets
in securities as to which a liquid trading market does not exist. Such
securities may include securities that are not readily marketable, such as
privately issued securities and other securities that are subject to legal or
contractual restrictions on resale, floating-and variable-rate demand
obligations as to which that Portfolio cannot exercise a demand feature on not
more than seven day's notice and as to which there is no secondary market and
repurchase agreements providing for settlement more than seven days after
notice.
Foreign Securities. Since the International Portfolio invests only in the stocks
of foreign issuers and since the stocks of some foreign issuers may be included
in the S&P 500 Index and the Wilshire 4500 Index, the International Portfolio's
will, and the S&P 500 Portfolio's and the Extended Market Portfolio's portfolio
may, contain securities of such foreign issuers, as well as American Depositary
Receipts and similar instruments, which will subject the International Portfolio
and may subject the S&P 500 Portfolio and the Extended Market Portfolio to
additional investment risks with respect to those securities that are different
in some respects from those incurred by a fund which invests only in securities
of domestic issuers. Such risks include possible adverse political and economic
developments, seizure or nationalization of foreign deposits or adoption of
governmental restrictions which might adversely affect the value of the
securities of a foreign issuer to investors located outside the country of the
issuer, whether from currency blockage or otherwise. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADDS (sponsored or unsponsored) are receipts typically
issued by a U.S. bank or trust company and traded on a U.S. Stock Exchange, that
evidence ownership of underlying foreign securities. Issuers of unsponsored ADRs
are not contractually obligated to disclose material information in the U.S.
and, therefore, such information may not correlate to the market value of the
unsponsored ADR.
Obligations of Foreign Governments, Banks and Corporations. The S&P 500,
Extended Market, International and Bond Portfolios may invest in U.S.
dollar-denominated short-term obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by their investment adviser to be of
comparable quality to the other obligations in which these
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Portfolios may invest. To the extent that such investments are consistent with
its investment objective, each of the S&P 500, Extended Market, International,
and Bond Portfolios may also invest in debt obligations of supranational
entities. Supranational entities include international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank. The percentage of these
Portfolios' assets invested in obligations of foreign governments and
supranational entities will vary depending on the relative yields of such
securities, the economic and financial markets of the countries in which the
investments are made and the interest rate climate of such countries.
Each of the S&P 500, Extended Market, International, and Bond Portfolios may
also invest a portion of their total assets in high quality, short-term (one
year or less) debt obligations of foreign branches of U.S. banks or U.S.
branches of foreign banks that are denominated in and pay interest in U.S.
dollars.
U.S. Government Obligations. The Portfolios other than the International
Portfolio may invest in various types of U.S. Government obligations. U.S.
Government obligations include securities issued or guaranteed as to principal
and interest by the U.S. Government and supported by the full faith and credit
of the U.S. Treasury. U.S. Treasury obligations differ mainly in the length of
their maturity. Treasury bills, the most frequently issued marketable government
securities, have a maturity of up to one year and are issued on a discount
basis. U.S. Government obligations also include securities issued or guaranteed
by federal agencies or instrumentalities, including government-sponsored
enterprises. Some obligations of such agencies or instrumentalities of the U.S.
Government are supported by the full faith and credit of the United States or
U.S. Treasury guarantees. Other obligation of such agencies or instrumentalities
of the U.S. Government are supported by the right of the issuer or guarantor to
borrow from the U.S. Treasury. Others are supported by the discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality or only by the credit of the agency or instrumentality
issuing the obligation. In the case of obligations not backed by the full faith
and credit of the United States, the investor must look principally to the
agency or instrumentality issuing or guaranteeing the obligation for ultimate
repayment, which agency or instrumentality may be privately owned. There can be
no assurance that the U.S. Government would provide financial support to its
agencies or instrumentalities (including government-sponsored enterprises) where
it is not obligated to do so. In addition, U.S. government obligations are
subject to fluctuations in market value due to fluctuations in market interest
rates. As a general matter, the value of debt instruments, including U.S.
government obligations, declines when market interest rates increase and rises
when market interest rates decrease. Certain types of U.S. government
obligations are subject to fluctuations in yield or value due to their structure
or contract terms.
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Unrated, Downgraded and Below Investment Grade Investments. The Portfolios may
purchase instruments that are not rated if, in the opinion of their investment
adviser, such obligations are of investment quality comparable to other rated
investments that are permitted to be purchased by the Portfolios. The Money
Market Portfolio may purchase such instruments if they are purchased in
accordance with the Money Market Portfolio's procedures in accordance with Rule
2a-7 of the 1940 Act. After purchase by a Portfolio, a security may cease to be
rated or its rating may be reduced below the minimum required for purchase by
the Portfolio. Neither event will require a sale of such security by the
Portfolio provided that when a security ceases to be rated, the Board of
Trustees for that Portfolio determines that such security presents minimal
credit risks and provided further that, when a security is downgraded below the
eligible quality for investment or no longer presents minimal credit risks, the
Board of Trustees finds that the sale of such security would not be in that
Portfolio's best interests. In no event will such securities exceed 5% of any
Portfolio's net assets. To the extent the ratings given by Moody's or S&P may
change as a result of changes in such organizations or their rating systems, the
Portfolios will attempt to use comparable ratings as standards for investments
in accordance with the investment policies contained in this SAI. The ratings of
Moody's and S&P are more fully described in the Appendix to this SAI.
Because the Portfolios are not required to sell downgraded securities, the
Portfolios could hold up to 5% of each of their net assets in debt securities
rated below "Baa" by Moody's or below "BBB" by S&P or in unrated, low quality
(below investment grade) securities. Although they may offer higher yields than
do higher rated securities, low rated, and unrated, low quality debt securities
generally involve greater volatility of price and risk of principal and income,
including the possibility of default by, or bankruptcy of, the issuers of the
securities. In addition, the markets in which low rated and unrated, low quality
debt are traded are more limited than those in which higher rated securities are
traded. The existence of limited markets for particular securities may diminish
a Portfolio's ability to sell the securities at fair value either to meet
redemption requests or to respond to changes in the economy or in the financial
markets and could adversely affect and cause fluctuations in the daily net asset
value of the Portfolio's shares.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of low rated or unrated, low
quality debt securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated or unrated, low quality debt securities
may be more complex than for issuers of higher rated securities, and the ability
of a Portfolio to achieve its investment objective may, to the extent such
Portfolio holds low rated or unrated low quality debt securities, be more
dependent upon such creditworthiness analysis than would be the case if that
Portfolio held exclusively higher rated or higher quality securities.
Low rated or unrated low quality debt securities may be more susceptible to real
or perceived adverse economic and competitive industry conditions than
investment grade securities. The prices of such debt securities have been found
to be less sensitive to interest rate changes than higher rated or higher
quality investments, but more
16
<PAGE>
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in low rated or unrated, low quality debt
securities prices because the advent of a recession could dramatically lessen
the ability of a highly leveraged company to make principal and interest
payments on its debt securities. If the issuer of the debt securities defaults,
a Portfolio may incur additional expenses to seek recovery.
FUND POLICIES
Fundamental Investment Restrictions of the Funds
The following are the Funds' fundamental investment restrictions which cannot be
changed without shareholder approval (i.e., the vote of a majority of the
outstanding shares of the applicable Fund, as set forth in the Investment
Company Act of 1940, as amended (the "1940 Act")
Unless noted otherwise, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in percentage resulting from a change
in a Fund's assets (i.e., due to cash inflows or redemptions) or in market value
of the investment or the Fund's assets will not constitute a violation of that
restriction.
Unless indicated otherwise below, each of the Funds may not:
1. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of its total assets may be
invested, and securities issued or guaranteed by the U.S. government,
or its agencies or instrumentalities may be purchased, without regard
to any such limitation.
2. With respect to 75% of its total assets, invest in a security if, as a
result of such investment, it would hold more than 10% (taken at the
time of such investment) of the outstanding voting securities of any
one issuer.
3. Issue senior securities, except as permitted under the 1940 Act.
4. Borrow money, except to the extent permitted under the 1940 Act, provided
that (i) the Bond Fund may borrow from banks up to 10% of the current value
of its net assets for temporary purposes only in order to meet redemptions,
and these borrowings may be secured by the pledge of up to 10% of the
current value of its net assets (but investments may not be purchased while
any such outstanding borrowing in excess of 5% of its net assets exists);
and (ii) the S&P 500 Index Fund, the Extended Market Index Fund and the
International Index Fund may borrow up to 20% of the current value of their
net assets for temporary purposes only in order to meet redemptions, and
these borrowings may be secured by the pledge of up to 20% of the current
value of its net assets (but with respect to the S&P 500 Index Fund only,
investments may not be purchased while any such outstanding borrowing in
excess of 5% of its net assets exists). For purposes of
17
<PAGE>
this investment restriction, a Fund's entry into options, forward
contracts, futures contracts, including those related to indexes, and
options or futures contracts or indexes shall not constitute borrowing
to the extent certain segregated accounts are established and
maintained by such Fund.
5. Act as an underwriter of another issuer's securities, except to the
extent that the Fund may be deemed to be an underwriter within the
meaning of the Securities Act of 1933, as amended (the "Securities
Act"), in connection with the disposition of portfolio securities.
6. Purchase the securities of any issuer if, as a result, more than 25% of the
Fund's total assets (taken at market value at the time of such investment)
would be invested in the securities of issuers in any particular industry,
provided, however, that (i) this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (or repurchase agreements thereto), or, for the Money
Market Fund, obligations of domestic banks, to the extent that the SEC, by
rule or interpretation, permits funds to reserve freedom to concentrate in
such obligations; and (ii) the S&P 500 Index Fund, the Extended Market
Index Fund, the International Index Fund, and the Bond Index Fund will
concentrate in obligations to the same degree that their respective Indexes
concentrate in those obligations during the same period.
7. Purchase or sell real estate, although it may purchase securities
secured by real estate or interests therein, or securities issued by
companies which invest in real estate, or interests therein.
8. Invest in commodities. This restriction shall not prohibit the S&P 500
Index Fund, the Extended Market Index Fund, the International Index
Fund and the Bond Index Fund, subject to restrictions described in the
Prospectus and elsewhere in this SAI, from purchasing, selling or
entering into futures contracts, options on futures contracts and other
derivative instruments, subject to compliance with any applicable
provisions of the federal securities or commodities laws.
9. Lend any funds or other assets, except that a Fund may, consistent with its
investment objective and policies: (a) invest in certain short-term or
temporary debt obligations, even though the purchase of such obligations
may be deemed to be the making of loans, (b) enter into repurchase
agreements, and (c) lend its portfolio securities in an amount not to
exceed 33 1/3% of the Fund's total assets, provided such loans are made in
accordance with applicable guidelines established by the SEC and the
Trustees of the Funds ((c) is not permitted for the Money Market Fund).
Non-Fundamental Investment Restrictions of the Funds
The following are the Funds' non-fundamental operating restrictions,
which may be changed by the Funds' Board of Trustees without
shareholder approval.
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<PAGE>
1. The Funds may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act.
Under the 1940 Act, a Fund's investment in such securities currently is
limited, subject to certain exceptions, to (i) 3% of the total voting stock
of any one investment company; (ii) 5% of such Fund's net assets with
respect to any one investment company; and (iii) 10% of such Fund's net
assets in the aggregate. Other investment companies in which the Funds
invest can be expected to charge fees for operating expenses, such as
investment advisory and administration fees that would be in addition to
those charged by the Fund.
2. Each Fund may not invest more than 15% of its net assets in illiquid
securities. For this purpose, illiquid securities include, among
others, (a) securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on
resale, (b) fixed time deposits that are subject to withdrawal
penalties an that have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days.
3. Each Fund may lend securities from its portfolio to brokers, dealers,
financial institutions, in amounts not to exceed (in the aggregate)
one-third of a Fund's total assets. Any such loans of portfolio
securities will be fully collateralized based on values that are marked
to market daily. The Funds will not enter into any portfolio security
lending arrangement having a duration of longer than one year.
PORTFOLIO POLICIES
The S&P 500, the Extended Market, the International and the Bond Portfolios:
Fundamental Investment Restrictions
The Master Portfolios are subject to the following fundamental investment
restrictions which cannot be changed without approval by the holders of a
majority (as defined in the 1940 Act) of these Portfolios' outstanding voting
securities. If a percentage restriction is adhered to at the time of investment,
a later change in percentage resulting from a change in values or assets will
not constitute a violation of such restriction.
Each of the S&P 500, the Extended Market, the International and the Bond
Portfolios may not:
1. Invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of its total assets may be
invested, and securities issued or guaranteed by the U.S. Government,
or its agencies or instrumentalities may be purchased, without regard
to any such limitation. This limitation does not apply to foreign
currency transactions, including without limitation, forward currency
contracts.
19
<PAGE>
2. Hold more than 10% of the outstanding voting securities of any single
issuer. This investment restriction applies only with respect to 75% of
each Portfolio's total assets.
3. Invest in commodities, except that each Portfolio may purchase and sell
(i.e., write) options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts or indexes.
4. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but each Portfolio may
purchase and sell securities that are secured by real estate or issued
by companies that invest or deal in real estate.
5. Borrow money, except to the extent permitted under the 1940 Act, provided
that the Bond Portfolio may borrow from banks up to 10% of the current
value of its net assets for temporary purposes only in order to meet
redemptions, and these borrowings may be secured by the pledge of up to 10%
of the current value of its net assets (but investments may not be
purchased while any such outstanding borrowing in excess of 5% of its net
assets exists), and except that the S&P 500 Portfolio, the Extended Market
Portfolio, and the International Portfolio may borrow up to 20% of the
current value of their net assets for temporary purposes only in order to
meet redemptions, and these borrowings may be secured by the pledge of up
to 20% of the current value of their net assets (but with respect to the
S&P 500 Portfolio only, investments may not be purchased while any such
outstanding borrowing in excess of 5% of its net assets exists). For
purposes of this investment restriction, a Portfolio's entry into options,
forward contracts, futures contracts, including those relating to indexes,
and options on futures contracts or indexes shall not constitute borrowing
to the extent certain segregated accounts are established and maintained by
such Portfolio.
6. Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements. However, each of the S&P 500
Portfolio, the Extended Market Portfolio, the International Portfolio
and the Bond Portfolio may lend its portfolio securities in an amount
not to exceed one-third of the value of its total assets. Any loans of
portfolio securities will be made according to guidelines established
by the SEC and the Portfolios' Board of Trustees.
7. Act as an underwriter of securities of other issuers, except to the
extent that the Portfolio may be deemed an underwriter under the
Securities Act by virtue of disposing of portfolio securities.
8. Invest 25% or more of its total assets in the securities of issuers in
any particular industry or group of closely related industries, except
that there shall be no limitation with respect to investments in (i)
obligations of the U.S. Government, its agencies or instrumentalities;
(ii) in the case of the S&P 500 Portfolio, the Extended Market
Portfolio and the International Portfolio, any industry in which
20
<PAGE>
the S&P 500 Index, the Wilshire 4500 Index, or the EAFE Index,
respectively, becomes concentrated to the same degree during the same
period, the relevant Portfolio will be concentrated as specified above
only to the extent the percentage of its assets invested in those
categories of investment is sufficiently large that 25% or more of its
total assets would be invested in a single industry; and (iii) in the
case of the Bond Portfolio, any industry in which the LB Bond Index
becomes concentrated to the same degree during the same period.
9. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent the activities permitted in such
Portfolio's Fundamental Investment Restrictions Nos. 3 and 5 may be
deemed to give rise to a senior security.
10. With respect to each Portfolio other than the Extended Market and
International Portfolios, purchase securities on margin, but each
Portfolio may make margin deposits in connection with transactions in
options, forward contracts, futures contracts, including those related
to indexes, and options on futures contracts or indexes.
The S&P 500, Extended Market, International, and Bond Portfolios:
Non-Fundamental Investment Restrictions
The S&P 500 Extended Market, International and Bond Portfolios are subject to
the following non-fundamental operating policies which may be changed by the
Board of Trustees of these Portfolios without the approval of the holders of
such Portfolio's outstanding securities.
1. The Portfolios may invest in shares of other open-end management investment
companies, subject to the limitations of Section 12(d)(1) of the 1940 Act.
Under the 1940 Act, a Portfolio's investment in such securities currently
is limited, subject to certain exceptions, to (i) 3% of the total voting
stock of any one investment company; (ii) 5% of such Portfolio's net assets
with respect to any one investment company; and (iii) 10% of such
Portfolio's net assets in the aggregate. Other investment companies in
which the Portfolios invest can be expected to charge fees for operating
expenses, such as investment advisory and administration fees that would be
in additions to those charged by the Portfolio.
2. Each Portfolio may not invest more than 15% of its net assets in
illiquid securities. For this purpose, illiquid securities include,
among others, (a) securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restrictions on
resale, (b) fixed time deposits that are subject to withdrawal
penalties an that have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days.
21
<PAGE>
3. Each Portfolio may lend securities from its portfolio to brokers,
dealers, financial institutions, in amounts not to exceed (in the
aggregate) one-third of a Portfolio's total assets. Any such loans of
portfolio securities will be fully collateralized based on values that
are marked to market daily. The Portfolios will not enter into any
portfolio security lending arrangement having a duration of longer than
one year.
Money Market Portfolio: Fundamental Investment Restrictions
The Money Market Portfolio may not:
1. Purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a
result thereof, the value of the Money Market Portfolio's investments in
that industry would be 25% or more of the current value of the Money Market
Portfolio's total assets, provided that there is no limitation with respect
to investments in (i) obligations of the U.S. Government, its agencies or
instrumentalities; and (ii) obligations of domestic banks, to the extent
that the SEC, by rule or interpretation, permits funds to reserve freedom
to concentrate in such obligations.
2. Purchase or sell real estate or real estate limited partnerships (other
than securities secured by real estate or interests therein or
securities issued by companies that invest in real estate or interests
therein).
3. Purchase commodities or commodity contracts (including futures
contracts), except that the Money Market Portfolio may purchase
securities of an issuer which invests or deals in commodities or
commodity contracts.
4. Purchase interests, leases, or limited partnership interests in oil,
gas, or other mineral exploration or development programs.
5. Purchase securities on margin (except for short-term credits necessary
for the clearance of transactions and except for margin payments in
connection with options, futures and options on futures) or make short
sales of securities.
6. Underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or
from an underwriter for an issuer and the later disposition of such
securities in accordance with the Money Market Portfolio's investment
program may be deemed to be an underwriting.
7. Make investments for the purpose of exercising control or management.
8. Borrow money or issue senior securities as defined in the 1940 Act,
except that the Money Market Portfolio may borrow from banks up to 10%
of the current value of its net assets for temporary purposes only in
order to meet redemptions,
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<PAGE>
and these borrowings may be secured by the pledge of up to 10% of the
current value of its net assets (but investments may not be purchased
while any such outstanding borrowings in excess of 5% of its net assets
exists).
9. Write, purchase or sell puts, calls, straddles, spreads, warrants,
options or any combination thereof, except that the Money Market
Portfolio may purchase securities with put rights in order to maintain
liquidity.
10. Purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities)
if, as a result, with respect to 75% of its total assets, more than 5%
of the value of the Money Market Portfolio's total assets would be
invested in the securities of any one issuer or, with respect to 100%
of its total assets the Money Market Portfolio's ownership would be
more than 10% of the outstanding voting securities of such issuer.
11. Make loans, except that the Money Market Portfolio may purchase or hold
debt instruments or lend its portfolio securities in accordance with
its investment policies, and may enter into repurchase agreements.
Money Market Portfolio: Non-Fundamental Investment Restrictions. The Money
Market Portfolio is subject to the following investment restrictions, all of
which are non-fundamental policies.
As a matter of non-fundamental policy:
1. The Money Market Portfolio may invest in shares of other open-end
management investment companies, subject to the limitations of Section
12(d)(1) of the 1940 Act. Under the 1940 Act, the Money Market Portfolio's
investment in such securities currently is limited, subject to certain
exceptions, to (i) 3% of the total voting stock of any one investment
company, (ii) 5% of the Money Market Portfolio's net assets with respect to
any one investment company; and (iii) 10% of the Money Market Portfolio's
net assets in the aggregate. Other investment companies in which the Money
Market Portfolio invests can be expected to charge fees for operating
expenses, such as investment advisory and administration fees, that would
be in addition to those charged by the Money Market Portfolio.
2. The Money Market Portfolio may not invest more than 10% of its net
assets in illiquid securities. For this purpose, illiquid securities
include, among others, (i) securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual
restrictions on resale, (ii) fixed time deposits that are subject to
withdrawal penalties and that have maturities of more than seven days,
and (iii) repurchase agreements not terminable within seven days.
3. The Money Market Portfolio may lend securities from its portfolio to
brokers, dealers and financial institutions, in amounts not to exceed
(in the aggregate)
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<PAGE>
one-third of the Money Market Portfolio's total assets. Any such loans
of portfolio securities will be fully collateralized based on values
that are marked to market daily. The Money Market Portfolio will not
enter into any portfolio security lending arrangement having a duration
of longer than one year.
TRUSTEES AND OFFICERS
The Trust's Board of Trustees is responsible for the overall management of the
Funds, including general supervision and review of its investment activities and
its conformity with Delaware Law and the stated policies of the Funds. The Board
of Trustees elects the officers of the Trust who are responsible for
administering the Funds' day-to-day operations. Trustees and officers of the
Funds, together with information as to their principal business occupations
during the last five years, and other information are shown below. Each
"interested or affiliated person," as defined in the 1940 Act, is indicated by
an asterisk (*):
<TABLE>
<CAPTION>
<S> <C> <C>
Name, Address, and Age Position(s) Held with Principal Occupation(s)
the Fund During the Past 5 Years
David M. Leahy Chairman of the Board, Partner, Sullivan &
Sullivan & Worcester LLP President Worcester LLP (law firm)
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
[Other information to be supplied by
amendment]
</TABLE>
The Trust pays each non-affiliated Trustee a quarterly fee of $___ per Board
meeting for the Funds. In addition, the Trust reimburses each of the
non-affiliated Trustees for travel and other expenses incurred in connection
with attendance at such meetings. Other officers and Trustees of the Trust
receive no compensation or expense reimbursement. The following table provides
an estimate of each Trustee's compensation for the current fiscal year:
Estimated Compensation Table
24
<PAGE>
Name of Person, Aggregate Compensation Total Compensation From
Position from the Funds Funds and Trust Expected to
be Paid to Trustees (1)
[To be supplied by amendment]
It is currently expected that no Trustee will receive any benefits upon
retirement. Accordingly, no pension or retirement benefits have accrued as part
of the Funds' expenses.
(1) This amount represents the estimated aggregate amount of compensation
paid to each non-affiliated Trustee for service on the Board of
Trustees for the fiscal year ending December 31, 2000.
Control Persons and Principal Holders of Securities
A shareholder that owns 25% or more of any Funds' voting securities is in
control of that Fund on matters submitted to a vote of shareholders. To satisfy
regulatory requirements, as of February __, 2000, whatifi Asset Management,
Inc., the Funds' investment adviser, owned 100% of each Fund's outstanding
shares. There are no other shareholders holding 25% or more of any Fund's
outstanding shares.
INVESTMENT MANAGEMENT
Investment Advisers. Under an investment advisory agreement with the Trust,
whatifi Asset Management, Inc. (the "Adviser") provides investment advisory
services to the Funds. The Adviser is a wholly owned subsidiary of whatifi.com
Corporation, a Delaware corporation. The Adviser is located at 790 Eddy Street,
San Francisco, California 94109.
Subject to the general supervision of the Trust's Board of Trustees and in
accordance with the investment objective, policies and restrictions of each of
the Funds, the Investment Adviser provides the Funds with investment guidance,
policy direction and monitoring of each of the Portfolios. The Adviser may in
the future manage cash and money market instruments for cash flow purposes. The
Adviser also provides or arranges for administration, transfer agency, custody
and all other services necessary for the Funds to operate. The Adviser has not
previously managed a mutual fund. For its services, the S&P 500 Index Fund pays
the Adviser an investment advisory fee at an annual rate equal to ____% of its
average daily net assets; the Extended Market Index Fund pays the Adviser an
investment advisory fee at an annual rate equal to __% of its average daily net
assets; the International Index Fund pays the Adviser an investment advisory fee
at an annual rate equal to __% of its average daily net assets; the Bond Index
Fund pays the Adviser an investment advisory fee at an annual rate equal to
____% of its average daily net assets and the Money Market Fund pays the Adviser
an investment advisory fee at an annual rate equal to __% of its average daily
net assets.
25
<PAGE>
The Portfolios' Investment Adviser. Each Portfolio's investment advisor is
Barclays Global Fund Advisors ("BGFA"). BGFA is a direct subsidiary of Barclays
Global Investors, N.A. (which, in turn, is an indirect subsidiary of Barclays
Bank PLC ("Barclays")) and is located at 45 Fremont Street, San Francisco,
California 94105. BFGA has provided assets management, administration and
advisory services for over 25 years. As of November 30, 1999, BGFA and its
affiliates provided investment advisory services for over $684 billion of
assets. Barclays Bank PLC has been involved in banking in the United Kingdom for
over 300 years. Pursuant to an Investment Advisory Contract dated January 1,
1996 (the "Advisory Contract") with the Portfolios, BGFA provides investment
guidance and policy direction in connection with the management of the
Portfolio's assets. Pursuant to the Advisory Contract, BGFA furnishes to the
Portfolio's Board of Trustees periodic reports on the investment strategy and
performance of the Portfolios. BGFA receives fees from the S&P 500 Portfolio,
the Extended Index Portfolio, the International Index Portfolio, the Bond
Portfolio and the Money Market Portfolio at an annual rate equal to 0.05%,
0.08%, 0.15%, 0.08% and 0.10%, respectively, of the Portfolio's average daily
net assets. This investment advisory fee is an expense of each Portfolio borne
proportionately by its interest holders, including each of the respective Funds.
The Advisory Contract for the Portfolios provides that if, in any fiscal year,
the total expenses of the S&P 500, the Extended Market, the International or
Bond Portfolio (excluding taxes, interest, brokerage commissions and
extraordinary expenses but including the fees provided for in the Advisory
Contract) exceed the most restrictive expense limitation applicable to a
Portfolio imposed by the securities laws or regulations of the states having
jurisdiction over that Portfolio, BGFA shall waive its fees under the Advisory
Contract for the fiscal year to the extent of the excess or reimburse the excess
of such Portfolio, but only to the extent of its fees.
BGFA has agreed to provide to each Portfolio, among other things, money market
security and fixed-income research, analysis and statistical and economic data
and information concerning interest rate and security market trends, portfolio
composition, credit conditions and average maturities of each Portfolio's
investment portfolio. The Advisory Contract will continue in effect for more
than two years for each Portfolio provided the continuance is approved annually
(i) by the holders of a majority of the applicable Portfolio's outstanding
voting securities or by the applicable Portfolio's Board of Trustees and (ii) by
a majority of the Trustees of the applicable Portfolio who are not parties to
the Advisory Contract or affiliated of any such party. The Advisory Contract may
be terminated on 60 day's written notice by either party and will terminate
automatically if assigned.
Asset allocation and modeling strategies are employed by BGFA for other
investment companies and accounts advised or sub-advised by BGFA. If these
strategies indicate particular securities should be purchased or sold at the
same time by a Portfolio and one or more of these investment companies or
accounts, available investments or opportunities for sales will be allocated
equitably to each by BGFA. In some cases,
26
<PAGE>
these procedures may adversely affect the size of the position obtained for or
disposed of by a Portfolio or the price paid or received by a Portfolio.
SERVICE PROVIDERS
Administrator of the Funds. Investors Bank & Trust Company ("IBT"), 200
Clarendon Street, Boston, MA 02111, serves as the Funds' administrator. As the
Funds' administrator, IBT provides administrative services directly or through
sub-contracting, including: (i) general supervision of the operation of the
Funds, including coordination of the services performed by the investment
adviser, transfer and dividend disbursing agent, custodian, shareholder
servicing agent, independent auditors and legal counsel; (ii) general
supervision of regulatory compliance matters, including the compilation of
information for documents such as reports to, and filings with, the SEC and
state securities commissions; and (iii) periodic reviews of management reports
and financial reporting. IBT also furnishes office space and certain facilities
required for conducting the business of the Funds. The Adviser pays IBT for all
administrative services provided to the Funds.
Administrator of the Portfolios. Stephens, Inc. ("Stephens"), and Barclays
Global Investors, N.A. ("BGI") serve as co-administrators on behalf of the
Portfolios. Under the Co-Administration Agreement between Stephens, BGI and the
Portfolios, Stephens and BGI provide as administrative services, among other
things: (i) general supervision of the operation of the Portfolios, including
coordination of the services performed by the investment adviser, transfer and
dividend disbursing agent, custodian, shareholder servicing agent(s),
independent auditors and legal counsel; (ii) general supervision of regulatory
compliance matters, including the compilation of information for documents such
as reports to, and filings with, the SEC and state securities commissions; and
preparation of proxy statements and shareholder reports for the Portfolios; and
(iii) general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Portfolios' officers and
Board of Trustees. Stephens also furnishes office space and certain facilities
required for conducting the business of the Portfolios together with those
ordinary clerical and bookkeeping services that are not furnished by BGFA.
Stephens also pays the compensation of the Portfolios' Trustees, officers and
employees who are affiliated with Stephens. Furthermore, except as provided in
the advisory contract, Stephens and BGI bear substantially all costs of the
Portfolios and the Portfolios' operations. However, Stephens and BGI are not
required to bear any cost or expense which a majority of the non-affiliated
Trustees of the Portfolios deem to be an extraordinary expense.
Custodian and Fund Accounting Services Agent. IBT also serves as custodian of
the assets of the Funds and the Portfolios. Accordingly, IBT has custody of all
securities and cash of the Funds and the Portfolios, delivers and receives
payment for securities sold, receives and pays for securities purchased,
collects income from investments, and performs other duties, all as directed by
the officers of the Funds and the Portfolios. The custodian has no
responsibility for any of the investment policies or decisions of
27
<PAGE>
the Funds and the Portfolios. IBT also acts as the Funds' Accounting Services
Agent. The Adviser pays IBT for all custodial services provided to the Funds.
Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent.
BISYS acts as transfer agent, dividend disbursing agent and shareholder
servicing agent for the Funds. BISYS is located at ____ Stelzer Road, Columbus,
Ohio _____. Under its agreement with the Funds, as shareholder servicing agent,
BISYS provides personal services to the Funds' shareholders and maintains the
Funds' shareholder accounts. Such services include, (i) answering shareholder
inquiries regarding account status and history, the manner in which purchases
and redemptions of the Funds' shares may be effected, and certain other matters
pertaining to the Funds; (ii) assisting shareholders in designating and changing
dividend options, account designations and addresses; (iii) providing necessary
personnel and facilities to coordinate the establishment and maintenance of
shareholder accounts and records with the Funds' transfer agent; (iv)
transmitting shareholder's purchase and redemption orders to the Funds' transfer
agent; (v) arranging for the wiring or other transfer of funds to and from
shareholder accounts in connection with shareholder orders to purchase or redeem
shares of the Fund; (vi) verifying purchase and redemption orders, transfers
among and changes in shareholder-designated accounts; (vii) informing the
distributor of the Fund of the gross amount of purchase and redemption orders
for the Funds' shares; (viii) provide certain printing and mailing services,
such as printing and mailing of shareholder account statements, checks, and tax
forms; and (ix) providing such other related services as a Fund or a shareholder
may reasonably request, to the extent permitted by applicable law.
Independent Auditors. KPMG LLP, 99 High Street, Boston, Massachusetts, 02110,
acts as independent auditors for the Fund.
Legal Counsel. Sullivan & Worcester LLP, 1025 Connecticut Avenue, N.W.,
Washington, DC 20036, acts as legal counsel for the Trust and its Independent
Trustees.
PORTFOLIO TRANSACTIONS AND BROKERAGE SELECTION
The Portfolios have no obligation to deal with any dealer or group of
broker-dealers in the execution of transactions in portfolio securities. Subject
to policies established by the Portfolios' Board of Trustees, BGFA as adviser to
the Portfolios, is responsible for the Portfolios' investment portfolio
decisions and the placing of portfolio transactions. In placing orders, it is
the policy of the Portfolios to obtain the best results taking into account the
broker-dealer's general execution and operational facilities, the type of
transaction involved and other factors such as the broker/dealer's risk in
positioning the securities involved. While BGFA generally seeks reasonably
competitive spreads or commissions, the Portfolios will not necessarily be
paying the lowest spread or commission available.
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Purchase and sale orders of the securities held by the Portfolios may be
combined with those of other accounts that BGFA manages, and for which it has
brokerage placement authority, in the interest of seeking the most favorable
overall net results. When BGFA determines that a particular security should be
bought or sold for a Portfolio and other accounts managed by BGFA, BGFA
undertakes to allocate those transactions among the participants equitably.
Under the 1940 Act, persons affiliated with the Portfolios such as Stephens,
BGFA and their affiliates are prohibited from dealing with the Portfolios as a
principal in the purchase and sale of securities unless an exemptive order
allowing such transactions is obtained from the SEC or an exemption is otherwise
available.
Except in the case of equity securities purchased by the S&P 500 Portfolio,
purchases and sales of securities usually will be principal transactions.
Portfolio securities normally will be purchased or sold from or to dealers
serving as market makers for the securities at a net price. The Portfolios also
will purchase portfolio securities in underwritten offerings and may purchase
securities directly from the issuer. Generally, money market securities,
adjustable rate mortgage securities ("ARMS"), municipal obligations, and
collateralized mortgage obligations ("CMOs") are traded on a net basis and do
not involve brokerage commissions. The cost of executing the Portfolio's
investment portfolio securities transactions will consist primarily of dealer
spreads and underwriting commissions.
Purchases and sales of equity securities on a securities exchange are effected
through brokers who charge a negotiated commission for their services. Orders
may be directed to any broker including, to the extent and in the manner
permitted by applicable law, Stephens or BGI. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the price
of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.
In placing orders for portfolio securities of the Portfolios, BGFA is required
to give primary consideration to obtaining the most favorable price and
efficient execution. This means that BGFA seeks to execute each transaction at a
price and commission, if any, that provide the most favorable total cost or
proceeds reasonably attainable in the circumstances. While BGFA generally seeks
reasonably competitive spreads or commissions, the Portfolios will not
necessarily be paying the lowest spread or commission available. In executing
portfolio transactions and selecting brokers or dealers, BGFA seeks to obtain
the best overall terms available for the Portfolios. In assessing the best
overall terms available for any transaction, BGFA considers factors deemed
relevant, including the breadth of the market in the security, the price of the
security, the financial condition and execution capability of the broker or
dealer, and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis. Rates are established pursuant to
negotiations with the broker based
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on the quality and quantity of execution services provided by the broker in the
light of generally prevailing rates. The allocation of orders among brokers and
the commission rates paid are reviewed periodically by the Portfolio's Board of
Trustees.
Certain of the brokers or dealers with whom the Portfolios may transact business
offer commission rebates to the Portfolios. BGFA considers such rebates in
assessing the best overall terms available for any transaction. The overall
reasonableness of brokerage commissions paid is evaluated by BGFA based upon its
knowledge of available information as to the general level of commission paid by
other institutional investors for comparable services.
ORGANIZATION, DIVIDEND AND VOTING RIGHTS
The Funds are diversified series of whatifi Funds (the "Trust"), an open-end
investment company, organized as a Delaware business trust on December 15, 1999.
The Trust may issue additional series and classes.
All shareholders may vote on each matter presented to shareholders. Fractional
shares have the same rights proportionately as do full shares. Shares of the
Trust have no preemptive, conversion, or subscription rights. If the Trust
issues additional series, each series of shares will be held separately by the
custodian, and in effect each series will be a separate fund.
All shares of the Trust have equal voting rights. Approval by the shareholders
of a Fund is effective as to that Fund whether or not sufficient votes are
received from the shareholders of the other investment portfolios to approve the
proposal as to those investment portfolios.
The Trust does not expect to hold annual meetings of shareholders unless
required to do so by the 1940 Act. The Trust will hold a special meeting of its
shareholders for the purpose of voting on the question of removal of a Trustee
or Trustees if requested in writing by the holders of at least 10% of the
Trust's outstanding voting securities, and to assist in communicating with other
shareholders as required by Section 16(c) of the 1940 Act.
Each share of a Fund represents an equal proportional interest in that Fund and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to that Fund as are declared in the discretion of the Trustees.
In the event of the liquidation or dissolution of the Trust, shareholders of a
Fund are entitled to receive the assets attributable to that Fund that are
available for distribution, and a distribution of any general assets not
attributable to a particular investment portfolio that are available for
distribution in such manner and on such basis as the Trustees in their sole
discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares, when issued,
will be fully paid and non-assessable by the Trust.
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Under Delaware law, the shareholders of the Funds are not generally subject to
liability for the debts or obligations of the Trust. Similarly, Delaware law
provides that a series of the Trust will not be liable for the debts or
obligations of any other series of the Trust. However, no similar statutory or
other authority limiting business trust shareholder liability exists in other
states. As a result, to the extent that a Delaware business trust or a
shareholder is subject to the jurisdiction of courts of such other states, the
courts may not apply Delaware law and may thereby subject the Delaware business
trust shareholders to liability. To guard against this risk, the Declaration of
Trust contains an express disclaimer of shareholder liability for acts or
obligations of a Fund. Notice of such disclaimer will generally be given in each
agreement, obligation or instrument entered into or executed by a series or the
Trustees. The Declaration of Trust also provides for indemnification by the
relevant series for all losses suffered by a shareholder as a result of an
obligation of the series. In view of the above, the risk of personal liability
of shareholders of a Delaware business trust is remote.
SHAREHOLDER INFORMATION
Shares are sold through and distributed by BISYS.
Pricing of Fund Shares. The net asset value of the S&P 500 Index Fund, the
Extended Market Index Fund, the International Index Fund and the Bond Index Fund
is determined as of the close of trading on each day the New York Stock Exchange
("NYSE") is open for trading. The NYSE is open for trading Monday through Friday
except on national holidays observed by the NYSE. The Money Market Fund uses the
amortized cost method to determine the value of its portfolio securities
pursuant to Rule 2a-7 under the 1940 Act. The amortized cost method involves
valuing a security at its cost and amortizing any discount or premium over the
period until maturity, regardless of the impact of fluctuating interest rates on
the market value of the security. The yield to a shareholder may differ somewhat
from that which could be obtained from a similar fund that uses a method of
valuation based upon market prices.
Rule 2a-7 provides that in order to value its portfolio using the amortized cost
method, the Money Market Fund must maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase securities having remaining maturities (as
defined in Rule 2a-7) of thirteen months or less and invest only in those
high-quality securities that are determined by the Board of Trustees to present
minimal credit risks. The maturity of an instrument is generally deemed to be
the period remaining until the date when the principal amount thereof is due or
the date on which the instrument is to be redeemed. However, Rule 2a-7 provides
that the maturity of an instrument may be deemed shorter in the case of certain
instruments, including certain variable-and floating-rate instruments subject to
demand features. Pursuant to the Rule, the Board of Trustees is required to
establish procedures designed to stabilize, to the extent reasonably possible,
the Money Market Fund's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Money Market Fund's
portfolio holdings by the Board of Trustees, at such intervals as it may deem
appropriate, to determine whether the Money Market Fund's net asset value
calculated
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by using available market quotations deviates from the $1.00 per share based on
amortized cost. The extent of any deviation will be examined by the Board of
Trustees. If such deviation exceeds 1/2 of 1%, the Board of Trustees will
promptly consider what action, if any, will be initiated. In the event the Board
of Trustees determines that a deviation exists that may result in material
dilution or other unfair results to shareholders, the Board of Trustees will
take such corrective action as it regards as necessary and appropriate,
including the sale of portfolio instruments prior to maturity to realize capital
gains or losses or to shorten average portfolio maturity, withholding dividends
or establishing a net asset value per share by using available market
quotations.
Internet Redemption Privileges. The Trust employs reasonable procedures to
confirm that instructions communicated by the Internet are genuine. The Trust
and the Funds may not be liable for losses due to unauthorized or fraudulent
instructions. Such procedures include but are not limited to requiring a form of
personal identification prior to acting on instructions received by the
Internet, providing written confirmations of such transactions to the address of
record, tape recording telephone instructions and backing up Internet
transactions.
TAXATION
The following discussion does not purport to be complete or to deal with all
aspects of federal income taxation that may be relevant to shareholders in light
of their own circumstances. This discussion is based upon current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities.
These are all subject to change and such change may be retroactive. Prospective
investors should consult their own tax advisors regarding a the federal tax
consequences of the purchase, ownership, or disposition of Fund shares, as well
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
Taxation of the Funds. The Funds intend to be taxed as regulated investment
companies under Subchapter M of the Code. As such, a Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities or currencies; and (b) diversify its holdings so that, at
the end of each fiscal quarter, (i) at least 50% of the value of the Fund's
total assets is represented by cash and cash items, U.S. Government securities,
the securities of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer, to an amount
not greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities and the securities of other regulated investment
companies).
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As a regulated investment company, a Fund generally is not subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if
at least 90% of the Fund's investment company taxable income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses) for the taxable year is
distributed. The Fund intends to distribute substantially all of such income.
Any 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, a Fund must distribute during each calendar year
an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending on October 31 of
the calendar year, and (3) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, each Fund intends to make distributions in accordance with the
calendar year distribution requirement.
Distributions. Distributions of investment company taxable income (including net
short-term capital gains) are taxable to a U.S. shareholder as ordinary income,
whether paid in cash or shares. Dividends paid by the Fund to a corporate
shareholder, to the extent such dividends are attributable to dividends received
by the Fund from U.S. corporations, may, subject to limitation, be eligible for
the dividends received deduction. The alternative minimum tax applicable to
corporations may reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) designated by the Fund as capital gain
dividends, whether paid in cash or reinvested in Fund shares, will generally be
taxable to shareholders as long-term capital gain, regardless of how long a
shareholder has held Fund shares.
Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received. A distribution will be treated as paid on December 31 of a calendar
year if it is declared by a Fund in October, November or December of that 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 in which the distributions are declared, rather than the calendar
year in which the distributions are received.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by the Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of a Fund
immediately prior to a distribution. The price of shares purchased at such time
will include the amount of the forthcoming distribution, but the distribution
will generally be taxable to the shareholder.
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Dispositions. Upon a redemption, sale or exchange of shares of the Fund, a
shareholder will realize a taxable gain or loss depending upon his or her basis
in the shares. A gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder's hands, and will be long-term
capital gain or loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for not more than one
year. Any loss realized on a redemption, sale or exchange will be disallowed to
the extent the shares disposed of are replaced (including through reinvestment
of dividends) within a period of 61 days, beginning 30 days before and ending 30
days after the shares are disposed of. In such a case the basis of the shares
acquired will be adjusted to reflect the disallowed loss. If a shareholder holds
Fund shares for six months or less and during that period receives a
distribution taxable to the shareholder as long-term capital gain, any loss
realized on the sale of such shares during such six-month period would be a
long-term loss to the extent of such distribution.
Backup Withholding. Each Fund generally will be required to withhold federal
income tax at a rate of 31% ("backup withholding") from dividends paid, capital
gain distributions, and redemption proceeds to shareholders if (1) the
shareholder fails to furnish a Fund with the shareholder's correct taxpayer
identification number or social security number, (2) the IRS notifies the
shareholder or a Fund that the shareholder has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to that
effect, or (3) when required to do so, the shareholder fails to certify that he
or she is not subject to backup withholding. Any amounts withheld may be
credited against the shareholder's federal income tax liability.
Other Taxation. Distributions may be subject to additional state, local and
foreign taxes, depending on each shareholder's situation.
Market Discount. If the Fund purchases a debt security at a price lower than the
stated redemption price of such debt security, the excess of the stated
redemption price over the purchase price is "market discount". If the amount of
market discount is more than a de minimis amount, a portion of such market
discount must be included as ordinary income (not capital gain) by a Fund in
each taxable year in which the Fund owns an interest in such debt security and
receives a principal payment on it. A Fund will be required to allocate that
principal payment first to the portion of the market discount on the debt
security that has accrued but has not previously been includable in income. In
general, the amount of market discount that must be included for each period is
equal to the lesser of (i) the amount of market discount accruing during such
period (plus any accrued market discount for prior periods not previously taken
into account) or (ii) the amount of the principal payment with respect to such
period. Generally, market discount accrues on a daily basis for each day the
debt security is held by the Fund at a constant rate over the time remaining to
the debt security's maturity or, at the election of a Fund, at a constant yield
to maturity which takes into account the semi-annual compounding of interest.
Gain realized on the disposition of a market discount obligation must be
recognized as ordinary interest income (not capital gain) to the extent of the
"accrued market discount."
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Original Issue Discount. Certain debt securities acquired by a Fund may be
treated as debt securities that were originally issued at a discount. Original
issue discount is defined as the difference between the price at which a
security was issued and its stated redemption price at maturity. Although no
cash income on account of such discount is actually received by the Fund,
original issue discount that accrues on a debt security in a given year
generally is treated for federal income tax purposes as interest and, therefore,
such income would be subject to the distribution requirements applicable to
regulated investment companies. Some debt securities may be purchased by a Fund
at a discount that exceeds the original issue discount on such debt securities,
if any. This additional discount represents market discount for federal income
tax purposes (see above).
Options, Futures and Forward Contracts. Any regulated futures contracts and
certain options (namely, non-equity options and dealer equity options) in which
a Fund may invest may be "section 1256 contracts." Gains (or losses) on such
contracts generally are considered to be 60% long-term and 40% short-term
capital gains or losses. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and on certain other dates prescribed in the Code) are
"marked to market" with the result that unrealized gains or losses are treated
as though they were realized.
Transactions in options, futures and forward contracts undertaken by a Fund may
result in "straddles" for federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by the Fund, and losses
realized by the Fund on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Certain carrying charges (including interest expense) associated with positions
in a straddle may be required to be capitalized rather than deducted currently.
Certain elections that the Fund may make with respect to its straddle positions
may also affect the amount, character and timing of the recognition of gains or
losses from the affected positions.
Since few regulations implementing the straddle rules have been promulgated, the
consequences of such transactions to a Fund are not clear. The straddle rules
may increase the amount of short-term capital gain realized by a Fund, which is
taxed as ordinary income when distributed to shareholders. Because application
of the straddle rules may affect the character of gains or losses, defer losses
and/or accelerate the recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders as ordinary
income or long-term capital gain may be increased or decreased substantially as
compared to a fund that did not engage in such transactions.
Constructive Sales. Under certain circumstances, a Fund may recognize gain from
a constructive sale of an "appreciated financial position" it holds if it enters
into a short sale, forward contract or other transaction that substantially
reduces the risk of loss with respect to the appreciated position. In that
event, the Fund would be treated as if it had sold and immediately repurchased
the property and would be taxed on any gain
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(but not loss) from the constructive sale. The character of gain from a
constructive sale would depend upon the Fund's holding period in the property.
Loss from a constructive sale would be recognized when the property was
subsequently disposed of, and its character would depend on the Fund's holding
period and the application of various loss deferral provisions of the Code.
Constructive sale treatment does not apply to transactions closed in the 90-day
period ending with the 30th day after the close of the taxable year, if certain
conditions are met.
MASTER PORTFOLIO ORGANIZATION
The Portfolios are series of Master Investment Portfolio ("MIP"), an open-end,
series management investment company organized as Delaware business trust. MIP
was organized on October 21, 1993. In accordance with Delaware law and in
connection with the tax treatment sought by MIP, the Declaration of Trust
provides that its investors are personally responsible for Trust liabilities and
obligations, but only to the extent the Trust property is insufficient to
satisfy such liabilities and obligations. The Declaration of Trust also provides
that MIP must maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Trust, its investors,
Trustees, officers, employees and agents covering possible tort and other
liabilities, and that investors will be indemnified to the extent they are held
liable for a disproportionate share of MIP's obligations. Accordingly, the risk
of an investor incurring financial loss on account of investor liability is
limited to circumstances in which both inadequate insurance existed and MIP
itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of MIP are not
binding upon its Trustees individually but only upon the property of MIP and
that the Trustees will not be liable for any action or failure to act, but
nothing in the Declaration of Trust protects a Trustee against any liability to
which the Trustee 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 Trustee's office.
The interests in the Portfolios have substantially identical voting and other
rights as those rights enumerated above for shares of the Funds. MIP is
generally not required to hold annual meetings, but is required by Section 16(c)
of the 1940 Act to hold a special meeting and assist investor communications
under certain circumstances. Whenever the one of the Funds is requested to vote
on a matter with respect to the Portfolio in which it invests, such Fund will
hold a meeting of its shareholders and will cast its votes as instructed by its
shareholders.
In a situation where a Fund does not receive instructions from certain of its
shareholders on how to vote the corresponding shares of the applicable
Portfolio, such Fund will vote such shares in the same proportion as the shares
for which the Fund receives voting instructions.
Master/Feeder Structure. Each Fund seeks to achieve its investment objective by
investing all of its assets in the corresponding Master Portfolio of MIP. The
Funds and
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other entities investing in a Master Portfolio are each liable for all
obligations of such Master Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and MIP itself is unable to meet its
obligations. Accordingly, the Trust's Board of Trustees believes that neither a
Fund nor its shareholders will be adversely affected by investing Fund assets in
a Master Portfolio. However, if a mutual fund or other investor withdraws its
investment from such Master Portfolio, the economic efficiencies (e.g.,
spreading fixed expenses among a larger asset base) that the Trust's Board of
Trustees believes may be available through investment in the Master Portfolio
may not be fully achieved. In addition, given the relative novelty of the
master/feeder structure, accounting or operational difficulties, although
unlikely, could arise.
A Fund may withdraw its investment in a Master Portfolio only if the Trust's
Board of Trustees determines that such action is in the best interests of such
Fund and its shareholders. Upon any such withdrawal, the Trust's Board of
Trustees would consider alternative investments, including investing all of the
Fund's assets in another investment company with the same investment objective
as the Fund or hiring an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Master Portfolio.
Certain policies of the Master Portfolio which are non-fundamental may be
changed by vote of a majority of MIP's Trustees without interest holder
approval. If the Master Portfolio's investment objective or fundamental or
non-fundamental policies are changed, the corresponding Fund may elect to change
its investment objective or policies to correspond to those of the Master
Portfolio. A Fund also may elect to redeem its interests in the corresponding
Master Portfolio and either seek a new investment company with a matching
objective in which to invest or retain its own investment adviser to manage the
Fund's portfolio in accordance with its investment objective. In the latter
case, a Fund's inability to find a substitute investment company in which to
invest or equivalent management services could adversely affect shareholders'
investments in the Fund. The Funds will provide shareholders with 30 days'
written notice prior to the implementation of any change in the investment
objective of the Fund or the Master Portfolio, to the extent possible.
PERFORMANCE INFORMATION
The S&P 500 Index Fund, the Extended Market Index Fund, the International Index
Fund and the Bond Index Fund may advertise a variety of types of performance
information as more fully described below. All of the Funds' performance is
historical and past performance does not guarantee the future performance of the
Funds. From time to time, the Adviser may agree to waive or reduce its
management fee and/or to reimburse certain operating expenses of the Funds.
Waivers of management fees and reimbursement of other expenses will have the
effect of increasing the Funds' performance.
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Average Annual Total Return. The Index Funds' average annual total return
quotation will be computed in accordance with a standardized method prescribed
by rules of the SEC. The average annual total return for these Funds for a
specific period is calculated as follows:
P(1+T)(To the power of n) = ERV
Where:
P = a hypothetical initial payment of $10,000
T = average annual total return
N = number of years
ERV = ending redeemable value of a hypothetical $10,000 payment made at
the beginning of the applicable period at the end of the period.
The calculation assumes that all income and capital gains dividends paid by
these Funds have been reinvested at net asset value on the reinvestment dates
during the period and all recurring fees charged to all shareholder accounts are
included.
Total Return. Calculation of each of the Index Funds' total return is subject to
a standard formula. Total return performance for a specific period will be
calculated by first taking an investment (assumed below to be $10,000) ("initial
investment") in these Funds' shares on the first day of the period and computing
the "ending value" of that investment at the end of the period. The total return
percentage is then determined by subtracting the initial investment from the
ending value and dividing the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes that all income and capital
gains dividends paid by these Funds have been reinvested at net asset value of
the Funds on the reinvestment dates during the period. Total return may also be
shown as the increased dollar value of the hypothetical investment over the
period.
Cumulative Total Return. Cumulative total return represents the simple change in
value of an investment over a stated period and may be quoted as a percentage or
as a dollar amount. Total returns and cumulative total returns may be broken
down into their components of income and capital (including capital gains and
changes in share price) in order to illustrate the relationship between these
factors and their contributions to total return.
Distribution Rate. The distribution rate for each of the Index Funds will be
computed, according to a standard formula by dividing the total amount of actual
distributions per share paid by the applicable Fund over a twelve month period
by that Fund's net asset value on the last day of the period. The distribution
rate differs from these Funds' yield
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because the distribution rate includes distributions to shareholders from
sources other than dividends and interest, such as short-term capital gains.
Accordingly, these Funds' distribution rate may be substantially different than
its yield. Both the Funds' yield and distribution rates will fluctuate.
Yield. The yield for the Funds, including the Money Market Fund, fluctuates from
time to time, unlike bank deposits or other investments that pay a fixed yield
for a stated period of time, and does not provide a basis for determining future
yields since it is based on historical data. Yield is generally a function of
portfolio quality, composition, maturity and market conditions as well as the
expenses allocated to the particular Fund. The yield will be calculated based on
a 30-day (or one-month) period, computed by dividing the net investment income
per share earned during the period by the maximum offering price per share on
the last day of the period and annualizing the result, according to the
following formula:
YIELD = 2[(a-b+1)(To the power of 6)-1], cd
where:
a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends;
d = the maximum offering price per share on the last day of the period.
The net investment income of the Index Funds include actual interest income,
plus or minus amortized purchase discount (which may include original issue
discount) or premium, less accrued expenses. Realized and unrealized gains and
losses on portfolio securities are not included in the Index Funds' net
investment income.
Current yield for the Money Market Fund is calculated based on the net changes,
exclusive of capital changes, over a seven day and/or thirty day period, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7) with the
resulting yield figure carried to at least the nearest hundredth of one percent.
Effective yield for the Money Market Fund is calculated by determining the net
change exclusive of capital changes in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge
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reflecting deductions from shareholder accounts, and dividing the difference by
the value of the account at the beginning of the base period to obtain the base
period return, and then compounding the base period return by adding one,
raising the same to a power equal to 365 divided by seven, and subtracting one
from the result.
Performance Comparisons:
Certificates of Deposit. Investors may want to compare a Fund's performance to
that of certificates of deposit offered by banks and other depositary
institutions. Certificates of deposit may offer fixed or variable interest rates
and principal is guaranteed and may be insured. Withdrawal of the deposits prior
to maturity normally will be subject to a penalty. Rates offered by banks and
other depositary institutions are subject to change at any time specified by the
issuing institution.
Money Market Funds. Investors may also want to compare performance of a Fund to
that of money market funds. Money market fund yields will fluctuate and shares
are not insured, but share values usually remain stable.
Lipper Analytical Services, Inc. ("Lipper") and Other Independent Ranking
Organizations. From time to time, in marketing and other fund literature, a
Fund's performance may be compared to the performance of other mutual funds in
general or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper is a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, and may
be cited. Lipper performance figures are based on changes in net asset value,
with all income and capital gains dividends reinvested. Such calculations do not
include the effect of any sales charges imposed by other funds. A Fund may be
compared to Lipper's appropriate fund category, that is, by fund objective and
portfolio holdings. A Fund's performance may also be compared to the average
performance of its Lipper category.
Morningstar, Inc. A Fund's performance may also be compared to the performance
of other mutual funds by Morningstar, Inc., which rates funds on the basis of
historical risk and total return. Morningstar's ratings range from five stars
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a weighted average for 3, 5,
and 10 year periods. Ratings are not absolute and do not represent future
results.
Independent Sources. Evaluations of fund performance made by independent sources
may also be used in advertisements concerning the Funds, including reprints of,
or selections from, editorials or articles about the Funds, especially those
with similar objectives. Sources for fund performance and articles about the
Funds may include publications such as Money, Forbes, Kiplinger's, Smart Money,
Financial World, Business Week, U.S. News and World Report, The Wall Street
Journal, Barron's, and a variety of investment newsletters.
40
<PAGE>
Indices. The Funds may compare their performance to a wide variety of indices.
There are differences and similarities between the investments that a
Fund may purchase and the investments measured by the indices.
Historical Asset Class Returns. From time to time, marketing materials may
portray the historical returns of various asset classes. Such presentations will
typically compare the average annual rates of return of inflation, U.S. Treasury
bills, bonds, common stocks, and small stocks. There are important differences
between each of these investments that should be considered in viewing any such
comparison. The market value of stocks will fluctuate with market conditions,
and small-stock prices generally will fluctuate more than large-stock prices.
Stocks are generally more volatile than bonds. In return for this volatility,
stocks have generally performed better than bonds or cash over time. Bond prices
generally will fluctuate inversely with interest rates and other market
conditions, and the prices of bonds with longer maturities generally will
fluctuate more than those of shorter-maturity bonds. Interest rates for bonds
may be fixed at the time of issuance, and payment of principal and interest may
be guaranteed by the issuer and, in the case of U.S. Treasury obligations,
backed by the full faith and credit of the U.S. Treasury.
Portfolio Characteristics. In order to present a more complete picture of a
Fund's portfolio, marketing materials may include various actual or estimated
portfolio characteristics, including but not limited to median market
capitalizations, earnings per share, alphas, betas, price/earnings ratios,
returns on equity, dividend yields, capitalization ranges, growth rates,
price/book ratios, top holdings, sector breakdowns, asset allocations, quality
breakdowns, and breakdowns by geographic region.
Measures of Volatility and Relative Performance. Occasionally statistics may be
used to specify fund volatility or risk. The general premise is that greater
volatility connotes greater risk undertaken in achieving performance. Measures
of volatility or risk are generally used to compare a fund's net asset value or
performance relative to a market index. One measure of volatility is beta. Beta
is the volatility of a fund relative to the total market as represented by the
Standard & Poor's 500 Stock Index. A beta of more than 1.00 indicates volatility
greater than the market, and a beta of less than 1.00 indicates volatility less
than the market. Another measure of volatility or risk is standard deviation.
Standard deviation is a statistical tool that measures the degree to which a
fund's performance has varied from its average performance during a particular
time period.
Standard deviation is calculated using the following formula:
Standard deviation = the square root of S(xi - xm)2
n-1
Where: S = "the sum of",
xi = each individual return during the time period,
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xm = the average return over the time period, and n = the number of
individual returns during the time period.
Statistics may also be used to discuss a Fund's relative performance. One such
measure is alpha. Alpha measures the actual return of a fund compared to the
expected return of a fund given its risk (as measured by beta). The expected
return is based on how the market as a whole performed, and how the particular
fund has historically performed against the market. Specifically, alpha is the
actual return less the expected return. The expected return is computed by
multiplying the advance or decline in a market representation by the fund's
beta. A positive alpha quantifies the value that the fund manager has added, and
a negative alpha quantifies the value that the fund manager has lost. Other
measures of volatility and relative performance may be used as appropriate.
However, all such measures will fluctuate and do not represent future results.
Discussions of economic, social, and political conditions and their impact on
the Funds may be used in advertisements and sales materials. Such factors that
may impact the Funds include, but are not limited to, changes in interest rates,
political developments, the competitive environment, consumer behavior, industry
trends, technological advances, macroeconomic trends, and the supply and demand
of various financial instruments. In addition, marketing materials may cite the
portfolio management's views or interpretations of such factors.
Master Portfolio Performance. The Funds intend to disclose historical
performance of the Portfolios, including the average annual and cumulative
returns restated to reflect the expense ratio of the Funds. This information
will be included by amendment. Although the investments of the Portfolios will
be reflected in the Funds, the Funds are distinct mutual funds and have
different fees, expenses and returns than the Portfolios. Historical performance
of substantially similar mutual funds is not indicative of future performance of
the Funds. The Portfolios' performance will be supplied by the Portfolios.
FINANCIAL STATEMENTS
The statements of assets and liabilities of the Funds as of February __, 2000,
and related notes to the statements of assets and liabilities, and the
independent auditors' report will be filed by amendment.
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
A-1 and Prime-1 Commercial Paper Ratings
The rating A-1 (including A-1+) is the highest commercial paper rating assigned
by S&P. Commercial paper rated A-1 by S&P has the following characteristics:
42
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o liquidity ratios are adequate to meet cash requirements;
o long-term senior debt is rated "A" or better;
o the issuer has access to at least two additional channels of
borrowing;
o basic earnings and cash flow have an upward trend with allowance made for
unusual circumstances;
o typically, the issuer's industry is well established and the issuer has a
strong position within the industry; and
o the reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated A-1, A-2 or A-3. Issues rated A-1 that are
determined by S&P to have overwhelming safety characteristics are designated
A-1+.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning ratings are the following:
o evaluation of the management of the issuer;
o economic evaluation of the issuer's industry or industries and an appraisal
of speculative-type risks which may be o inherent in certain areas;
o evaluation of the issuer's products in relation to competition and
customer acceptance; liquidity;
o amount and quality of long-term debt;
o trend of earnings over a period of ten years;
o financial strength of parent company and the relationships which exist
with the issuer; and
o recognition by the management of obligations which may be present or may
arise as a result of public interest questions and preparations to meet
such obligations.
DESCRIPTION OF BOND RATINGS
Bonds are considered to be "investment grade" if they are in one of the top four
ratings.
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S&P's ratings are as follows:
o Bonds rated AAA have the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
o Bonds rated AA have a very strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds in
higher rated categories.
o Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
o Bonds rated BBB are 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 in higher rated categories.
o Debt rated BB, B, CCC, CC or C is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse debt
conditions.
The rating C1 is reserved for income bonds on which no interest is being paid.
Debt rated D is in default and payment of interest and/or repayment of principal
is in arrears.
The ratings from AA to CCC may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within the major rating categories.
Moody's ratings are as follows:
o 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.
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o 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 risks appear somewhat larger than
in Aaa securities.
o Bonds which are rated A possess many favorably investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment some time in the
future.
o 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.
o 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.
o 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.
o Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
o Bonds which are rated Ca represent obligations which are speculative to a
high degree. Such issues are often in default or have other marked
shortcomings.
o Bonds which are rated C are the lowest class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies modifiers to each rating classification from Aa through B to
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indicate relative ranking within its rating categories. The modifier "1"
indicates that a security ranks in the higher end of its rating category; the
modifier "2" indicates a mid-range ranking and the modifier "3" indicates that
the issue ranks in the lower end of its rating category.
46
<PAGE>
PART C:
OTHER INFORMATION
Item 23. Exhibits
(a) Form of Trust Instrument
(b) By-laws
(c) Instruments Defining Rights of Security Holders: (To be filed by
amendment)
(d) Form of Investment Advisory Agreement between whatifi Asset Management,
Inc. and the Registrant
(e) Form of Underwriting Agreement between BISYS and the Registrant: (To be
filed by amendment)
(f) Bonus or Profit Sharing Contracts: Not applicable
(g) Form of Custodian Agreement between whatifi Asset Management, Inc.,
Investors Bank & Trust Company, and the Registrant
(h) Other Material Contracts:
(i) Form of Administration Agreement between whatifi Asset
Management, Inc., Investors Bank & Trust, and the Registrant
(ii) Form of Transfer Agent, Dividend Disbursing Agent and
Shareholder Servicing Agent Agreement among whatifi Asset
Management, Inc., BISYS and Registrant (To be filed by
amendment)
(iii) Form of whatifi Funds Electronic Delivery Consent Agreement
(To be filed by amendment)
(iv) Form of Third Party Feeder Fund Agreement among whatifi Asset
Management, Inc., Master Investment Portfolio, and the
Registrant
(v) Form of Consent to Use of Name
(vi) Consent to Service as a Trustee
(i) Opinion and Consent of Counsel (To be filed by amendment)
(j) Consent of Independent Auditors (To be filed by amendment)
(k) Omitted Financial Statements: Not applicable
(l) Form of Subscription Agreement between whatifi Asset Management, Inc.
and the Registrant
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(m) Rule 12b-1 Plan: Not applicable
(n) Financial Data Schedules: Not applicable
(o) Rule 18f-3 Plan: Not applicable
Item 24. Persons Controlled by or Under Common Control With Registrant
No person is controlled by or under common control with the Registrant.
Item 25. Indemnification
Reference is made to Article VII of the Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers or controlling
persons of the Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 26. Business and Other Connections of Investment Adviser
whatifi Asset Management, Inc. (the "Adviser") is a Delaware corporation
that offers investment advisory services. The Investment Adviser's offices are
located at 790 Eddy Street, San Francisco, California 94109. The directors and
officers of the Adviser and their business and other connections are as follows:
Directors and Officers of Title/Status with Investment Other
Investment Adviser Adviser Business
Monica Chandra To be supplied by amendment Connections
Item 27. Principal Underwriters
Shares of the Funds are distributed by BISYS.
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Item 28. Location of Accounts and Records
The account books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder will be maintained at the offices of whatifi Asset Management, Inc.,
790 Eddy Street, San Francisco, California 94109, and Investors Bank & Trust
Company, 200 Clarendon Street, Boston, Massachusetts, 02111.
Item 29. Management Services
Not applicable
Item 30. Undertakings:
Not applicable
49
<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, duly authorized, in
Washington, the District of Columbia on the 22nd day of December, 1999
whatifi Funds
(Registrant)
By: /s/ David M. Leahy
-----------------------------
Name: David M. Leahy
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/David M. Leahy Chairman of the Board of
- --------------------------- Trustees and President December 22, 1999
David M. Leahy
/s/David M. Leahy
- --------------------------- Treasurer and December 22, 1999
David M. Leahy Chief Financial Officer
50
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EXHIBIT LIST
Exhibit No. Exhibit Name
23(a)(iii) Trust Instrument
23(d)(i) Form of Investment Advisory Agreement
23(g) Form of Custodian Agreement
23(h)(i) Form of Administration Agreement
23(h)(ii) Form of Transfer Agency Agreement (To be filed by amendment)
23(h)(iii) Form of whatifi Funds Electronic Delivery Consent Agreement
(To be filed by amendment)
23(h)(iv) Form of Third Party Feeder Fund Agreement
23(i) Opinion and Consent of Counsel (To be filed by amendment)
23(j)(i) Consent of Independent Auditors (To be filed by amendment)
23(l) Form of Subscription Agreement
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Agreement And Declaration of Trust
of
whatifi Funds
a Delaware Business Trust
Principal Place of Business:
790 Eddy Street
San Francisco, California 94109
Agent for Service of
Process in Delaware:
Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
<PAGE>
TABLE OF CONTENTS
AGREEMENT AND DECLARATION OF TRUST
ARTICLE I Name and Definitions.................................1
1. Name ............................................1
2. Definitions..........................................1
(a) By-Laws.....................................1
(b) Certificate of Trust........................1
(c) Class.......................................1
(d) Commission..................................2
(e) Declaration of Trust........................2
(f) Delaware Act................................2
(g) Interested Person...........................2
(h) Adviser(s)..................................2
(i) 1940 Act....................................2
(j) Person......................................2
(k) Principal Underwriter.......................2
(l) Series......................................2
(m) Shareholder.................................2
(n) Shares......................................2
(o) Trust.......................................2
(p) Trust Property..............................2
(q) Trustees....................................2
ARTICLE II Purpose of Trust.....................................3
ARTICLE III Shares...............................................3
1. Division of Beneficial Interest......................3
2. Ownership of Shares..................................4
3. Transfer of Shares...................................4
4. Investments in the Trust.............................5
5. Status of Shares and Limitation of Personal Liability..5
6. Establishment, Designation, Abolition or
Termination, etc. of Series or Class...................5
(a) Assets Held with Respect to a Particular Series.5
(b) Liabilities Held with Respect to a Particular
Series............... .......6
(c) Dividends, Distributions, Redemptions,
and Repurchases.................................7
(d) Equality........................................7
(e) Fractions.......................................7
(f) Exchange Privilege..............................7
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(g) Combination of Series........................ 7
ARTICLE IV Trustees...............................................8
1. Number, Election, and Tenure...........................8
2. Effect of Death, Resignation, etc. of a Trustee...... .8
3. Powers.................................................9
4. Payment of Expenses by the Trust......................12
5. Payment of Expenses by Shareholders. . . . . . . . . .13
6. Ownership of Assets of the Trust......................13
7. Service Contracts.....................................13
8. Trustees and Officers as Shareholders.................14
9. Compensation..........................................15
ARTICLE V Shareholders' Voting Powers and Meetings..............15
1. Voting Powers, Meetings, Notice and Record Dates......15
2. Quorum and Required Vote..............................15
3. Record Dates..........................................16
4. Additional Provisions.................................16
ARTICLE VI Net Asset Value, Distributions and Redemptions.........16
1. Determination of Net Asset Value, Net Income
and Distributions......................................16
2. Redemptions and Repurchases............................16
ARTICLE VII Limitation of Liability; Indemnification...............17
1. Trustees, Shareholders, etc. Not Personally
Liable; Notice.........................................17
2. Trustees' Good Faith Action; Expert Advice;
No Bond or Surety......................................18
3. Indemnification of Shareholders........................19
4. Indemnification of Trustees, Officers, etc.............19
5. Compromise Payment.....................................20
6. Indemnification Not Exclusive, etc.....................20
7. Liability of Third Persons Dealing with Trustees.......20
8. Insurance..............................................21
ARTICLE VIII Miscellaneous
1. Termination of the Trust or Any Series or Class........21
2. Reorganization.........................................21
3. Amendments.............................................22
4. Filing of Copies; References; Headings.................23
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5. Applicable Law......................................23
6. Provisions in Conflict with Law or Regulations......24
7. Business Trust Only.................................24
-iii-
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Agreement And Declaration of Trust
of whatifi Funds
THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into as of
the date set forth below by the Trustee named hereunder for the purpose of
forming a Delaware business trust in accordance with the provisions hereinafter
set forth.
NOW, THEREFORE, the Trustees hereby direct that the Certificate of
Trust be filed with the Office of the Secretary of State of the State of
Delaware and do hereby declare that the Trustees will hold IN TRUST all cash,
securities, and other assets which the Trust now possesses or may hereafter
acquire from time to time in any manner and manage and dispose of the same upon
the following terms and conditions for the benefit of the holders of Shares of
this Trust.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as whatifi Funds and the
Trustees shall conduct the business of the Trust under that name or any other
name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) "Adviser(s)" means a party or parties furnishing services to the
Trust pursuant to any investment advisory or investment management contract
described in Article IV, Section 6(a) hereof;
(b) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time, which By-Laws are expressly herein incorporated by reference as part of
the "governing instrument" within the meaning of the Delaware Act;
(c) "Certificate of Trust" means the certificate of trust, as amended
or restated from time to time, filed by the Trustees in the Office of the
Secretary of State of the State of Delaware in accordance with the Delaware Act;
(d) "Class" means a class of Shares of a Series of the Trust
established in accordance with the provisions of Article III hereof;
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<PAGE>
(e) "Commission" shall have the meaning given such term in the 1940
Act;
(f) "Declaration of Trust" means this Agreement and Declaration of
Trust, as amended or restated from time to time;
(g) "Delaware Act" means the Delaware Business Trust Act, 12 Del. C.
ss.ss. 3801 et seq., as amended from time to time;
(h) "Interested Person" shall have the meaning given it in Section
2(a)(19) of the 1940 Act;
(i) "1940 Act" means the Investment Company Act of 1940 and the rules
and regulations thereunder, all as amended from time to time;
(j) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures, estates, and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof, whether domestic or foreign;
(k) "Principal Underwriter" shall have the meaning given such term in
the 1940 Act;
(l) "Series" means each Series of Shares established and designated
under or in accordance with the provisions of Article III hereof; and where the
context requires or where appropriate, shall be deemed to include "Class" or
"Classes";
(m) "Shareholder" means a record owner of outstanding Shares;
(n) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares;
(o) "Trust" means the Delaware Business Trust established under the
Delaware Act by this Declaration of Trust and the filing of the Certificate of
Trust in the Office of the Secretary of State of the State of Delaware;
(p) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is from time to time owned or held by or for the
account of the Trust; and
(q) "Trustees" means the Person or Persons who have signed this
Declaration of Trust and all other Persons who may from time to time be duly
elected or appointed to serve as Trustees in accordance with the provisions
hereof, in each case so long as such Person shall continue in office in
accordance with the terms of this Declaration of
-2-
<PAGE>
Trust, and reference herein to a Trustee or the Trustees shall refer to such
Person or Persons in his or her or their capacity as Trustees hereunder.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on the
business of an investment company registered under the 1940 Act through one or
more Series and to carry on such other business as the Trustees may from time to
time determine. The Trustees shall not be limited by any law limiting the
investments which may be made by fiduciaries.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust shall be divided into one or more Series. The Trustees may divide each
Series into Classes. Subject to the further provisions of this Article III and
any applicable requirements of the 1940 Act, the Trustees shall have full power
and authority, in their sole discretion, and without obtaining any authorization
or vote of the Shareholders of any Series or Class thereof, (i) to divide the
beneficial interest in each Series or Class thereof into Shares, with or without
par value as the Trustees shall determine, (ii) to issue Shares without
limitation as to number (including fractional Shares) to such Persons and for
such amount and type of consideration, including cash or securities, subject to
any restriction set forth in the By-Laws, at such time or times and on such
terms as the Trustees may deem appropriate, (iii) to establish and designate and
to change in any manner any Series or Class thereof and to fix such preferences,
voting powers, rights, duties and privileges and business purpose of each Series
or Class thereof as the Trustees may from time to time determine, which
preferences, voting powers, rights, duties and privileges may be senior or
subordinate to (or in the case of business purpose, different from) any existing
Series or Class thereof and may be limited to specified property or obligations
of the Trust or profits and losses associated with specified property or
obligations of the Trust, (iv) to divide or combine the Shares of any Series or
Class thereof into a greater or lesser number without thereby materially
changing the proportionate beneficial interest of the Shares of such Series or
Class thereof in the assets held with respect to that Series, (v) to classify or
reclassify any issued Shares of any Series or Class thereof into shares of one
or more Series or Classes thereof; (vi) to change the name of any Series or
Class thereof; (vii) to abolish or terminate any one or more Series or Classes
thereof; (viii) to refuse to issue Shares to any Person or class of Persons; and
(ix) to take such other action with respect to the Shares as the Trustees may
deem desirable.
-3-
<PAGE>
Subject to the distinctions permitted among Classes of the same Series
as established by the Trustees, consistent with the requirements of the 1940
Act, each Share of a Series of the Trust shall represent an equal beneficial
interest in the net assets of such Series, and each holder of Shares of a Series
shall be entitled to receive such Shareholder's pro rata share of distributions
of income and capital gains, if any, made with respect to such Series and upon
redemption of the Shares of any Series, such Shareholder shall be paid solely
out of the funds and property of such Series of the Trust.
All references to Shares in this Declaration of Trust shall be deemed
to be Shares of any or all Series or Classes thereof, as the context may
require. All provisions herein relating to the Trust shall apply equally to each
Series of the Trust and each Class thereof, except as the context otherwise
requires.
All Shares issued hereunder, including, without limitation, Shares
issued in connection with a dividend or other distribution in Shares or a split
or reverse split of Shares, shall be fully paid and nonassessable. Except as
otherwise provided by the Trustees, Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or those of a transfer or similar agent for
the Trust, which books shall be maintained separately for the Shares of each
Series or Class of the Trust. No certificates certifying the ownership of Shares
shall be issued except as the Trustees may otherwise determine from time to
time. The Trustees may make such rules as they consider appropriate for the
issuance of Share certificates, the transfer of Shares of each Series or Class
of the Trust and similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall be conclusive
as to the identity of the Shareholders of each Series or Class of the Trust and
as to the number of Shares of each Series or Class of the Trust held from time
to time by each Shareholder.
Section 3. Transfer of Shares. Except as otherwise provided by the
Trustees, Shares shall be transferable on the books of the Trust only by the
record holder thereof or by his or her duly authorized agent upon delivery to
the Trustees or the Trust's transfer agent of a duly executed instrument of
transfer, together with a Share certificate if one is outstanding, and such
evidence of the genuineness of each such execution and authorization and of such
other matters as may be required by the Trustees. Upon such delivery, and
subject to any further requirements specified by the Trustees or contained in
the By-Laws, the transfer shall be recorded on the books of the Trust. Until a
transfer is so recorded, the holder of record of Shares 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 or any officer, employee, or
agent of the Trust, shall be affected by any notice of a proposed transfer.
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Section 4. Investments in the Trust. Investments may be accepted by the
Trust from Persons, at such times, on such terms, and for such consideration as
the Trustees from time to time may authorize.
Section 5. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof. The
death, incapacity, dissolution, termination, or bankruptcy of a Shareholder
during the existence of the Trust shall not operate to terminate the Trust, nor
entitle the representative of any such Shareholder to an accounting or to take
any action in court or elsewhere against the Trust or the Trustees, but shall
entitle such representative only to the rights of such Shareholder under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in or
to the whole or any part of the Trust Property or any right to call for a
participation or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders as partners. No Shareholder
shall be personally liable for the debts, liabilities, obligations and expenses
incurred by, contracted for, or otherwise existing with respect to, the Trust or
any Series. Neither the Trust nor the Trustees, nor any officer, employee, or
agent of the Trust shall have any power to bind personally any Shareholder, nor,
except as specifically provided herein, 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.
Section 6. Establishment, Designation, Abolition or Termination etc. of
Series or Class. The establishment and designation of any Series or Class of
Shares of the Trust shall be effective upon the adoption by a majority of the
Trustees then in office of a resolution that sets forth such establishment and
designation and the relative rights and preferences of such Series or Class of
the Trust, whether directly in such resolution or by reference to another
document including, without limitation, any registration statement of the Trust,
or as otherwise provided in such resolution. The abolition or termination of any
Series or Class of Shares of the Trust shall be effective upon the adoption by a
majority of the Trustees then in office of a resolution that abolishes or
terminates such Series or Class.
Shares of each Series or Class of the Trust established pursuant to
this Article III, unless otherwise provided in the resolution establishing such
Series or Class, shall have the following relative rights and preferences:
(a) Assets Held with Respect to a Particular Series. All consideration
received by the Trust for the issue or sale of Shares of a particular Series,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof from whatever source derived
(including, without limitation, any proceeds derived from the sale, exchange or
liquidation of such assets and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be) shall
irrevocably be held separate with respect to that
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Series for all purposes, and shall be so recorded upon the books of account of
the Trust. Such consideration, assets, income, earnings, profits and proceeds
thereof, from whatever source derived, (including, without limitation) any
proceeds derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds), in whatever
form the same may be, are herein referred to as "assets held with respect to"
that Series. In the event that there are any assets, income, earnings, profits
and proceeds thereof, funds or payments which are not readily identifiable as
assets held with respect to any particular Series (collectively "General
Assets"), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series in such manner and on such basis as the Trustees,
in their sole discretion, deem fair and equitable, and any General Assets so
allocated to a particular Series shall be held with respect to that Series. Each
such allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes. Separate and distinct records shall
be maintained for each Series and the assets held with respect to each Series
shall be held and accounted for separately from the assets held with respect to
all other Series and the General Assets of the Trust not allocated to such
Series.
(b) Liabilities Held with Respect to a Particular Series. The assets of
the Trust held with respect to each particular Series shall be charged against
the liabilities of the Trust held with respect to that Series and all expenses,
costs, charges, and reserves attributable to that Series, except that
liabilities and expenses allocated solely to a particular Class shall be borne
by that Class. Any general liabilities of the Trust which are not readily
identifiable as being held with respect to any particular Series or Class shall
be allocated and charged by the Trustees to and among any one or more of the
Series or Classes in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. All liabilities, expenses, costs, charges,
and reserves so charged to a Series or Class are herein referred to as
"liabilities held with respect to" that Series or Class. Each allocation of
liabilities, expenses, costs, charges, and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all Series or Classes for all
purposes. Without limiting the foregoing, but subject to the right of the
Trustees to allocate general liabilities, expenses, costs, charges 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 held with respect to such Series only and not
against the assets of the Trust generally or against the assets held with
respect to any other Series. Notice of this contractual limitation on
liabilities among Series may, in the Trustees' discretion, be set forth in the
Certificate of Trust 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 liabilities among Series (and the statutory effect under Section
3804 of setting forth such notice in the certificate of trust) shall become
applicable to the Trust and each Series. Any person extending credit to,
contracting with or having any claim against any Series may look only to the
assets of that Series to satisfy or enforce any debt, with respect to that
Series. 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.
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(c) Dividends, Distributions. Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article Vl, no dividend or distribution, including, without
limitation, any distribution paid upon termination of the Trust or of any Series
or Class with respect to, nor any redemption or repurchase of, the Shares of any
Series or Class, shall be effected by the Trust other than from the assets held
with respect to such Series, nor shall any Shareholder or any particular Series
or Class otherwise have any right or claim against the assets held with respect
to any other Series except to the extent that such Shareholder has such a right
or claim hereunder as a Shareholder of such other Series. The Trustees shall
have full discretion, to the extent not inconsistent with the 1940 Act, to
determine which items shall be treated as income and which items as capital, and
each such determination and allocation shall be conclusive and binding upon the
Shareholders.
(d) Equality. All the Shares of each particular Series shall represent
an equal proportionate interest in the assets held with respect to that Series
(subject to the liabilities held with respect to that Series or Class thereof
and such rights and preferences as may have been established and designated with
respect to any Class within such Series), and each Share of any particular
Series shall be equal to each other Share of that Series. With respect to any
Class of a Series, each such Class shall represent interests in the assets held
with respect to that Series and shall have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
expenses allocated to a Class may be borne solely by such Class as determined by
the Trustees and a Class may have exclusive voting rights with respect to
matters affecting only that Class.
(e) Fractions. Any fractional Share of a Series or Class thereof shall
carry proportionately all the rights and obligations of a whole Share of that
Series or Class, including rights with respect to voting, receipt of dividends
and distributions, redemption of Shares and termination of the Trust.
(f) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series or Class shall have the right
to exchange said Shares for Shares of one or more other Series of Shares or
Class of Shares of the Trust or of other investment companies registered under
the 1940 Act in accordance with such requirements and procedures as may be
established by the Trustees.
(g) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series or Class unless otherwise
required by applicable law, to combine the assets and liabilities held with
respect to any two or more Series or Classes into assets and liabilities held
with respect to a single Series or Class.
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ARTICLE IV
Trustees
Section 1. Number, Election and Tenure. The number of Trustees shall
initially be 1, who shall be ____________. On a date fixed by the Trustee(s),
the shareholders shall elect additional Trustees. The number of Trustees shall
at all times be at least one and no more than such number as determined, from
time to time, by the Trustees pursuant to Section 3 of this Article IV. Each
Trustee shall serve during the lifetime of the Trust until he or she dies,
resigns, has reached any mandatory retirement age as set by the Trustees, is
declared bankrupt or incompetent by a court of appropriate jurisdiction, or is
removed, or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and until the election and qualification of his or
her successor. In the event that less than a majority of the Trustees holding
office have been elected by the Shareholders, the Trustees then in office shall
take such actions as may be necessary under applicable law for the election of
Trustees. Any Trustee may resign at any time by written instrument signed by him
or her and delivered to any officer of the Trust or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his or her
resignation or removal, or any right to damages on account of such removal. The
Shareholders may elect Trustees at any meeting of Shareholders called by the
Trustees for that purpose. Any Trustee may be removed at any meeting of
Shareholders by a vote of two-thirds of the outstanding Shares of the Trust.
Section 2. Effect of Death. Resignation. etc. of a Trustee. The death,
declination to serve, resignation, retirement, removal or incapacity of one or
more Trustees, or all of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Declaration of Trust.
Whenever there shall be fewer than the designated number of Trustees, until
additional Trustees are elected or appointed as provided herein to bring the
total number of Trustees equal to the designated number, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by this Declaration
of Trust. As conclusive evidence of such vacancy, a written instrument
certifying the existence of such vacancy may be executed by an officer of the
Trust or by a majority of the Trustees. In the event of the death, declination,
resignation, retirement, removal, or incapacity of all the then Trustees within
a short period of time and without the opportunity for at least one Trustee
being able to appoint additional Trustees to replace those no longer serving,
the Trust's Adviser(s) are empowered to appoint new Trustees subject to the
provisions of the 1940 Act.
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Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Trustees, and the
Trustees shall have all powers necessary or convenient to carry out that
responsibility including the power to engage in transactions of all kinds on
behalf of the Trust as described in this Declaration of Trust. Without limiting
the foregoing, the Trustees may: adopt By-Laws not inconsistent with this
Declaration of Trust providing for the management of the affairs of the Trust
and may amend and repeal such By-Laws to the extent that such By-Laws do not
reserve that right to the Shareholders; enlarge or reduce the number of
Trustees; remove any Trustee with or without cause 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, and fill
vacancies caused by enlargement of their number or by the death, resignation,
retirement or removal of a Trustee; elect and remove, with or without cause,
such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees, consisting of two or more Trustees, that may exercise the
powers and authority of the Board of Trustees to the extent that the Trustees so
determine; employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank; employ an administrator for the Trust and may
authorize such administrator to employ subadministrators; employ an investment
adviser or investment advisers to the Trust and may authorize such Advisers to
employ subadvisers; retain a transfer agent or a shareholder servicing agent, or
both; provide for the issuance and distribution of Shares by the Trust directly
or through one or more Principal Underwriters or otherwise; redeem, repurchase
and transfer Shares pursuant to applicable law; set record dates for the
determination of Shareholders with respect to various matters; declare and pay
dividends and distributions to Shareholders of each Series from the assets of
such Series; and in general delegate such authority as they consider desirable
to any officer of the Trust, to any committee of the Trustees and to any agent
or employee of the Trust or to any such custodian, transfer or shareholder
servicing agent, or Principal Underwriter. Any determination as to what is in
the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees. Unless
otherwise specified herein or in the By-Laws or required by law, any action by
the Trustees shall be deemed effective if approved or taken by a majority of the
Trustees present at a meeting of Trustees at which a quorum of Trustees is
present, within or without the State of Delaware.
Without limiting the foregoing, the Trustees shall have the power and
authority to cause the Trust (or to act on behalf of the Trust):
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal in or dispose of contracts for the future acquisition or delivery
of fixed income or other securities, and
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securities of every nature and kind, including, without limitation, all types of
bonds, debentures, stocks, negotiable or non-negotiable instruments,
obligations, evidences of indebtedness, certificates of deposit or indebtedness,
commercial papers, repurchase agreements, bankers' acceptances, and other
securities of any kind, issued, created, guaranteed, or sponsored by any and all
Persons, including without limitation, states, territories, and possessions of
the United States and the District of Columbia and any political subdivision,
agency, or instrumentality thereof, any foreign government or any political
subdivision of the United States Government or any foreign government, or any
international instrumentality, or by any bank or savings institution, or by any
corporation or organization organized under the laws of the United States or of
any state, territory, or possession thereof, or by any corporation or
organization organized under any foreign law, or in "when issued" contracts for
any such securities, to change the investments of the assets of the Trust; and
to exercise any and all rights, powers, and privileges of ownership or interest
in respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons to exercise any of
said rights, powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options (including, options on futures contracts) with respect to or
otherwise deal in any property rights relating to any or all of the assets of
the Trust or any Series;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such Person or Persons as the Trustees shall
deem proper, granting to such Person or Persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not
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so deposited or transferred) as the Trustees shall deem proper, and to agree to
pay, and to pay, such portion of the expenses and compensation of such
committee, depositary or trustee as the Trustees shall deem proper;
(h) To 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;
(i) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes and in connection therewith to issue notes or
other evidences of indebtedness; and to mortgage and pledge the Trust Property
or any part thereof to secure any or all of such indebtedness;
(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof; and to mortgage and pledge the
Trust Property or any part thereof to secure any of or all of such obligations;
(l) To purchase and pay for entirely out of Trust Property such
insurance as the Trustees may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies insuring the
assets of the Trust or payment of distributions and principal on its portfolio
investments, and insurance polices insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust, individually against all claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such Person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person against
liability;
(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift and other retirement, incentive and
benefit plans and trusts, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits, for any or
all of the Trustees, officers, employees and agents of the Trust;
(n) To operate as and carry out the business of an investment company,
and exercise all the powers necessary or appropriate to the conduct of such
operations;
(o) To enter into contracts of any kind and description;
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(p) To employ as custodian of any assets of the Trust one or more
banks, trust companies or companies that are members of a national securities
exchange or such other entities as the Commission may permit as custodians of
the Trust, subject to any conditions set forth in this Declaration of Trust or
in the By-Laws;
(q) To employ auditors, counsel or other agents of the Trust, subject
to any conditions set forth in this Declaration of Trust or in the By-Laws;
(r) To interpret the investment policies, practices, or
limitations of any Series or Class;
(s) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes, and with
separate Shares representing beneficial interests in such Series, and to
establish separate Classes, all in accordance with the provisions of Article
III;
(t) To the full extent permitted by the Delaware Act, to allocate
assets, liabilities and expenses of the Trust to a particular Series and Class
or to apportion the same between or among two or more Series or Classes,
provided that any liabilities or expenses incurred by a particular Series or
Class shall be payable solely out of the assets belonging to that Series or
Class as provided for in Article III;
(u) To invest all of the assets of the Trust, or any Series or any
Class thereof in a single investment company;
(v) Subject to the 1940 Act, to engage in any other lawful act or
activity in which a business trust organized under the Delaware Act may engage.
The Trust shall not be limited to investing in obligations maturing
before the possible termination of the Trust or one or more of its Series. The
Trust shall not in any way be bound or limited by any present or future law or
custom in regard to investment by fiduciaries. The Trust shall not be required
to obtain any court order to deal with any assets of the Trust or take any other
action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of the principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, Advisers, Principal
Underwriter, auditors, counsel, custodian, transfer agent, shareholder servicing
agent, and such other agents or independent contractors and such other expenses
and charges as the Trustees may deem necessary or proper to incur, which
expenses, fees, charges, taxes and liabilities shall be allocated in accordance
with Article III, Section 6 hereof.
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Section 5. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series, to pay directly, in advance or
arrears, expenses of the Trust as described in Section 4 of this Article IV
("Expenses"), in an amount fixed from time to time by the Trustees, by setting
off such Expenses due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of Shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of such Expenses due from such Shareholder,
provided that the direct payment of such Expenses by Shareholders is permitted
under applicable law.
Section 6. Ownership of Assets of the Trust. Title to all of the assets
of the Trust shall at all times be considered as vested in the Trust, except
that the Trustees shall have power to cause legal title to any Trust Property to
be held by or in the name of one or more of the Trustees, or in the name of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine. The right, title and interest of the Trustees in the
Trust Property shall vest automatically in each Person who may hereafter become
a Trustee. Upon the resignation, removal or death of a Trustee, he or she shall
automatically cease to have any right, title or interest in any of the Trust
Property, and the right, title and interest of such Trustee in the Trust
property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as may be set forth
under federal and/or state law and in the By-Laws, including, without
limitation, the requirements of Section 15 of the 1940 Act, the Trustees may, at
any time and from time to time, contract for exclusive or nonexclusive advisory,
management and/or administrative services for the Trust or for any Series (or
Class thereof) with any Person and any such contract may contain such other
terms as the Trustees may determine, including, without limitation, authority
for the Adviser(s) or administrator to delegate certain or all of its duties
under such contracts to other qualified investment advisers and administrators
and to determine from time to time without prior consultation with the Trustees
what investments shall be purchased, held sold or exchanged and what portion, if
any, of the assets of the Trust shall be held uninvested and to make changes in
the Trust's investments, or such other activities as may specifically be
delegated to such party.
(b) The Trustees may also, at any time and from time to time, contract
with any Person, appointing such Person exclusive or nonexclusive distributor or
Principal
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Underwriter for the Shares of one or more of the Series (or Classes) or other
securities to be issued by the Trust.
(c) The Trustees are also empowered, at any time and from time to
time, to contract with any Person, appointing such Person or Persons the
custodian, transfer agent and/or shareholder servicing agent for the Trust or
one or more of its Series.
(d) The Trustees are further empowered, at any time and from time to
time, to contract with any Person to provide such other services to the Trust or
one or more of the Series, as the Trustees determine to be in the best interests
of the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the Trust
is a shareholder, director, officer, partner, trustee,
employee, Adviser, Principal Underwriter, distributor, or
affiliate or agent of or for any Person, or for any parent
or affiliate of any Person with which an advisory,
management, or administration contract, or Principal
Underwriter's or distributor's contract, or transfer agent,
shareholder servicing agent or other type of service
contract may have been or may hereafter be made, or that any
such organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust; or that
(ii) any Person with which an advisory, management, or
administration contract or Principal Underwriter's or
distributor's contract, or transfer agent or
shareholder servicing agent contract may have been or
may hereafter be made also has an advisory,
management, or administration contract, or Principal
Underwriter's or distributor's or other service
contract with one or more other Persons, or has other
business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the Trust from voting upon or executing the
same, or create any liability or accountability to the Trust or its
shareholders.
Section 8. Trustees and Officers as Shareholders. Any Trustee, officer
or agent of the Trust may acquire, own and dispose of Shares to the same extent
as if he or she were not a Trustee, officer or agent; and the Trustees may issue
and sell and cause to be issued and sold Shares to, and redeem such Shares from,
any such Person or any firm or company in which such Person is interested,
subject only to the general limitations contained herein or in the By-Laws
relating to the sale and redemption of such Shares.
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Section 9. Compensation. The Trustees in such capacity shall be
entitled to reasonable compensation from the Trust and they may fix the amount
of such compensation. Nothing herein shall in any way prevent the employment of
any Trustee for advisory, management, legal, accounting, investment banking or
other services and payment for such services by the Trust.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Meetings. Notice. and Record Dates. The
Shareholders shall have power to vote only: (i) for the election or removal of
Trustees as provided in Article IV, Section 1 hereof, and (ii) with respect to
such additional matters relating to the Trust as may be required by applicable
law, this Declaration of Trust, the By-Laws or any registration statement of the
Trust with the Commission (or any successor agency) or as the Trustees may
consider necessary or desirable. Shareholders shall be entitled to one vote for
each Share, and a fractional vote for each fraction of a Share for each Share
held, as to any matter on which the Share is entitled to vote. Notwithstanding
any other provision of this Declaration of Trust, on any matters submitted to a
vote of the Shareholders, all shares of the Trust then entitled to vote shall be
voted in aggregate, except: (i) when required by the 1940 Act, Shares shall be
voted by individual Series; (ii) when the matter involves any action that the
Trustees have determined will affect only the interests of one or more Series,
then only Shareholders of such Series shall be entitled to vote thereon; and
(iii) when the matter involves any action that the Trustees have determined will
affect only the interests of one or more Classes, then only the Shareholders of
such Class or Classes shall be entitled to vote thereon. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy may be given in writing. The By-Laws may provide that proxies
may also, or may instead, be given by an electronic or telecommunications device
or in any other manner. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by law, this Declaration
of Trust or the By-Laws to be taken by the Shareholders. Meetings of the
Shareholders shall be called and notice thereof and record dates therefor shall
be given and set as provided in the By-Laws.
Section 2. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust, one
third (33 1/3%) of the Shares issued and outstanding shall constitute a quorum
at a Shareholders' meeting but any lesser number shall be sufficient for
adjourned sessions. When any one or more Series (or Classes) is to vote as a
single Series (or Class) separate from any other Shares, one third (33 1/3%) of
the Shares of each such Series (or Class) issued and outstanding shall
constitute a quorum at a Shareholders' meeting of that Series (or Class). Except
when a larger vote is required by any provision of this Declaration of Trust or
the By-Laws or by applicable law, when a quorum is present at any meeting, a
majority of the Shares voted shall decide any questions and a plurality
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<PAGE>
of the Shares voted shall elect a Trustee, provided that where any provision of
law or of this Declaration of Trust requires that the holders of any Series
shall vote as a Series (or that holders of a Class shall vote as a Class), then
a majority of the Shares of that Series (or Class) voted on the matter (or a
plurality with respect to the election of a Trustee) shall decide that matter
insofar as that Series (or Class) is concerned.
Section 3. Record Dates. For the purpose of determining the
Shareholders of any Series (or Class) who are entitled to receive payment of any
dividend or of any other distribution, the Trustees may from time to time fix a
date, which shall be before the date for the payment of such dividend or such
other payment, as the record date for determining the Shareholders of such
Series (or Class) having the right to receive such dividend or distribution.
Without fixing a record date, the Trustees may for distribution purposes close
the register or transfer books for one or more Series (or Classes) at any time
prior to the payment of a distribution. Nothing in this Section shall be
construed as precluding the Trustees from setting different record dates for
different Series (or Classes).
Section 4. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions and Redemptions
Section 1. Determination of Net Asset Value, Net Income and
Distributions. Subject to applicable law and Article III, Section 6 hereof, the
Trustees, in their absolute discretion, may prescribe and shall set forth in the
By-Laws or in a duly adopted vote of the Trustees such bases and time for
determining the per Share or net asset value of the Shares of any Series or
Class or net income attributable to the Shares of any Series or Class, or the
declaration and payment of dividends and distributions on the Shares of any
Series or Class, as they may deem necessary or desirable.
Section 2. Redemptions and Repurchases.
(a) The Trust shall purchase such Shares as are offered by any
Shareholder for redemption, upon the presentation of a proper instrument of
transfer together with a request directed to the Trust, or a Person designated
by the Trust, that the Trust purchase such Shares or in accordance with such
other procedures for redemption as the Trustees may from time to time authorize;
and the Trust will pay therefor the net asset value thereof as determined by the
Trustees (or on their behalf), in accordance with any applicable provisions of
the By-Laws, any registration statement of the Trust and applicable law. Unless
extraordinary circumstances exist, payment for said Shares shall be made by the
Trust to the Shareholder in accordance with the 1940 Act and any rules and
regulations thereunder or as otherwise required by the Commission. The
obligation set forth in this Section 2(a) is subject to the provision that,
during any
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<PAGE>
emergency which makes it impracticable for the Trust to dispose of the
investments of the applicable Series or to determine fairly the value of the net
assets held with respect to such Series, such obligation may be suspended or
postponed by the Trustees. In the case of a suspension of the right of
redemption as provided herein, a Shareholder may either withdraw the request for
redemption or receive payment based on the net asset value per share next
determined after the termination of such suspension.
(b) The redemption price may in any case or cases be paid wholly or
partly in kind if the Trustees determine that such payment is advisable in the
interest of the remaining Shareholders of the Series or Class thereof for which
the Shares are being redeemed. Subject to the foregoing, the fair value,
selection and quantity of securities or other property so paid or delivered as
all or part of the redemption price may be determined by or under authority of
the Trustees. In no case shall the Trust be liable for any delay of any Adviser
or other Person in transferring securities selected for delivery as all or part
of any payment-in-kind.
(c) If the Trustees shall, at any time and in good faith, determine
that direct or indirect ownership of Shares of any Series or Class thereof has
or may become concentrated in any Person to an extent that would disqualify any
Series as a regulated investment company under the Internal Revenue Code of
1986, as amended (or any successor statute thereof), then the Trustees shall
have the power (but not the obligation) by such means as they deem equitable (i)
to call for the 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, (ii) to
refuse to transfer or issue Shares of any Series or Class thereof to such Person
whose acquisition of the Shares in question would result in such
disqualification, or (iii) to take such other actions as they deem necessary and
appropriate to avoid such disqualification. Any such redemption shall be
effected at the redemption price and in the manner provided in this Article VI.
(d) The holders of Shares 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 provisions of the Internal
Revenue Code of 1986, as amended (or any successor statute thereto), or to
comply with the requirements of any other taxing authority.
ARTICLE VII
Limitation of Liability; Indemnification
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice. The
Trustees, officers, employees and agents of the Trust, in incurring any debts,
liabilities or obligations, or in limiting or omitting any other actions for or
in connection with the Trust, are or shall be deemed to be acting as Trustees,
officers, employees or agents of the Trust and not in their own capacities. No
Shareholder shall be subject to any
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<PAGE>
personal liability whatsoever in tort, contract or otherwise to any other Person
or Persons in connection with the assets or the affairs of the Trust or of any
Series, and subject to Section 4 of this Article VII, no Trustee, officer,
employee or agent of the Trust shall be subject to any personal liability
whatsoever in tort, contract, or otherwise, to any other Person or Persons in
connection with the assets or affairs of the Trust or of any Series, save only
that arising from his or her own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or
her office or the discharge of his or her functions. The Trust (or if the matter
relates only to a particular Series, that Series) shall be solely liable for any
and all debts, claims, demands, judgments, decrees, liabilities or obligations
of any and every kind, against or with respect to the Trust or such Series in
tort, contract or otherwise in connection with the assets or the affairs of the
Trust or such Series, and all Persons dealing with the Trust or any Series shall
be deemed to have agreed that resort shall be had solely to the Trust Property
of the Trust (or if the matter relates only to a particular Series, that of such
Series), for the payment or performance thereof.
The Trustees may provide that every note, bond, contract, instrument,
certificate or undertaking made or issued by the Trustees or by any officers or
officer shall give notice that a Certificate of Trust in respect of the Trust is
on file with the Secretary of State of the State of Delaware and may recite to
the effect that the same was executed or made by or on behalf of the Trust or by
them as Trustees or Trustee or as officers or officer, and not individually, and
that the obligations of any instrument made or issued by the Trustees or by any
officer of officers of the Trust are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust, or the particular Series in question, as the case may be. The
omission of any statement to such effect from such instrument shall not operate
to bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually, or to subject the assets of any Series to the
obligations of any other Series.
Section 2. Trustees' Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to Section 4 of this Article
VII, a Trustee shall be liable for his or her own willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee, and for nothing else, and shall not be liable
for errors of judgment or mistakes of fact or law. Subject to the foregoing, (i)
the Trustees shall not be responsible or liable in any event for any neglect or
wrongdoing of any officer, agent, employee, consultant, Adviser, administrator,
distributor or Principal Underwriter, custodian or transfer agent, dividend
disbursing agent, shareholder servicing agent or accounting agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
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<PAGE>
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a contracting party employed by
the Trust. The Trustees as such shall not be required to give any bond or surety
or any other security for the performance of their duties.
Section 3. Indemnification of Shareholders. If any Shareholder (or
former Shareholder) of the Trust shall be charged or held to be personally
liable for any obligation or liability of the Trust solely by reason of being or
having been a Shareholder and not because of such Shareholder's acts or
omissions or for some other reason, the Trust (upon proper and timely request by
the Shareholder) may assume the defense against such charge and satisfy any
judgment thereon or may reimburse the Shareholders for expenses, and the
Shareholder or former Shareholder (or the heirs, executors, administrators or
other legal representatives thereof, or in the case of a corporation or other
entity, its corporate or other general successor) shall be entitled (but solely
out of the assets of the Series of which such Shareholder or former Shareholder
is or was the holder of Shares) to be held harmless from and indemnified against
all loss and expense arising from such liability.
Section 4. Indemnification of Trustees, Officers, etc. Subject to the
limitations, if applicable, hereinafter set forth in this Section 4, the Trust
shall indemnify (from the assets of one or more Series to which the conduct in
question relates) each of its Trustees, officers, employees and agents
(including Persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter, together with such Person's
heirs, executors, administrators or personal representative, referred to as a
"Covered Person")) against all liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromise or as fines and penalties, and
expenses, including reasonable accountants' and counsel fees, incurred by any
Covered Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or may
have been involved as a party or otherwise or with which such Covered Person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such Covered
Person (i) did not act in good faith in the reasonable belief that such Covered
Person's action was in or not opposed to the best interests of the Trust; or
(ii) had acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office;
and (iii) for a criminal proceeding, had reasonable cause to believe that his or
her conduct was unlawful (the conduct described in (i), (ii) and (iii) being
referred to hereafter as "Disabling Conduct"). A determination that the Covered
Person is entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
Covered Person to be indemnified was not liable by reason of Disabling Conduct,
(ii) dismissal of a court action or an administrative proceeding
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<PAGE>
against a Covered Person for insufficiency of evidence of Disabling Conduct, or
(iii) a reasonable determination, based upon a review of the facts, that the
indemnitee was not liable by reason of Disabling Conduct by (a) a vote of a
majority of a quorum of the Trustees who are neither "interested persons" of the
Trust as defined in the 1940 Act nor parties to the proceeding (the
"Disinterested Trustees"), or (b) an independent legal counsel in a written
opinion. Expenses, including accountants' and counsel fees so incurred by any
such Covered Person (but excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), may be paid from time to time by one or
more Series to which the conduct in question related in advance of the final
disposition of any such action, suit or proceeding; provided that the Covered
Person shall have undertaken to repay the amounts so paid to such Series if it
is ultimately determined that indemnification of such expenses is not authorized
under this Article VII and (i) the Covered Person shall have provided security
for such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
Disinterested Trustees, or an independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts (as opposed
to a full trial type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
Section 5. Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 4 of this
Article VII, pursuant to a consent decree or otherwise, no such indemnification
either for said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
Disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent legal
counsel pursuant to clause (ii) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with either of
such clauses as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or to have been 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 the Covered Person's
office.
Section 6. Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article VII shall not be exclusive of or affect
any other rights to which any such Covered Person or shareholder may be
entitled. As used in this Article VII, a "disinterested" Person is one against
whom none of the actions, suits or other proceedings in question, and no other
action, suit or other proceeding on the same or similar grounds is then or has
been pending or threatened. Nothing contained in this Article VII shall affect
any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other Persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such Person.
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<PAGE>
Section 7. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 8. Insurance. The Trustees shall be entitled and empowered to
the fullest extent permitted by law to purchase with Trust assets insurance for
liability and for all expenses reasonably incurred or paid or expected to be
paid by a Trustee, officer, employee, or agent of the Trust in connection with
any claim, action, suit, or proceeding in which he or she may become involved by
virtue of his or her capacity or former capacity as a Trustee of the Trust.
ARTICLE VIII
Miscellaneous
Section 1. Termination of the Trust or Any Series or Class.
(a) Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trustees in their sole discretion may terminate
the Trust.
(b) Upon the requisite action by the Trustees to terminate the Trust or
any one or more Series of Shares or any Class thereof, after paying or otherwise
providing for all charges, taxes, expenses, and liabilities, whether due or
accrued or anticipated, of the Trust or of the particular Series or any Class
thereof as may be determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees may consider appropriate reduce the remaining
assets of the Trust or of the affected Series or Class to distributable form in
cash or Shares (if any Series remain) or other securities, or any combination
thereof, and distribute the proceeds to the Shareholders of the Series or
Classes involved, ratably according to the number of Shares of such Series or
Class held by the Shareholders of such Series or Class on the date of
distribution. Thereupon, the Trust or any affected Series or Class shall
terminate and the Trustees and the Trust shall be discharged from any and all
further liabilities and duties relating thereto or arising therefrom, and the
right, title, and interest of all parties with respect to the Trust or such
Series or Class shall be canceled and discharged.
(c) 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 2. Reorganization.
(a) Notwithstanding anything else herein, the Trustees may, without
Shareholder approval unless such approval is required by applicable law, (i)
cause the
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<PAGE>
Trust to merge or consolidate with or into or transfer its assets and any
liabilities to one or more trusts (or series thereof to the extent permitted by
law), partnerships, associations, corporations or other business entities
(including trusts, partnerships, associations, corporations or other business
entities created by the Trustees to accomplish such merger or consolidation or
transfer of assets and any liabilities) so long as the surviving or resulting
entity is an investment company as defined in the 1940 Act, or is a series
thereof, that will succeed to or assume the Trust's registration under the 1940
Act and that is formed, organized, or existing under the laws of the United
States or of a state, commonwealth, possession or colony of the United States,
unless otherwise permitted under the 1940 Act, (ii) cause any one or more Series
(or Classes) of the Trust to merge or consolidate with or into or transfer its
assets and any liabilities to any one or more other Series (or Classes) of the
Trust, one or more trusts (or series or classes thereof to the extent permitted
by law), partnerships, associations, corporations, (iii) cause the Shares to be
exchanged under or pursuant to any state or federal statute to the extent
permitted by law or (iv) cause the Trust to reorganize as a corporation, limited
liability company or limited liability partnership under the laws of Delaware or
any other state or jurisdiction.
(b) 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 Declaration of Trust, an agreement of merger or consolidation
or exchange or transfer of assets and liabilities approved by the Trustees in
accordance with this Section 2 may (i) effect any amendment to the governing
instrument of the Trust or (ii) effect the adoption of a new governing
instrument of the Trust if the Trust is the surviving or resulting trust in the
merger or consolidation.
(c) The Trustees may create one or more business trusts to which all or
any part of the assets, liabilities, profits, or losses of the Trust or any
Series or Class thereof may be transferred and may provide for the conversion of
Shares in the Trust or any Series or Class thereof into beneficial interests in
any such newly created trust or trusts or any series or classes thereof.
Section 3. Amendments. Except as specifically provided in this Section
3, the Trustees may, without Shareholder vote, restate, amend, or otherwise
supplement this Declaration of Trust. Shareholders shall have the right to vote
on (i) any amendment that would affect their right to vote granted in Article V,
Section 1 hereof, (ii) any amendment to this Section 3 of Article VIII; (iii)
any amendment that may require their vote under applicable law or by the Trust's
registration statement, as filed with the Commission, and (iv) any amendment
submitted to them for their vote by the Trustees. Any amendment required or
permitted to be submitted to the Shareholders that, as the Trustees determine,
shall affect the Shareholders of one or more Series shall be authorized by a
vote of the Shareholders of each Series affected and no vote of Shareholders of
a Series not affected shall be required. Notwithstanding anything else herein,
no amendment hereof shall limit the rights to insurance provided by Article VII
hereof with respect to any acts or omissions of Persons covered thereby prior to
such
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<PAGE>
amendment nor shall any such amendment limit the rights to indemnification
referenced in Article VIl hereof as provided in the By-Laws with respect to any
actions or omissions of Persons covered thereby prior to such amendment. The
Trustees may, without Shareholder vote, restate, amend, or otherwise supplement
the Certificate of Trust as they deem necessary or desirable.
Section 4. Filing of Copies; References; Headings. The original or a
copy of this instrument and of each restatement and/or amendment hereto shall be
kept at the office of the Trust where it may be inspected by any Shareholder.
Anyone dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such restatements and/or amendments have been
made and as to any matters in connection with the Trust hereunder; and, with the
same effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such restatements
and/or amendments. In this instrument and in any such restatements and/or
amendments, references to this instrument, and all expressions such as "herein,"
"hereof," and "hereunder," shall be deemed to refer to this instrument as
amended or affected by any such restatements and/or amendments. Headings are
placed herein for convenience of reference only and shall not be taken as a part
hereof or control or affect the meaning, construction or effect of this
instrument. Whenever the singular number is used herein, the same shall include
the plural; and the neuter, masculine and feminine genders shall include each
other, as applicable. This instrument may be executed in any number of
counterparts each of which shall be deemed an original.
Section 5. Applicable Law.
(a) The Trust is created under, and this Declaration of Trust is to be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware. The Trust shall be of the type commonly called a business
trust, and without limiting the provisions hereof, the Trust specifically
reserves the right to exercise any of the powers or privileges afforded to
business trusts or actions that may be engaged in by business 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.
(b) Notwithstanding the first sentence of Section 5(a) of this Article
VIII, there shall not be applicable to the Trust, the Trustees, or this
Declaration of Trust either the provisions of Section 3540 of Title 12 of the
Delaware Code or any provisions of the laws (statutory or common) of the State
of Delaware (other than the Delaware Act) pertaining to trusts that 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 a court or other governmental approval
concerning the acquisition, holding, or disposition of real or personal
property; (iv) fees or other sums applicable to trustees, officers, agents or
employees of a trust; (v) the allocation
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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 or responsibilities or limitations on the acts or powers or
liabilities or authorities and powers of trustees that are inconsistent with the
limitations or liabilities or authorities and powers of the Trustees set forth
or referenced in this Declaration of Trust; or (viii) activities similar to
those referenced in the foregoing items (i) through (vii).
Section 6. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any such
provision is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code of 1986, as amended (or any successor
statute thereto), and the regulations thereunder, the Delaware Act or with other
applicable laws and regulations, the conflicting provision shall be deemed never
to have constituted a part of this Declaration of Trust; provided, however, that
such decision shall not affect any of the remaining provisions of this
Declaration of Trust or render invalid or improper any action taken or omitted
prior to such determination.
(b) If any provision of this Declaration of Trust shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall, not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration of Trust in any jurisdiction.
Section 7. Business Trust Only. It is the intention of the Trustees to
create a business trust pursuant to the Delaware Act. It is not the intention of
the Trustees to create a general partnership, limited partnership, joint stock
association, corporation, bailment, or any form of legal relationship other than
a business trust pursuant to the Delaware Act. Nothing in this Declaration of
Trust shall be construed to make the Shareholders, either by themselves or with
the Trustees, partners, or members of a joint stock association.
<PAGE>
IN WITNESS WHEREOF, the Trustee named below does hereby make and enter
into this Agreement and Declaration of Trust as of the 15th day of December,
1999.
Trustee and not individually
THE PRINCIPAL PLACE OF BUSINESS
OF THE TRUST IS:
790 Eddy Street
San Francisco, California 94109
<PAGE>
By-laws
of
whatifi Funds
a Delaware Business Trust
<PAGE>
TABLE OF CONTENTS
INTRODUCTION...................................................................1
A. Agreement and Declaration of Trust.................................1
B. Definitions........................................................1
ARTICLE I OFFICES.............................................................1
Section 1. Principal Office...........................................1
Section 2. Delaware Office............................................1
Section 3. Other Offices..............................................1
ARTICLE II MEETINGS OF SHAREHOLDERS...........................................1
Section 1. Place of Meetings..........................................1
Section 2. Call of Meetings...........................................2
Section 3. Notice of Meetings of Shareholders.........................2
Section 4. Manner of Giving Notice: Affidavit of Notice...............2
Section 5. Adjourned Meeting; Notice..................................3
Section 6. Voting.....................................................3
Section 7. Waiver of Notice; Consent of Absent Shareholders...........3
Section 8. Shareholder Action by Written Consent Without a Meeting....4
Section 9. Record Date for Shareholder Notice; Voting and Giving
Consents..................................4
Section 10. Proxies...................................................5
Section 11. Inspectors of Election....................................5
ARTICLE III TRUSTEES..........................................................6
Section 1. Powers.....................................................6
Section 2. Number of Trustees.........................................6
Section 3. Vacancies..................................................6
Section 4. Chair......................................................6
Section 5. Place of Meetings and Meetings by Telephone................7
Section 6. Regular Meetings...........................................7
Section 7. Special Meetings...........................................7
Section 8. Quorum.....................................................7
Section 9. Waiver of Notice...........................................8
Section 10. Adjournment...............................................8
Section 11. Notice of Adjournment.....................................8
Section 12. Action Without a Meeting..................................8
Section 13. Fees and Compensation of Trustees.........................8
Section 14. Delegation of Power to Other Trustees.....................8
ARTICLE IV COMMITTEES.........................................................9
Section 1. Committees of Trustees.....................................9
Section 2. Meetings and Action of Committees..........................9
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<PAGE>
ARTICLE V OFFICERS..........................................................10
Section 1. Officers.................................................10
Section 2. Election of Officers.....................................10
Section 3. Subordinate Officers.....................................10
Section 4. Removal and Resignation of Officers......................10
Section 5. Vacancies in Offices.....................................10
Section 6. President................................................10
Section 7. Vice Presidents..........................................11
Section 8. Secretary................................................11
Section 9. Treasurer................................................11
ARTICLE VI INSPECTION OF RECORDS AND REPORTS................................12
Section 1. Inspection by Shareholders...............................12
Section 2. Inspection by Trustees...................................12
ARTICLE VII GENERAL MATTERS.................................................12
Section 1. Checks, Drafts, Evidences of Indebtedness................12
Section 2. Contracts and Instruments: How Executed..................13
Section 3. Fiscal Year..............................................13
Section 4. Seal.....................................................13
ARTICLE VIII AMENDMENTS.....................................................13
Section 1. Amendment................................................13
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<PAGE>
By-Laws
of
whatifi Funds
a Delaware Business Trust
INTRODUCTION
A. Agreement and Declaration of Trust. These By-Laws shall be subject
to the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of whatifi Funds, a Delaware business trust (the
"Trust"). In the event of any inconsistency between the terms hereof and the
terms of the Declaration of Trust, the terms of the Declaration of Trust shall
control.
B. Definitions. Capitalized terms used herein and not herein defined
are used as defined in the Declaration of Trust.
ARTICLE I OFFICES
Section 1. Principal Office. The Trustees shall fix and, from time to
time, may change the location of the principal executive office of the Trust at
any place within or outside the State of Delaware.
Section 2. Delaware Office. The Trustees shall establish a registered
office in the State of Delaware and shall appoint as the Trust's registered
agent for service of process in the State of Delaware an individual who is a
resident of the State of Delaware or a Delaware corporation or a corporation
authorized to transact business in the State of Delaware; in each case the
business office of such registered agent for service of process shall be
identical with the registered Delaware office of the Trust.
Section 3. Other Offices. The Trustees may at any time establish branch or
subordinate offices at any place or places within or outside the State of
Delaware where the Trust intends to do business.
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<PAGE>
ARTICLE II MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. Meetings of Shareholders shall be held at
any place designated by the Trustees. In the absence of any such designation,
Shareholders' meetings shall be held at the principal executive office of the
Trust.
Section 2. Call of Meetings. There shall be no annual Shareholders'
meetings. Special meetings of the Shareholders may be called at any time by the
Trustees, the President or any other officer designated for the purpose by the
Trustees, for the purpose of seeking action upon any matter requiring the vote
or authority of the Shareholders as herein provided or provided in the
Declaration of Trust or upon any other matter as to which such vote or authority
is deemed by the Trustees or the President to be necessary or desirable. To the
extent required by the Investment Company Act of 1940, as amended ("1940 Act"),
meetings of the Shareholders for the purpose of voting on the removal of any
Trustee shall be called promptly by the Trustees.
Section 3. Notice of Meetings of Shareholders. All notices of meetings
of Shareholders shall be sent or otherwise given to Shareholders in accordance
with Section 4 of this Article II not less than ten (10) nor more than ninety
(90) days before the date of the meeting. The notice shall specify (i) the
place, date and hour of the meeting, and (ii) the general nature of the business
to be transacted.
Section 4. Manner of Giving Notice: Affidavit of Notice. Notice of any
meeting of Shareholders shall be (i) given either by hand delivery, first-class
mail, telegraphic or other written communication, charges prepaid, and (ii)
addressed to the Shareholder at the address of that Shareholder appearing on the
books of the Trust or its transfer agent or given by the Shareholder to the
Trust for the purpose of notice. If no such address appears on the Trust's books
or is not given to the Trust, notice shall be deemed to have been given if sent
to that Shareholder by first class mail or telegraphic or other written
communication to the Trust's principal executive office, or if published at
least once in a newspaper of general circulation in the county where that office
is located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication or, where notice is given by publication, on the date of
publication.
An affidavit of the mailing or other means of giving any notice of any
meeting of Shareholders shall be filed and maintained in the minute book of the
Trust.
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Section 5. Adjourned Meeting; Notice. Any meeting of Shareholders, whether
or not a quorum is present, may be adjourned from time to time by: (a) the vote
of the majority of the Shares represented at that meeting, either in person or
by proxy; or (b) in his or her discretion by the chair of the meeting.
When any meeting of Shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed. Notice of any
such adjourned meeting shall be given to each Shareholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.
Section 6. Voting. The Shareholders entitled to vote at any meeting of
Shareholders shall be determined in accordance with the provisions of the
Declaration of Trust of the Trust, as in effect at such time. The Shareholders'
vote may be by voice vote or by ballot, provided, however, that any election for
Trustees must be by ballot if demanded by any Shareholder before the voting has
begun.
Section 7. Waiver of Notice; Consent of Absent Shareholders. The
transaction of business and any actions taken at a meeting of Shareholders,
however called and noticed and wherever held, shall be as valid as though taken
at a meeting duly held after regular call and notice provided a quorum is
present either in person or by proxy at the meeting of Shareholders and if
either before or after the meeting, each Shareholder entitled to vote who was
not present in person or by proxy at the meeting of the Shareholders signs a
written waiver of notice or a consent to a holding of the meeting or an approval
of the minutes. The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any meeting of Shareholders.
Attendance by a Shareholder at a meeting of Shareholders shall
constitute a waiver of notice of that meeting, except if the Shareholder objects
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened and except that attendance at a
meeting of Shareholders is not a waiver of any right to object to the
consideration of matters not included in the notice of the meeting of
Shareholders if that objection is expressly made at the beginning of the
meeting.
Section 8. Shareholder Action by Written Consent Without a Meeting.
Except as provided in the Declaration of Trust, any action that may be taken at
any meeting of Shareholders may be taken without a meeting and without prior
notice if a consent in writing setting forth the action to be taken is signed by
the holders of
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outstanding Shares having not less than the minimum number of votes that would
be necessary to authorize or take that action at a meeting, at which all Shares
entitled to vote on that action were present and voted, provided, however, that
the Shareholders receive any necessary Information Statement or other necessary
documentation in conformity with the requirements of the Securities Exchange Act
of 1934 or the rules or regulations thereunder. All such consents shall be filed
with the Secretary of the Trust and shall be maintained in the Trust's records.
Any Shareholder giving a written consent or the Shareholder's proxy holders or a
transferee of the Shares or a personal representative of the Shareholder or
their respective proxy holders may revoke the Shareholder's written consent by a
writing received by the Secretary of the Trust before written consents of the
number of Shares required to authorize the proposed action have been filed with
the Secretary.
If the consents of all Shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
Shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the Shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II.
Section 9. Record Date for Shareholder Notice; Voting and Giving
Consents.
(a) For purposes of determining the Shareholders entitled to vote or
act at any meeting or adjournment thereof, the Trustees may fix in advance a
record date which shall not be more than ninety (90) days nor less than ten (10)
days before the date of any such meeting. Without fixing a record date for a
meeting, the Trustees may for voting and notice purposes close the register or
transfer books for one or more Series (or Classes) for all or any part of the
period between the earliest date on which a record date for such meeting could
be set in accordance herewith and the date of such meeting.
If the Trustees do not so fix a record date or close the register or
transfer books of the affected Series or Classes, the record date for
determining Shareholders entitled to notice of or to vote at a meeting of
Shareholders shall be the close of business on the business day next preceding
the day on which notice is given or if notice is waived, at the close of
business on the business day next preceding the day on which the meeting is
held.
(b) The record date for determining Shareholders entitled to give
consent to action in writing without a meeting, (a) when no prior action of the
Trustees has been taken, shall be the day on which the first written consent is
given, or (b) when prior action of the Trustees has been taken, shall be (i)
such date as determined for that purpose by the Trustees, which record date
shall not precede
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the date upon which the resolution fixing it is adopted by the Trustees and
shall not be more than twenty (20) days after the date of such resolution, or
(ii) if no record date is fixed by the Trustees, the record date shall be the
close of business on the day on which the Trustees adopt the resolution relating
to that action. Nothing in this Section shall be constituted as precluding the
Trustees from setting different record dates for different Series or Classes.
Only Shareholders of record on the record date as herein determined shall have
any right to vote or to act at any meeting or give consent to any action
relating to such record date, notwithstanding any transfer of Shares on the
books of the Trust after such record date.
Section 10. Proxies. Subject to the provisions of the Declaration of
Trust, every Person entitled to vote for Trustees or on any other matter shall
have the right to do so either in person or by proxy, provided that either (i)
an instrument authorizing such a 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 (ii) the Trustees
adopt an electronic, telephonic, computerized or other alternative to the
execution of a written instrument authorizing the proxy to act, and such
authorization is received not more than eleven (11) months before the meeting. A
proxy shall be deemed executed by a Shareholder if the Shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the Shareholder or the Shareholder's
attorney-in-fact. A valid proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the Person
executing it before the vote pursuant to that proxy is taken, (a) by a writing
delivered to the Trust stating that the proxy is revoked, or (b) by a subsequent
proxy executed by such Person, or (c) attendance at the meeting and voting in
person by the Person executing that proxy, or (d) revocation by such Person
using any electronic, telephonic, computerized or other alternative means
authorized by the Trustees for authorizing the proxy to act; or (ii) written
notice of the death or incapacity of the maker of that proxy is received by the
Trust before the vote pursuant to that proxy is counted. A proxy with respect to
Shares held in the name of two or more Persons shall be valid if executed by any
one of them unless at or prior to exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of the two or more Persons.
A proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger.
Section 11. Inspectors of Election. Before any meeting of Shareholders, the
Trustees may appoint any persons other than nominees for office to act as
inspectors of election at the meeting or its adjournments. If no inspectors of
election are so appointed, the Chairman of the meeting may appoint inspectors of
election at the meeting. The number of inspectors shall be two (2). If any
person
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appointed as inspector fails to appear or fails or refuses to act, the Chairman
of the meeting may appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of Shares outstanding and the voting
power of each, the Shares represented at the meeting, the
existence of a quorum and the authenticity, validity and
effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all Shareholders.
ARTICLE III TRUSTEES
Section 1. Powers. Subject to the applicable provisions of the 1940
Act, the Declaration of Trust and these By-Laws relating to action required to
be approved by the Shareholders, the business and affairs of the Trust shall be
managed and all powers shall be exercised by or under the direction of the
Trustees.
Section 2. Number of Trustees. The exact number of Trustees within the
limits specified in the Declaration of Trust shall be fixed from time to time by
a resolution of the Trustees.
Section 3. Vacancies. Vacancies in the authorized number of Trustees may
be filled as provided in the Declaration of Trust.
Section 4. Chair. The Trustees shall have the power to appoint from
among the members of the Boards of Trustees a Chair. Such appointment shall be
by majority vote of the Trustees. Such Chair shall serve until his or her
successor is appointed or until his or her earlier death, resignation or
removal. The Chair shall preside at meetings of the Trustees and shall, subject
to the control of the Trustees, perform such other powers and duties as may be
from time to time
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assigned to him or her by the Trustees or prescribed by the Declaration of Trust
or these By-Laws, consistent with his or her position. The Chair need not be a
Shareholder.
Section 5. Place of Meetings and Meetings by Telephone. All meetings of
the Trustees may be held at any place that has been selected from time to time
by the Trustees. In the absence of such an election, regular meetings shall be
held at the principal executive office of the Trust. Subject to any applicable
requirements of the 1940 Act, any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all Trustees
participating in the meeting can hear one another and all such Trustees shall be
deemed to be present in person at the meeting.
Section 6. Regular Meetings. Regular meetings of the Trustees shall be held
without call at such time as shall from time to time be fixed by the Trustees.
Such regular meetings may be held without notice.
Section 7. Special Meetings. Special meetings of the Trustees for any
purpose or purposes may be called at any time by the Chair, the President or the
Secretary or any two (2) Trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail, by
telegram or telecopy (or similar electronic means) or, by nationally recognized
overnight courier, charges prepaid, addressed to each Trustee at that Trustee's
address as it is shown on the records of the Trust. If the notice is mailed, it
shall be deposited in the United States mail at least seven (7) calendar days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, telecopy (or similar electronic
means), or overnight courier, it shall be given at least forty eight (48) hours
before the time of the holding of the meeting. Any oral notice given personally
or by telephone must be communicated only to the Trustee. The notice need not
specify the purpose of the meeting or the place of the meeting, if the meeting
is to be held at the principal executive office of the Trust. Notice of a
meeting need not be given to any Trustee if a written waiver of notice, executed
by such Trustee before or after the meeting, is filed with the records of the
meeting, or to any Trustee who attends the meeting without protesting, prior
thereto or at its commencement, the Iack of notice to such Trustee.
Section 8. Quorum. Twenty-five percent (25%) of the Trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Trustees, subject to the
provisions of the Declaration of
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Trust. A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of Trustees if any action taken is
approved by at least a majority of the required quorum for that meeting.
Section 9. Waiver of Notice. Notice of any meeting need not be given to
any Trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Trustee who attends the meeting without protesting,
prior to or at its commencement, the lack of notice to that Trustee.
Section 10. Adjournment. A majority of the Trustees present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
Section 11. Notice of Adjournment. Notice of the time and place of holding
an adjourned meeting need not be given.
Section 12. Action Without a Meeting. Unless the 1940 Act requires that
a particular action be taken only at a meeting at which the Trustees are present
in person, any action to be taken by the Trustees at a meeting may be taken
without such meeting by the written consent of a majority of the Trustees then
in office. Any such written consent may be executed and given by telecopy or
similar electronic means. Such written consents shall be filed with the minutes
of the proceedings of the Trustees. If any action is so taken by the Trustees by
the written consent of less than all of the Trustees, prompt notice of the
taking of such action shall be furnished to each Trustee who did not execute
such written consent, provided that the effectiveness of such action shall not
be impaired by any delay or failure to furnish such notice.
Section 13. Fees and Compensation of Trustees. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Trustees. This Section 13 of Article III shall not be construed to preclude any
Trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.
Section 14. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his or her power for a period not exceeding one (1)
month at any one time to any other Trustee. Except where applicable law may
require a Trustee to be present in person, a Trustee represented by another
Trustee,
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pursuant to such power of attorney, shall be deemed to be present for purpose of
establishing a quorum and satisfying the required majority vote.
ARTICLE IV COMMITTEES
Section 1. Committees of Trustees. The Trustees may by resolution
designate one or more committees, each consisting of two (2) or more Trustees,
to serve at the pleasure of the Trustees. The Trustees may designate one or more
Trustees as alternate members of any committee who may replace any absent member
at any meeting of the committee. Any committee, to the extent provided for by
resolution of the Trustees, shall have the authority of the Trustees, except
with respect to:
(a) the approval of any action which under applicable law requires
approval by a majority of the Trustees or certain Trustees;
(b) the filling of vacancies of Trustees;
(c) the fixing of compensation of the Trustees for services generally
or as a member of any committee;
(d) the amendment or termination of the Declaration of Trust or any
Series or Class or the amendment of the By-Laws or the adoption
of new By-Laws;
(e) the amendment or repeal of any resolution of the Trustees
which by its express terms is not so amendable or repealable;
(f) a distribution to the Shareholders of the Trust, except at a
rate or in a periodic amount or within a designated range
determined by the Trustees; or
(g) the appointment of any other committees of the Trustees or the
members of such new committees.
Section 2. Meetings and Action of Committees. Meetings and action of
committees shall be governed by, held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Trustees generally, except that the time of regular meetings of committees may
be determined either
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by resolution of the Trustees or by resolution of the committee. Special
meetings of committees may also be called by resolution of the Trustees.
Alternate members shall be given notice of meetings of committees and shall have
the right to attend all meetings of committees. The Trustees may adopt rules for
the governance of any committee not inconsistent with the provisions of these
By-Laws.
ARTICLE V OFFICERS
Section 1. Officers. The officers of the Trust shall be a President, a
Secretary, and a Treasurer. The Trust may also have, at the discretion of the
Trustees, one or more Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article V. Any number of
offices may be held by the same person. Any officer may be, but need not be, a
Trustee or Shareholder.
Section 2. Election of Officers. The officers of the Trust, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Trustees, and each shall
serve at the pleasure of the Trustees, subject to the rights, if any, of an
officer under any contract of employment.
Section 3. Subordinate Officers. The Trustees may appoint and may
empower the President to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Trustees may from time to time determine.
Section 4. Removal and Resignation of Officers. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Trustees at any regular or special
meeting of the Trustees or by such officer upon whom such power of removal may
be conferred by the Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.
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Section 5. Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled in
the manner prescribed in these By-Laws for regular appointment to that office.
The President may make temporary appointments to a vacant office pending action
by the Trustees.
Section 6. President. The President shall be the chief operating and
chief executive officer of the Trust and shall, subject to the control of the
Trustees, have general supervision, direction and control of the business and
the officers of the Trust. He or she or his or her designee, shall preside at
all meetings of the Shareholders. He or she shall have the general powers and
duties of a president of a corporation and shall have such other powers and
duties as may be prescribed by the Trustees, the Declaration of Trust or these
By-Laws.
Section 7. Vice Presidents. In the absence or disability of the
President, any Vice President, unless there is an Executive Vice President,
shall perform all the duties of the President and when so acting shall have all
powers of and be subject to all the restrictions upon the President. The
Executive Vice President or Vice Presidents, whichever the case may be, shall
have such other powers and shall perform such other duties as from time to time
may be prescribed for them respectively by the Trustees or the President or by
these By-Laws.
Section 8. Secretary. The Secretary shall keep or cause to be kept at
the principal executive office of the Trust, or such other place as the Trustees
may direct, a book of minutes of all meetings and actions of Trustees,
committees of Trustees and Shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at Trustees' meetings or committee meetings, the
number of Shares present or represented at meetings of Shareholders and the
proceedings of the meetings.
The Secretary shall keep or cause to be kept at the principal
executive office of the Trust or at the office of the Trust's transfer agent or
registrar, a share register or a duplicate share register showing the names of
all Shareholders and their addresses, the number and classes of Shares held by
each, the number and date of certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give or cause to be given notice of all meetings of
the Shareholders and of the Trustees (or committees thereof) required to be
given by these By-Laws or by applicable law and shall have such other powers and
perform such other duties as may be prescribed by the Trustees or by these
By-Laws.
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Section 9. Treasurer. The Treasurer shall be the chief financial
officer and chief accounting officer of the Trust and shall keep and maintain or
cause to be kept and maintained adequate and correct books and records of
accounts of the properties and business transactions of the Trust and each
Series or Class thereof, including accounts of the assets, liabilities,
receipts, disbursements, gains, losses, capital and retained earnings of all
Series or Classes thereof. The books of account shall at all reasonable times be
open to inspection by any Trustee.
The Treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositaries as may be designated by
the Board of Trustees. He or she shall disburse the funds of the Trust as may be
ordered by the Trustees, shall render to the President and Trustees, whenever
they request it, an account of all of his or her transactions as chief financial
officer and of the financial condition of the Trust and shall have other powers
and perform such other duties as may be prescribed by the Trustees or these
By-Laws.
ARTICLE VI INSPECTION OF RECORDS AND REPORTS
Section 1. Inspection by Shareholders. 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 the 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 2. Inspection by Trustees. Every Trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.
ARTICLE VII GENERAL MATTERS
Section 1. Checks, Drafts, Evidences of Indebtedness. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed in such manner and by such person or persons as shall be designated
from time to time in accordance with the resolution of the Board of Trustees.
Section 2. Contracts and Instruments: How Executed. The Trustees, except as
otherwise provided in these By-Laws, may authorize any officer or officers,
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Trust and this authority may be general or confined
to
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specific instances; and unless so authorized or ratified by the Trustees or
within the agency power of an officer, no officer, agent, or employee shall have
any power or authority to bind the Trust by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
Section 3. Fiscal Year. The fiscal year of each series of the Trust
shall be fixed and refixed or changed from time to time by the Trustees.
Section 4. Seal. The seal of the Trust shall consist of a flat-faced
dye with the name of the Trust cut or engraved thereon. However, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
ARTICLE VIII AMENDMENTS
Section 1. Amendment. Except as otherwise provided by applicable law or by
the Declaration of Trust, these By-Laws may be restated, amended, supplemented
or repealed by a majority vote of the Trustees.
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FORM OF INVESTMENT ADVISORY AGREEMENT
Whatifi FUNDS
AGREEMENT, effective as of February __, 2000 between whatifi Asset
Management, Inc. (the "Adviser") and whatifi Funds (the "Trust") with respect to
the series listed in Exhibit A ("Funds").
WHEREAS, the Trust is a Delaware business trust organized pursuant to a
Declaration of Trust dated December 15, 1999 (the "Declaration of Trust"), and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company; and
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Funds, and the Adviser is willing to provide such
services to the Funds; and
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");
NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as investment
adviser to the Funds for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties.
(a) Subject to the supervision of the Trustees of the Trust, the
Adviser will provide a program of continuous investment
management for the Fund in accordance with each Fund's investment
objective, policies and limitations as stated in the Fund's
Prospectus and Statement of Additional Information included as
part of the Trust's Registration Statement filed with the
Securities and Exchange Commission ("SEC") and as the Prospectus
and Statement of Additional Information may be amended from time
to time, copies of which shall be provided to the Adviser by the
Trust. Subject to approval by the Trustees of the Trust, the
Adviser for each Fund may select a master fund having
substantially the same investment objective and policies as the
Fund into which all or substantially all of the Fund's assets may
be invested, or select and manage investment subadvisers who may
be granted discretionary investment authority with respect to the
assets of the Fund.
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<PAGE>
(b) In performing its investment management services to the Funds
hereunder, the Adviser will provide the Funds with ongoing
investment guidance, policy direction, including oral and
written research, monitoring of any master funds, analysis,
advice, statistical and economic data and judgments regarding
individual investments, general economic conditions and trends
and long-range investment policy.
(c) Subject to the approval of the Trustees of the Trust, the
Adviser shall have the authority to manage cash and money
market instruments for cash flow purposes.
(d) The Adviser may advise as to the securities, instruments,
repurchase agreements, options and other investments and
techniques that each Fund will purchase, sell, enter into or
use, and will provide an ongoing evaluation of the Fund's
portfolio. The Adviser will advise as to what portion of the
Fund's portfolio shall be invested in securities and other
assets, and what portion if any, should be held uninvested.
(e) The Adviser shall provide or arrange for administration,
transfer agency, custody and all other services necessary for
the Funds to operate, and shall be responsible for the payment
of all expenses associated with such services, subject to
Section 5 of this Investment Advisory Agreement.
(f) The Adviser may engage and remove one or more subadvisers,
subject to any necessary approvals of the Trust and its
shareholders, and the Adviser shall monitor the performance of
any subadviser and report to the Trust thereon.
(g) The Adviser further agrees that, in performing its duties
hereunder, it will:
(i) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the
"Code") and all other applicable federal and state laws and
regulations, and with any applicable procedures adopted by the
Trustees;
(ii) use reasonable efforts to manage each Fund so that it
will qualify, and continue to qualify, as a regulated
investment company under Subchapter M of the Code and
regulations issued thereunder; (iii) place orders pursuant to
each Fund's investment determinations as approved by the
Trustees for the Fund directly with the issuer, or with any
broker or dealer, in accordance with applicable policies
expressed in the Fund's Prospectus and/or Statement of
Additional Information and in accordance with applicable legal
requirements; (iv) furnish to the Trust whatever statistical
information the Trust may reasonably request with respect to
each Fund's assets or contemplated investments. In addition,
the Adviser
2
<PAGE>
will keep the Trust and the Trustees informed of developments
materially affecting each Fund's portfolio and shall, on the
Adviser's own initiative, furnish to the Trust from time to
time whatever information the Adviser believes appropriate for
this purpose; (v) make available to the Trust's administrator
(the "Administrator") and the Trust, promptly upon their
request, such copies of its investment records and ledgers
with respect to each Fund as may be required to assist the
Administrator and the Trust in their compliance with
applicable laws and regulations. The Adviser will furnish the
Trustees with such periodic and special reports regarding the
Fund and any subadviser as they may reasonably request; (vi)
immediately notify the Trust in the event that the Adviser or
any of its affiliates: (1) becomes aware that it is subject to
a statutory disqualification that prevents the Adviser from
serving as investment adviser pursuant to this Agreement; or
(2) becomes aware that it is the subject of an administrative
proceeding or enforcement action by the SEC or other
regulatory authority. The Adviser further agrees to notify the
Trust immediately of any material fact known to the Adviser
respecting or relating to the Adviser that is not contained in
the Trust's Registration Statement regarding the Funds, or any
amendment or supplement thereto, but that is required to be
disclosed thereon, and of any statement contained therein that
becomes untrue in any material respect; and (vii) in providing
investment advice to the Funds, use no inside information that
may be in its possession or in the possession of any of its
affiliates, nor will the Adviser seek to obtain any such
information.
3. Futures and Options. The Adviser's investment authority shall include advice
with regard to purchasing, selling, covering open positions, and generally
dealing in financial futures contracts and options thereon, or master funds
which do so in accordance with Rule 4.5 of the Commodity Futures Trading
Commission.
The Adviser's authority shall include authority to: (i) open and
maintain brokerage accounts for financial futures and options (such accounts
hereinafter referred to as "Brokerage Accounts") on behalf of and in the name of
the Fund; and (ii) execute for and on behalf of the Brokerage Accounts, standard
customer agreements with a broker or brokers. The Adviser may, using such of the
securities and other property in the Brokerage Accounts as the Adviser deems
necessary or desirable, direct the custodian to deposit on behalf of a Fund,
original and maintenance brokerage deposits and otherwise direct payments of
cash, cash equivalents and securities and other property into such brokerage
accounts and to such brokers as the Adviser deems desirable or appropriate.
4. Use of Securities Brokers and Dealers. The Adviser will monitor the use by
master funds of broker-dealers. To the extent permitted by the Adviser's Form
ADV as filed with the SEC, purchase and sale orders will usually be placed with
brokers who are selected by the Adviser as able to achieve "best execution" of
such orders. "Best
3
<PAGE>
execution" shall mean prompt and reliable execution at the most favorable
securities price, taking into account the other provisions hereinafter set
forth. Whenever the Adviser places orders, or directs the placement of orders,
for the purchase or sale of portfolio securities on behalf of a Fund, in
selecting brokers or dealers to execute such orders, the Adviser is expressly
authorized to consider the fact that a broker or dealer has furnished
statistical, research or other information or services which enhance the
Adviser's research and portfolio management capability generally. It is further
understood in accordance with Section 28(e) of the Securities Exchange Act of
1934, as amended, that the Adviser may negotiate with and assign to a broker a
commission which may exceed the commission which another broker would have
charged for effecting the transaction if the Adviser determines in good faith
that the amount of commission charged was reasonable in relation to the value of
brokerage and/or research services (as defined in Section 28(e)) provided by
such broker, viewed in terms either of the Fund or the Adviser's overall
responsibilities to the Adviser's discretionary accounts.
Neither the Adviser nor any parent, subsidiary or related firm shall
act as a securities broker with respect to any purchases or sales of securities
which may be made on behalf of a Fund, provided that this limitation shall not
prevent the Adviser from utilizing the services of a securities broker which is
a parent, subsidiary or related firm, provided such broker effects transactions
on a "cost only" or "nonprofit" basis to itself and provides competitive
execution. Unless otherwise directed by the Trust in writing, the Adviser may
utilize the service of whatever independent securities brokerage firm or firms
it deems appropriate to the extent that such firms are competitive with respect
to price of services and execution.
5. Allocation of Charges and Expenses.
The Adviser will pay all of the expenses of each class of each series
of the Trust's shares that it shall manage other than interest, taxes, brokerage
commissions, extraordinary expenses, the fees and expenses of those directors
who are not "interested persons" as defined in the 1940 Act, including counsel
fees, and expenses incurred in connection with the provision of shareholder
services and distribution services.
6. Compensation.
As compensation for the services provided and expenses assumed by the
Adviser under this Agreement, the Trust will arrange for each Fund to pay the
Adviser at the end of each calendar month an advisory fee computed daily at an
annual rate equal to the amount of average daily net assets listed opposite each
Fund's name in Exhibit A, attached hereto. The "average daily net assets" of a
Fund shall mean the average of the values placed on the Fund's net assets as of
the close of regular trading on the New York Stock Exchange on each day on which
the net asset value of the Fund is determined consistent with the provisions of
Rule 22c-1 under the 1940 Act or,
4
<PAGE>
if the Fund lawfully determines the value of its net assets as of some other
time on each business day, as of such other time. The value of net assets of
each Fund shall always be determined pursuant to the applicable provisions of
the Declaration of Trust and the Registration Statement. If, pursuant to such
provisions, the determination of net asset value is suspended for any particular
business day, then for the purposes of this section 6, the value of the net
assets of a Fund as last determined shall be deemed to be the value of its net
assets as of the close of the New York Stock Exchange, or as of such other time
as the value of the net assets of the Fund's portfolio may lawfully be
determined, on that day. If the determination of the net asset value of the
shares of a Fund has been so suspended for a period including any month end when
the Adviser's compensation is payable pursuant to this section 6, then the
Adviser's compensation payable at the end of such month shall be computed on the
basis of the value of the net assets of the Fund as last determined (whether
during or prior to such month). If a Fund determines the value of the net assets
of its portfolio more than once on any day, then the last such determination
thereof on that day shall be deemed to be the sole determination thereof on that
day for the purposes of this section 6.
7. Books and Records. The Adviser agrees to maintain such books and records with
respect to its services to the Funds as are required by Section 31 under the
1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Adviser also
agrees that records it maintains and preserves pursuant to Rules 31a-1 and Rule
31a-2 under the 1940 Act and otherwise in connection with its services hereunder
are the property of the Trust and will be surrendered promptly to the Trust upon
its request. The Adviser further agrees that it will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with its services hereunder which may be requested in order to
determine whether the operations of the Funds are being conducted in accordance
with applicable laws and regulations.
8. Aggregation of Orders. Provided that the investment objective, policies and
restrictions of the Funds are adhered to, the Trust agrees that the Adviser may
aggregate sales and purchase orders of securities held in the Funds with similar
orders being made simultaneously for other accounts managed by the Adviser or
with accounts of the affiliates of the Adviser, if in the Adviser's reasonable
judgment such aggregation shall result in an overall economic benefit to the
respective Fund taking into consideration the advantageous selling or purchase
price, brokerage commission and other expenses. The Trust acknowledges that the
determination of such economic benefit to a Fund by the Adviser represents the
Adviser's evaluation that the Fund is benefited by relatively better purchase or
sales prices, lower commission expenses and beneficial timing of transactions or
a combination of these and other factors.
9. Standard of Care and Limitation of Liability. The Adviser shall exercise its
best judgment in rendering the services provided by it under this Agreement. The
Adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by
5
<PAGE>
a Fund or the holders of the Fund's shares in connection with the matters to
which this Agreement relates, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Adviser against any liability to the
Trust, the Fund or to holders of the Fund's shares to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or by reason of the
Adviser's reckless disregard of its obligations and duties under this Agreement.
As used in this Section 9, the term "Adviser" shall include any officers,
directors, employees or other affiliates of the Adviser performing services with
respect to the Fund.
10. Services Not Exclusive. It is understood that the services of the Adviser
are not exclusive, and that nothing in this Agreement shall prevent the Adviser
from providing similar services to other investment companies or to other series
of investment companies, including the Trust (whether or not their investment
objectives and policies are similar to those of the Fund) or from engaging in
other activities, provided such other services and activities do not, during the
term of this Agreement, interfere in a material manner with the Adviser's
ability to meet its obligations to the Funds hereunder. When the Adviser
recommends the purchase or sale of a security for other investment companies and
other clients, and at the same time the Adviser recommends the purchase or sale
of the same security for a Fund, it is understood that in light of its fiduciary
duty to the Fund, such transactions will be executed on a basis that is fair and
equitable to the Fund. In connection with purchases or sales of portfolio
securities for the account of a Fund, neither the Adviser nor any of its
directors, officers or employees shall act as a principal or agent or receive
any commission. If the Adviser provides any advice to its clients concerning the
shares of a Fund, the Adviser shall act solely as investment counsel for such
clients and not in any way on behalf of the Trust or the Fund.
11. Duration and Termination.
(a) This Agreement shall continue for a period of two years from the
date of commencement, and thereafter shall continue automatically
for successive annual periods, provided such continuance is
specifically approved at least annually by (i) the Trustees or
(ii) a vote of a "majority" (as defined in the 1940 Act) of the
Funds' outstanding voting securities (as defined in the 1940
Act), provided that in either event the continuance is also
approved by a majority of the Trustees who are not parties to
this Agreement or "interested persons" (as defined in the 1940
Act) of any party to this Agreement, by vote cast in person (to
the extent required by the 1940 Act) at a meeting called for the
purpose of voting on such approval.
(b) Notwithstanding the foregoing, this Agreement may be
terminated: (a) at any time without penalty by the Funds upon
the vote of a majority of the Trustees or by vote of the
majority of the Funds' outstanding voting
6
<PAGE>
securities, upon sixty (60) days' written notice to the
Adviser or (b) by the Adviser at any time without penalty,
upon sixty (60) days' written notice to the Trust. This
Agreement will also terminate automatically in the event of
its assignment (as defined in the 1940 Act).
12. Amendments. This Agreement may be amended at any time but only by the
mutual agreement of the parties to this Agreement and in accordance with any
applicable legal or regulatory requirements.
13. Proxies. Unless the Trust gives written instructions to the contrary, the
Adviser shall vote all proxies solicited by or with respect to the issuers of
securities in which assets of a Fund may be invested in a manner which best
serves the interests of the Fund's shareholders. The Adviser shall use its best
good faith judgment to vote such proxies in a manner which best serves the
interests of the Fund's shareholders.
14. Use of "S&P 500", Wilshire 4500, Morgan Stanley Capital International
Europe, Australia and Far East Free Index and Lehman Brothers
Government/Corporate Bond Index Name.
It is understood that the Adviser has entered into licensing agreements
with the companies that own the above and related marks for the use of such
markets and related marks (the "licenses"). In accordance with such licenses,
the Adviser shall permit the Trust, on behalf of the relevant Funds, to use the
terms that are subject of the licenses so long as the license and this Agreement
shall continue in effect.
15. Failure to Perform; Force Majeure.
No failure or omission by either party hereto in the performance of any
obligation of this Agreement (other than payment obligations) shall be deemed a
breach of this Agreement or create any liability if the same shall arise from
any cause or causes beyond the control of the party, including but not limited
to, the following: acts of God, acts or omissions of any governmental agency;
any rules, regulations, or orders issued by any governmental authority or by any
officer, department, agency or instrumentality thereof; fire; storm; flood;
earthquake, war; rebellion; insurrection; riot; and invasion and provided that
such failure or omission resulting from one of the above causes is cured as soon
as is practicable after the occurrence of one or more of the above-mentioned
causes.
16. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in
a manner inconsistent with the 1940 Act, the Advisers Act, or
rules or orders of the SEC thereunder.
7
<PAGE>
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
(c) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected hereby and,
to this extent, the provisions of this Agreement shall be
deemed to be severable.
(d) Nothing herein shall be construed as constituting the Adviser
as an agent of the Trust or the Fund.
(e) All liabilities of the Trust hereunder are limited to the assets of
the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of February __, 2000.
whatifi Funds
By: ____________________
Name:
Title: Chair of the Board and
President
whatifi Asset Management, Inc.
By: ____________________
Name:
Title: Chair of the Board and
President
8
<PAGE>
EXHIBIT A
Name of Fund Advisory Fee
whatifi S&P 500 Index Fund 0.___%
whatifi Extended Market Index Fund 0.___%
whatifi International Index Fund 0.___%
whatifi Bond Index Fund 0.___%
whatifi Money Market Fund 0.___%
9
<PAGE>
CUSTODIAN AGREEMENT
AGREEMENT made as of this ___ day of __________, 2000, between whatifi
Funds, a business trust organized under the laws of the state of Delaware (the
"Fund"), and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the
"Bank").
The Fund, an open-end management investment company on behalf of the
portfolios/series listed on Appendix A hereto (as such Appendix A may be amended
from time to time) (each a "Portfolio" and collectively, the "Portfolios"),
desires to place and maintain all of its portfolio securities and cash in the
custody of the Bank. The Bank has at least the minimum qualifications required
by Section 17(f)(1) of the Investment Company Act of 1940 (the "1940 Act") to
act as custodian of the portfolio securities and cash of the Fund, and has
indicated its willingness to so act, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth. For the services rendered pursuant to this
Agreement the Fund agrees to pay to the Bank the fees set forth on Appendix B
hereto.
2. Definitions. Whenever used herein, the terms listed below will have
the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the
persons duly authorized to give Proper Instructions or otherwise act on behalf
of the Fund by appropriate resolution of its Board, and set forth in a
certificate as required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the Board
of Trustees of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the
same meaning assigned to such term in the Securities Act of 1933, as amended,
including, without limitation, any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any profit
sharing agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security", or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 Portfolio Security. Portfolio Security will mean any
security owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will
mean, unless otherwise indicated,
<PAGE>
any request, direction, instruction, or certification in writing signed by any
two Authorized Persons of the Fund.
2.6 Book-Entry System. Book-Entry System shall mean the
Federal Reserve-Treasury Department Book Entry System for United States
government, instrumentality and agency securities operated by the Federal
Reserve Bank, its successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust
Company ("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized Person,
such instructions to be given in such form and manner as the Bank and the Fund
shall agree upon from time to time, and (ii) instructions (which may be
continuing instructions) regarding other matters signed or initialed by an
Authorized Person. Oral instructions will be considered Proper Instructions if
the Bank reasonably believes them to have been given by an Authorized Person.
The Fund shall cause all oral instructions to be promptly confirmed in writing.
The Bank shall act upon and comply with any subsequent Proper Instruction which
modifies a prior instruction and the sole obligation of the Bank with respect to
any follow-up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Fund. The Fund shall be responsible, at
the Fund's expense, for taking any action, including any reprocessing, necessary
to correct any such discrepancy or error, and to the extent such action requires
the Bank to act, the Fund shall give the Bank specific Proper Instructions as to
the action required. Upon receipt by the Bank of an Officers' Certificate as to
the authorization by the Board accompanied by a detailed description of
procedures approved by the Fund, Proper Instructions may include communication
effected directly between electro-mechanical or electronic devices provided that
the Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Fund's assets.
3. Separate Accounts. If the Fund has more than one series or
portfolio, the Bank will segregate the assets of each series or portfolio to
which this Agreement relates into a separate account for each such series or
portfolio containing the assets of such series or portfolio (and all investment
earnings thereon). Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Fund shall be deemed to refer to the
Fund acting on behalf of one or more of its series, any reference in this
Agreement to any assets of the Fund, including, without limitation, any
portfolio securities and cash and earnings thereon, shall be deemed to refer
only to assets of the applicable series, any duty or obligation of the Bank
hereunder to the Fund shall be deemed to refer to duties and obligations with
respect to such individual series and any obligation or liability of the Fund
hereunder shall be binding only with respect to such individual series, and
shall be discharged only out of the assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that upon the occurrence of any change
in the
<PAGE>
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund will sign a new or amended certification setting forth the
change and the new, additional or omitted names or signatures. The Bank will be
entitled to rely and act upon any Officers' Certificate given to it by the Fund
which has been signed by Authorized Persons named in the most recent
certification received by the Bank.
5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Fund into a separate savings deposit account
upon which the Bank reserves the right to require seven (7) days notice prior to
withdrawal of cash from such an account. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for redemptions and repurchases of outstanding shares of common stock of the
Fund, notification from the Fund's transfer agent as provided in Section 7,
requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities
for the Fund, against contemporaneous receipt of such securities by the Bank or
against delivery of such securities to the Bank in accordance with generally
accepted settlement practices and customs in the jurisdiction or market in which
the transaction occurs registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the
repurchase or redemption of common shares of the Fund offered for repurchase or
redemption in accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the
account of the Fund of dividends or other distributions to shareholders as may
from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in
connection with the conversion, exchange or surrender of Portfolio Securities or
securities subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the
Fund, but, in the case of final payment, only upon redelivery to the Bank of any
Portfolio Securities pledged or
<PAGE>
hypothecated therefor and upon surrender of documents evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund
for the purpose of collateralizing the obligation to return to the Fund
certificates borrowed from the Fund representing Portfolio Securities, but only
upon redelivery to the Bank of such borrowed certificates.
5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements")which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may be
the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Fund deals or for their failure to comply with the terms of any
contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Fund on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as
hereinafter set forth pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided
herein, and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and
hold pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Fund. All such Portfolio Securities will be held or disposed of
by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise directed
by Proper Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any Regulations
<PAGE>
of the Treasury Department issued thereunder, and will execute and deliver all
such certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank
appropriate instruments to enable it to hold or deliver in proper form for
transfer, or to register in the name of its registered nominee, any Portfolio
Securities which may from time to time be registered in the name of the Fund.
6.2 Voting and Proxies. Neither the Bank nor any nominee of
the Bank will vote any of the Portfolio Securities held hereunder, except in
accordance with Proper Instructions or an Officers' Certificate. The Bank will
execute and deliver, or cause to be executed and delivered, to the Fund all
notices, proxies and proxy soliciting materials delivered to the Bank with
respect to such Securities, such proxies to be executed by the registered holder
of such Securities (if registered otherwise than in the name of the Fund), but
without indicating the manner in which such proxies are to be voted.
6.3 Corporate Action. If at any time the Bank is notified that
an issuer of any Portfolio Security has taken or intends to take a corporate
action (a "Corporate Action") that affects the rights, privileges, powers,
preferences, qualifications or ownership of a Portfolio Security, including
without limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Fund promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Fund of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Fund via telecopier and/or overnight
courier all notices, information statements or other materials relating to the
Corporate Action promptly after receipt of such materials by the Bank.
(a) The Bank shall act upon a required Response only after
receipt by the Bank of Proper Instructions from the Fund no later than 5:00 p.m.
on the date specified as the Response Deadline and only if the Bank (or its
agent or subcustodian hereunder) has actual possession of all necessary
Securities, consents and other materials no later than 5:00 p.m. on the date
specified as the Response Deadline.
(b) The Bank shall have no duty to act upon a required
Response if Proper Instructions relating to such Response and all necessary
Securities, consents and other materials are not received by and in the
possession of the Bank no later than 5:00 p.m. on the date specified as the
Response Deadline. Notwithstanding, the Bank may, in its sole discretion, use
its best efforts to act upon a Response for which Proper Instructions and/or
necessary Securities, consents or other materials are received by the Bank after
5:00 p.m. on the date specified as the Response Deadline, it being acknowledged
and agreed by the parties that any undertaking by the Bank to use its best
efforts in such circumstances shall in no way create any duty upon the Bank to
complete such Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a
Corporate Action requiring a Response and the Bank has received no other notice
of such Corporate Action, the Response Deadline shall be 48 hours prior to the
Response expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(e) of this Agreement shall govern any
Corporate Action involving Foreign Portfolio Securities held by a Selected
Foreign Sub-Custodian.
<PAGE>
6.4 Book-Entry System. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits of
Fund assets in the Book-Entry System, and (ii) for any subsequent changes to
such arrangements following such approval, the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry
System provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect
to the Fund's participation in the Book-Entry System through the Bank (or any
such agent) will identify by book entry the Portfolio Securities which are
included with other securities deposited in the Account and shall at all times
during the regular business hours of the Bank (or such agent) be open for
inspection by duly authorized officers, employees or agents of the Fund. Where
securities are transferred to the Fund's account, the Bank shall also, by book
entry or otherwise, identify as belonging to the Fund a quantity of securities
in a fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased
for the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Fund upon
(i) receipt of advice from the Book-Entry System that
payment for securities sold or payment of the initial
cash collateral against the delivery of securities
loaned by the Fund has been transferred to the Account;
and
(ii) the making of an entry on the records of the Bank (or
its agent) to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the
Book-Entry System of transfers of securities for the
account of the Fund shall identify the Fund, be
maintained for the Fund by the Bank and shall be
provided to the Fund at its request. The Bank shall
send the Fund a confirmation, as defined by Rule 17f-4
of the 1940 Act, of any transfers to or from the
account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by the Bank or its agent on the Book-Entry System's accounting system,
internal accounting control and procedures for safeguarding securities deposited
in the Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving deposits in
DTC or other such Depository and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive,
exchange, release, lend, deliver
<PAGE>
and otherwise deal with Portfolio Securities including stock dividends, rights
and other items of like nature, and to receive and remit to the Bank on behalf
of the Fund all income and other payments thereon and to take all steps
necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the
name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made
through the clearing medium employed by such Depository for transactions of
participants acting through it. Upon any purchase of Portfolio Securities,
payment will be made only upon delivery of the securities to or for the account
of the Fund and the Fund shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund only upon delivery of the Securities to
or for the account of the Fund; and upon any sale of Portfolio Securities,
delivery of the Securities will be made only against payment therefor or, in the
event Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such
Security is lost, destroyed, wrongfully taken or
otherwise not available to be returned to the Bank upon
its request;
(ii) Proxy materials received by a Depository with respect
to Portfolio Securities deposited with such Depository
are forwarded immediately to the Bank for prompt
transmittal to the Fund;
(iii) Such Depository promptly forwards to the Bank
confirmation of any purchase or sale of Portfolio Securities and of the
appropriate book entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the
Bank such records with
respect to the performance of the Bank's obligations and duties hereunder as may
be necessary for the Fund to comply with the recordkeeping requirements of
Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank all internal accounting control
reports, whether or not audited by an independent public accountant, as well as
such other reports as the Fund may reasonably request in order to verify the
Portfolio Securities held by such Depository.
6.6 Use of Book-Entry System for Commercial Paper. Provided
(i) the Bank has received a certified copy of a resolution of the Board
specifically approving participation in a system maintained by the Bank for the
holding of commercial paper in book-entry form ("Book-Entry Paper") and (ii) for
each year following such approval the Board has received and approved the
arrangements, upon receipt of Proper Instructions and upon receipt of
confirmation from an Issuer (as defined below) that the Fund has purchased such
Issuer's Book-Entry Paper, the Bank shall issue and hold in book-entry form, on
behalf of the Fund, commercial paper issued by issuers with whom the Bank has
entered into a book-entry agreement (the "Issuers"). In maintaining procedures
for Book-Entry Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by
the Fund in an account of
<PAGE>
the Bank that includes only assets held by it for customers;
(b) The records of the Bank with respect to the Fund's
purchase of Book-Entry Paper through the Bank will identify, by book-entry,
commercial paper belonging to the Fund which is included in the Book-Entry
System and shall at all times during the regular business hours of the Bank be
open for inspection by duly authorized officers, employees or agents of the
Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation
upon the maturity thereof upon contemporaneous (i) receipt of advice that
payment for such Book-Entry Paper has been transferred to the Fund, and (ii) the
making of an entry on the records of the Bank to reflect such payment for the
account of the Fund; and
(e) The Bank will send to the Fund such reports on its system
of internal accounting control with respect to the Book-Entry Paper as the Fund
may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
the maintenance of Portfolio Securities in an immobilization program operated by
a bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii) for each year following such approval the Board has reviewed and approved
the arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are
Eurodollar CDs may be physically held by the European branch of the U.S. banking
institution that is the issuer of such Eurodollar CD (a "European Branch"),
provided that such Portfolio Securities are identified on the books of the Bank
as belonging to the Fund and that the books of the Bank identify the European
Branch holding such Portfolio Securities. Notwithstanding any other provision of
this Agreement to the contrary, except as stated in the first sentence of this
subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Fund.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities
Exchanges, NASDAQ or Over-the-Counter.
(i) The Bank shall take action as to put options ("puts")
and call options ("calls") purchased or sold (written)
by the Fund regarding escrow or other arrangements (i)
in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions among
the Bank, any broker-dealer registered with the
National Association of Securities Dealers, Inc. (the
"NASD"), and, if necessary, the Fund, relating to the
compliance with the rules of the Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or
organizations.
(ii) Unless another agreement requires it to do so, the Bank shall be
under no duty or obligation to see that the Fund has deposited or
is maintaining adequate margin, if required,
<PAGE>
with any broker in connection with any option, nor shall the Bank be under duty
or obligation to present such option to the broker for exercise unless it
receives Proper Instructions from the Fund. The Bank shall have no
responsibility for the legality of any put or call purchased or sold on behalf
of the Fund, the propriety of any such purchase or sale, or the adequacy of any
collateral delivered to a broker in connection with an option or deposited to or
withdrawn from a Segregated Account (as defined in subsection 6.10 below). The
Bank specifically, but not by way of limitation, shall not be under any duty or
obligation to: (i) periodically check or notify the Fund that the amount of such
collateral held by a broker or held in a Segregated Account is sufficient to
protect such broker or the Fund against any loss; (ii) effect the return of any
collateral delivered to a broker; or (iii) advise the Fund that any option it
holds, has or is about to expire. Such duties or obligations shall be the sole
responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance
with the provisions of any agreement entered into upon the
receipt of Proper Instructions among the Fund, the Bank and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Fund.
(ii) The responsibilities of the Bank as to futures, puts and calls
traded on commodities exchanges, any Futures Commission Merchant
account and the Segregated Account shall be limited as set forth
in subparagraph (a)(ii) of this Section 6.9 as if such
subparagraph referred to Futures Commission Merchants rather than
brokers, and Futures and puts and calls thereon instead of
options.
6.10 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Exchange
Act and a member of the NASD or any Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Options Clearing Corporation and
of any registered national securities exchange or the Commodity
Futures Trading Commission or any registered Contract Market, or
of any similar organizations regarding escrow or other
arrangements in connection with transactions by the Fund;
(ii) for the purpose of segregating cash or securities in connection
with options purchased or written by the Fund or commodity
futures purchased or written by the Fund;
(iii)for the deposit of liquid assets, such as cash, U.S. Government
securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to
not less than the aggregate purchase price due on the settlement
dates of all the Fund's then outstanding forward commitment or
"when-issued" agreements relating to the purchase of Portfolio
Securities and all the Fund's then outstanding commitments under
reverse repurchase agreements entered into with broker-dealer
firms;
(iv) for the purposes of compliance by the Fund with the procedures
required
<PAGE>
by Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the maintenance
of Segregated Accounts by registered investment companies;
(v) for other proper corporate purposes, but only, in the case of
this clause (v), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board, or
of the executive committee of the Board signed by an officer of
the Fund and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such
Segregated Account and declaring such purposes to be proper
corporate purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii)
above, in accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or (a)(iv)
above, for sale or delivery to meet the Fund's obligations under
outstanding forward commitment or when-issued agreements for the
purchase of Portfolio Securities and under reverse repurchase
agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward commitment or when-issued
agreements for the purchase of portfolio securities or reverse repurchase
agreements are sold to other parties or the Fund's obligations thereunder
are met from assets of the Fund other than those in the Segregated Account;
(v) for delivery upon settlement of a forward commitment or when-issued
agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (a)(v) above, in accordance
with the purposes of such account as set forth in Proper Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall,
upon receipt of Proper Instructions relating to the purchase by the Fund of
interest-bearing fixed-term and call deposits, transfer cash, by wire or
otherwise, in such amounts and to such bank or banks as shall be indicated in
such Proper Instructions. The Bank shall include in its records with respect to
the assets of the Fund appropriate notation as to the amount of each such
deposit, the banking institution with which such deposit is made (the "Deposit
Bank"), and shall retain such forms of advice or receipt evidencing the deposit,
if any, as may be forwarded to the Bank by the Deposit Bank. Such deposits shall
be deemed Portfolio Securities of the Fund and the responsibility of the Bank
therefore shall be the same as and no greater than the Bank's responsibility in
respect of other Portfolio Securities of the Fund.
6.12 Transfer of Securities. The Bank will transfer, exchange,
deliver or release Portfolio Securities held by it hereunder, insofar as such
Securities are available for such purpose, provided that before making any
transfer, exchange, delivery or release under this Section only upon receipt of
Proper Instructions. The Proper Instructions shall state that such transfer,
exchange or delivery is for a purpose permitted under the terms of this Section
6.12, and shall specify the applicable
<PAGE>
subsection, or describe the purpose of the transaction with sufficient
particularity to permit the Bank to ascertain the applicable subsection. After
receipt of such Proper Instructions, the Bank will transfer, exchange, deliver
or release Portfolio Securities only in the following circumstances:
(a) Upon sales of Portfolio Securities for the account of the
Fund, against contemporaneous receipt by the Bank of payment therefor in full,
or against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such payment
is made;
(b) In exchange for or upon conversion into other securities
alone or other securities and cash pursuant to any plan of merger,
consolidation, reorganization, share split-up, change in par value,
recapitalization or readjustment or otherwise, upon exercise of subscription,
purchase or sale or other similar rights represented by such Portfolio
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided, however, that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for failure
to so tender in a timely manner unless such Proper Instructions are received by
the Bank at least two business days prior to the date required for tender, and
unless the Bank (or its agent or subcustodian hereunder) has actual possession
of such Security at least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their
terms into other securities;
(d) For the purpose of redeeming in-kind shares of the Fund
upon authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, provided further, however, that in cases where additional
collateral is required to secure a borrowing already made, and such fact is made
to appear in the Proper Instructions, Portfolio Securities may be released for
that purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender and any loan agreement between the fund and the
lender that an event of deficiency or default on the loan has occurred, the Bank
may deliver such pledged Portfolio Securities to or for the account of the
lender;
(h) for the purpose of releasing certificates representing
Portfolio Securities, against contemporaneous receipt by the Bank of the fair
market value of such security, as set forth in the Proper Instructions received
by the Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund to a bank or
broker
<PAGE>
dealer, but only against receipt in accordance with street delivery custom
except as otherwise provided herein, of adequate collateral as agreed upon from
time to time by the Fund and the Bank, and upon receipt of payment in connection
with any repurchase agreement relating to such securities entered into by the
Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set
forth pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Fund held by
the Bank in connection with redemptions and repurchases by the Fund of
outstanding common shares, the Bank will rely on notification by the Fund's
transfer agent of receipt of a request for redemption and certificates, if
issued, in proper form for redemption before such payment is made. Payment shall
be made in accordance with the Articles of Incorporation or Declaration of Trust
and By-laws of the Fund (the "Articles"), from assets available for said
purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees through
the end of the then current term of this Agreement, and disbursements and
expenses of the Bank, this Agreement will terminate and the Bank shall be
released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding
anything herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the
name of the Fund all checks, drafts, or other negotiable or transferable
instruments or other orders for the payment of money received by it for the
account of the Fund and hold for the account of the Fund all income, dividends,
interest and other payments or distributions of cash with respect to the
Portfolio Securities held thereunder;
9.2 Present for payment all coupons and other income items
held by it for the account of the Fund which call for payment upon presentation
and hold the cash received by it upon such
<PAGE>
payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all
securities received as a distribution on Portfolio Securities as a result of a
stock dividend, share split-up, reorganization, recapitalization, merger,
consolidation, readjustment, distribution of rights and similar securities
issued with respect to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary
ownership and other certificates and affidavits required by the Internal Revenue
Code or the regulations of the Treasury Department issued thereunder, or by the
laws of any state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are
called, redeemed, retired or otherwise become payable, and hold cash received by
it upon payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal.
11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. The books and records of
the Bank pertaining to its actions under this Agreement and reports by the Bank
or its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Fund and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of
account and render statements or copies from time to time as reasonably
requested by the Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. Fund Evaluation and Yield Calculation
12.1 Fund Evaluation. The Bank shall compute and, unless otherwise
directed by the
<PAGE>
Board, determine as of the close of regular trading on the New York Stock
Exchange on each day on which said Exchange is open for unrestricted trading and
as of such other days, or hours, if any, as may be authorized by the Board, the
net asset value and the public offering price of a share of capital stock of the
Fund, such determination to be made in accordance with the provisions of the
Articles and By-laws of the Fund and the Prospectus and Statement of Additional
Information relating to the Fund, as they may from time to time be amended, and
any applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination. In computing the net asset value hereunder, the Bank may rely in
good faith upon information furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the Bank,
(ii) reserves, if any, authorized by the Board or that no such reserves have
been authorized, (iii) the source of the quotations to be used in computing the
net asset value, (iv) the value to be assigned to any security for which no
price quotations are available, and (v) the method of computation of the public
offering price on the basis of the net asset value of the shares, and the Bank
shall not be responsible for any loss occasioned by such reliance or for any
good faith reliance on any quotations received from a source pursuant to (iii)
above.
12.2. Yield Calculation. The Bank will compute the performance
results of the Fund (the "Yield Calculation") in accordance with the provisions
of Release No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the
"Releases") promulgated by the Securities and Exchange Commission, and any
subsequent amendments to, published interpretations of or general conventions
accepted by the staff of the Securities and Exchange Commission with respect to
such releases or the subject matter thereof ("Subsequent Staff Positions"),
subject to the terms set forth below:
(a) The Bank shall compute the Yield Calculation for the Fund
for the stated periods of time as shall be mutually agreed upon, and communicate
in a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive
the items of data necessary for the computation from the records it generates
and maintains for the Fund pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Fund, any of the Fund's designated agents or any of the Fund's designated
third party providers.
(c) At the request of the Bank, the Fund shall provide, and
the Bank shall be entitled to rely on, written standards and guidelines to be
followed by the Bank in interpreting and applying the computation methods set
forth in the Releases or any Subsequent Staff Positions as they specifically
apply to the Fund. In the event that the computation methods in the Releases or
the Subsequent Staff Positions or the application to the Fund of a standard or
guideline is not free from doubt or in the event there is any question of
interpretation as to the characterization of a particular security or any aspect
of a security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or otherwise or
as to any other element of the computation which is pertinent to the Fund, the
Fund or its designated agent shall have the full responsibility for making the
determination of how the security or payment is to be treated for purposes of
the computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by this
Section, and shall not be responsible for its computations made in accordance
with such determinations so long as such computations are mathematically
correct.
(d) The Fund shall keep the Bank informed of all publicly
available information and
<PAGE>
of any non-public advice, or information obtained by the Fund from its
independent auditors or by its personnel or the personnel of its investment
adviser, or Subsequent Staff Positions related to the computations to be
undertaken by the Bank pursuant to this Agreement and the Bank shall not be
deemed to have knowledge of such information (except as contained in the
Releases) unless it has been furnished to the Bank in writing.
13. Additional Services. The Bank shall perform the additional services
for the Fund as are set forth on Appendix C hereto. Appendix C may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix B shall be appropriately increased.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing
its duties hereunder and any other duties listed on any Schedule hereto, if any,
the Bank will be entitled to receive and act upon the advice of independent
counsel of its own selection, which may be counsel for the Fund, and will be
without liability for any action taken or thing done or omitted to be done in
accordance with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will
not be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by or for the Fund, the legality of the purchases thereof or the
propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of
the Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the
Fund or the legality of the distribution of any Portfolio Securities as payment
in kind of such dividend; and
(f) any property or moneys of the Fund unless and until
received by it, and any such property or moneys delivered or paid by it pursuant
to the terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain whether any Portfolio Securities at any time delivered to or held by
it for the account of the Fund are such as may properly be held by the Fund
under the provisions of its Articles, By-laws, any federal or state statutes or
any rule or regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the
Fund Held in the United States. The Bank may employ agents of its own selection
in the performance of its duties hereunder and shall be responsible for the acts
and omissions of such agents as if performed by the Bank hereunder. Without
limiting the foregoing, certain duties of the Bank hereunder may be performed by
one or more affiliates of the Bank.
<PAGE>
Upon receipt of Proper Instructions, the Bank may employ
subcustodians selected by or at the direction of the Fund, provided that any
such subcustodian meets at least the minimum qualifications required by Section
17(f)(1) of the 1940 Act to act as a custodian of the Fund's assets with respect
to property of the Fund held in the United States. The Bank shall have no
liability to the Fund or any other person by reason of any act or omission of
any such subcustodian and the Fund shall indemnify the Bank and hold it harmless
from and against any and all actions, suits and claims, arising directly or
indirectly out of the performance of any subcustodian. Upon request of the Bank,
the Fund shall assume the entire defense of any action, suit, or claim subject
to the foregoing indemnity. The Fund shall pay all fees and expenses of any
subcustodian.
14.3 Duties of the Bank with Respect to Property of the Fund Held Outside
of the United States.
(a) Appointment of Foreign Custody Manager.
(i) If the Fund has appointed the Bank Foreign Custody Manager (as
that term is defined in Rule 17f-5 under the 1940 Act), the
Bank's duties and obligations with respect to the Fund's
Portfolio Securities and other assets maintained outside the
United States shall be, to the extent not set forth herein, as
set forth in the Delegation Agreement between the Fund and the
Bank (the "Delegation Agreement").
(ii) If the Fund has appointed any other person or entity Foreign
Custody Manager, the Bank shall act only upon Proper Instructions
from the Fund with regard to any of the Fund's Portfolio
Securities or other assets held or to be held outside of the
United States, and the Bank shall be without liability for any
Claim (as that term is defined in Section 15 hereof) arising out
of maintenance of the Fund's Portfolio Securities or other assets
outside of the United States. The Fund also agrees that it shall
enter into a written agreement with such Foreign Custody Manager
that shall obligate such Foreign Custody Manager to provide to
the Bank in a timely manner all information required by the Bank
in order to complete its obligations hereunder. The Bank shall
not be liable for any Claim arising out of the failure of such
Foreign Custody Manager to provide such information to the Bank.
(b) Segregation of Securities. The Bank shall identify on its
books as belonging to the Fund the Foreign Portfolio Securities held by each
foreign sub-custodian (each an "Eligible Foreign Custodian") selected by the
Foreign Custody Manager, subject to receipt by the Bank of the necessary
information from such Eligible Foreign Custodian if the Foreign Custody Manager
is not the Bank.
(c) Access of Independent Accountants of the Fund. If the Bank
is the Fund's Foreign Custody Manager, upon request of the Fund, the Bank will
use its best efforts to arrange for the independent accountants of the Fund to
be afforded access to the books and records of any foreign banking institution
employed as an Eligible Foreign Custodian insofar as such books and records
relate to the performance of such foreign banking institution with regard to the
Fund's Portfolio Securities and other assets.
(d) Reports by Bank. If the Bank is the Fund's Foreign Custody
Manager, the Bank will supply to the Fund the reports required under the
Delegation Agreement.
(e) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Fund held by an Eligible Foreign Custodian shall be
effected pursuant to Proper Instructions from the Fund to the Bank and shall be
effected in accordance with the applicable agreement between the
<PAGE>
Foreign Custody Manager and such Eligible Foreign Custodian. If at any time any
Foreign Portfolio Securities shall be registered in the name of the nominee of
the Eligible Foreign Custodian, the Fund agrees to hold any such nominee
harmless from any liability by reason of the registration of such securities in
the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the
account of the Fund and delivery of Foreign Portfolio Securities maintained
for the account of the Fund may be effected in accordance with the
customary established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction
occurs, including, without limitation, delivering securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser
or dealer) against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer.
In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the exercise
of any voting rights, subscription rights, redemption rights, exchange rights,
conversion rights or tender rights, or any other action in connection with any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any instructions, forms or certifications with
respect to such Rights, and any instructions relating to the actions to be taken
in connection therewith, as the Bank shall receive from the Fund pursuant to
Proper Instructions. Notwithstanding the foregoing, the Bank shall have no
further duty or obligation with respect to such Rights, including, without
limitation, the determination of whether the Fund is entitled to participate in
such Rights under applicable U.S. and foreign laws, or the determination of
whether any action proposed to be taken with respect to such Rights by the Fund
or by the applicable Eligible Foreign Custodian will comply with all applicable
terms and conditions of any such Rights or any applicable laws or regulations,
or market practices within the market in which such action is to be taken or
omitted.
(f) Tax Law. The Bank shall have no responsibility or
liability for any obligations now or hereafter imposed on the Fund or the Bank
as custodian of the Fund by the tax laws of any jurisdiction, and it shall be
the responsibility of the Fund to notify the Bank of the obligations imposed on
the Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Eligible Foreign Custodian with regard
to such tax law shall be to use reasonable efforts to assist the Fund with
respect to any claim for exemption or refund under the tax law of jurisdictions
for which the Fund has provided such information.
14.4. Insurance. The Bank shall use the same care with respect
to the safekeeping of Portfolio Securities and cash of the Fund held by it as it
uses in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
14.5. Fees and Expenses of the Bank. The Fund will pay or
reimburse the Bank from time to time for any transfer taxes payable upon
transfer of Portfolio Securities made hereunder, and for all necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or expense
to the Bank as provided above. For the services rendered by the Bank hereunder,
the Fund will pay to the Bank such compensation or fees at such rate and at such
times as shall be agreed upon in writing by the parties from time to time. The
Bank will also be entitled to reimbursement by the Fund for all reasonable
expenses incurred in conjunction with termination of
<PAGE>
this Agreement.
14.6 Advances by the Bank. The Bank may, in its sole
discretion, advance funds on behalf of the Fund to make any payment permitted by
this Agreement upon receipt of any proper authorization required by this
Agreement for such payments by the Fund. Should such a payment or payments, with
advanced funds, result in an overdraft (due to insufficiencies of the Fund's
account with the Bank, or for any other reason) this Agreement deems any such
overdraft or related indebtedness a loan made by the Bank to the Fund payable on
demand. Such overdraft shall bear interest at the current rate charged by the
Bank for such loans unless the Fund shall provide the Bank with agreed upon
compensating balances. The Fund agrees that the Bank shall have a continuing
lien and security interest to the extent of any overdraft or indebtedness and to
the extent required by law, in and to any property at any time held by it for
the Fund's benefit or in which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any overdraft or indebtedness, together with
interest due thereon, against any balance of account standing to the credit of
the Fund on the Bank's books.
15. Limitation of Liability.
15.1 Notwithstanding anything in this Agreement to the
contrary, in no event shall the Bank or any of its officers, directors,
employees or agents (collectively, the "Indemnified Parties") be liable to the
Fund or any third party, and the Fund shall indemnify and hold the Bank and the
Indemnified Parties harmless from and against any and all loss, damage,
liability, actions, suits, claims, costs and expenses, including legal fees, (a
"Claim") arising as a result of any act or omission of the Bank or any
Indemnified Party under this Agreement, except for any Claim resulting solely
from the gross negligence, willful misfeasance or bad faith of the Bank or any
Indemnified Party. Without limiting the foregoing, neither the Bank nor the
Indemnified Parties shall be liable for, and the Bank and the Indemnified
Parties shall be indemnified against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party
in good faith reliance upon the terms of this Agreement, any Officer's
Certificate, Proper Instructions, resolution of the Board, telegram, telecopier,
notice, request, certificate or other instrument reasonably believed by the Bank
to genuine;
(b) Any act or omission of any subcustodian selected by or at the
direction of the Fund;
(c) Any act or omission of any Foreign Custody Manager other
than the Bank or any act or ommission of any Eligible Foreign Custodian if the
Bank is not the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event related
to Portfolio Securities which, at the direction of the Fund, have not been
registered in the name of the Bank or its nominee;
(e) Any Corporate Action requiring a Response for which the
Bank has not received Proper Instructions or obtained actual possession of all
necessary Securities, consents or other materials by 5:00 p.m. on the date
specified as the Response Deadline;
(f) Any act or omission of any European Branch of a U.S.
banking institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
<PAGE>
(g) Information relied on in good faith by the Bank and
supplied by any Authorized Person in connection with the calculation of (i) the
net asset value and public offering price of the shares of capital stock of the
Fund or (ii) the Yield Calculation; or
(h) Any acts of God, earthquakes, fires, floods, storms or
other disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation or computers (hardware or software) and
computer facilities, the unavailability of energy sources and other similar
happenings or events.
15.2 Notwithstanding anything to the contrary in this
Agreement, in no event shall the Bank or the Indemnified Parties be liable to
the Fund or any third party for lost profits or lost revenues or any special,
consequential, punitive or incidental damages of any kind whatsoever in
connection with this Agreement or any activities hereunder.
16. Termination.
16.1 The term of this Agreement shall be three years
commencing upon the date hereof (the "Initial Term"), unless earlier terminated
as provided herein. After the expiration of the Initial Term, the term of this
Agreement shall automatically renew for successive three-year terms (each a
"Renewal Term") unless notice of non-renewal is delivered by the non-renewing
party to the other party no later than ninety days prior to the expiration of
the Initial Term or any Renewal Term, as the case may be.
Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term or any Renewal Term in the event the other party
violates any material provision of this Agreement, provided that the
non-violating party gives written notice of such violation to the violating
party and the violating party does not cure such violation within 90 days of
receipt of such notice.
16.2 In the event of the termination of this Agreement, the
Bank will immediately upon receipt or transmittal, as the case may be, of notice
of termination, commence and prosecute diligently to completion the transfer of
all cash and the delivery of all Portfolio Securities duly endorsed and all
records maintained under Section 11 to the successor custodian when appointed by
the Fund. The obligation of the Bank to deliver and transfer over the assets of
the Fund held by it directly to such successor custodian will commence as soon
as such successor is appointed and will continue until completed as aforesaid.
If the Fund does not select a successor custodian within ninety (90) days from
the date of delivery of notice of termination the Bank may, subject to the
provisions of subsection 16.3, deliver the Portfolio Securities and cash of the
Fund held by the Bank to a bank or trust company of the Bank's own selection
which meets the requirements of Section 17(f)(1) of the 1940 Act and has a
reported capital, surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Fund under terms similar to those
on which they were held by the Bank, whereupon such bank or trust company so
selected by the Bank will become the successor custodian of such assets of the
Fund with the same effect as though selected by the Board. Thereafter, the Bank
shall be released from any and all obligations under this Agreement.
16.3 Prior to the expiration of ninety (90) days after notice
of termination has been given, the Fund may furnish the Bank with an order of
the Fund advising that a successor custodian cannot be found willing and able to
act upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will
<PAGE>
deliver the Portfolio Securities and cash of the Fund held by it, subject as
aforesaid, in accordance with one of such alternatives which may be approved by
the requisite vote of shareholders, upon receipt by the Bank of a copy of the
minutes of the meeting of shareholders at which action was taken, certified by
the Fund's Secretary and an opinion of counsel to the Fund in form and content
satisfactory to the Bank. Thereafter, the Bank shall be released from any and
all obligations under this Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable
expenses incurred by the Bank in connection with the termination of this
Agreement.
16.5 At any time after the termination of this Agreement, the
Fund may, upon written request, have reasonable access to the records of the
Bank relating to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision.
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
[ ]
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company 200 Clarendon Street, P.O.
Box 9130 Boston, Massachusetts 02117-9130 Attention:
__________________, Director - Client Management With a copy
to: John E. Henry, General Counsel
or at such other place as such party may from time to time
designate in writing.
19. Amendments. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties.
20. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will
be governed by the
<PAGE>
laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. Limitation of Liability. The Bank agrees that the obligations
assumed by the Fund hereunder shall be limited in all cases to the assets of the
Fund and that the Bank shall not seek satisfaction of any such obligation from
the officers, agents, employees, trustees, or shareholders of the Fund.
25. Several Obligations of the Portfolios. This Agreement is an
agreement entered into between the Bank and the Fund with respect to each
Portfolio. With respect to any obligation of the Fund on behalf of any Portfolio
arising out of this Agreement, the Bank shall look for payment or satisfaction
of such obligation solely to the assets of the Portfolio to which such
obligation relates as though the Bank had separately contracted with the Fund by
separate written instrument with respect to each Portfolio.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
whatifi Funds
By:
Name:
Title:
INVESTORS BANK & TRUST COMPANY
By:
Name:
Title:
<PAGE>
Appendices
Appendix A...............................................Portfolios
Appendix B...............................................Fee Schedule
Appendix C...............................................Additional Services
23
<PAGE>
ADMINISTRATION AGREEMENT
AGREEMENT made as of February __, 2000 by and between whatifi Funds, a
business trust organized under the laws of the State of Delaware (the "Fund"),
and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").
WHEREAS, the Fund, a registered investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), consisting of the separate
portfolios listed on Appendix A hereto; and
WHEREAS, the Fund desires to retain the Bank to render certain
administrative services to the Fund and the Bank is willing to render such
services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Bank to act as
Administrator of the Fund on the terms set forth in this Agreement. The Bank
accepts such appointment and agrees to render the services herein set forth for
the compensation herein provided.
2. Delivery of Documents. The Fund has furnished the Bank with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing
the appointment of the Bank to provide certain administrative services to the
Fund and approving this Agreement;
(b) The Fund's incorporating documents filed with the state of
[state] on [date] and all amendments thereto (the "Articles");
(c) The Fund's by-laws and all amendments thereto (the
"By-Laws");
(d) The Fund's agreements with all service providers which
include any investment advisory agreements, sub-investment advisory agreements,
custody agreements, distribution agreements and transfer agency agreements
(collectively, the "Agreements");
(e) The Fund's most recent Registration Statement on Form N-1A
(the "Registration Statement") under the Securities Act of 1933 and under the
1940 Act and all amendments thereto; and
(f) The Fund's most recent prospectus and statement of
additional information (the "Prospectus"); and
(g) Such other certificates, documents or opinions as may
mutually be deemed necessary or appropriate for the Bank in the proper
performance of its duties hereunder.
The Fund will immediately furnish the Bank with copies of all
amendments of or supplements to the foregoing. Furthermore, the Fund will notify
the Bank as soon as possible of any
1
<PAGE>
matter which may materially affect the performance by the Bank of its services
under this Agreement.
3. Duties of Administrator. Subject to the supervision and direction of
the Board of Directors of the Fund, the Bank, as Administrator, will assist in
conducting various aspects of the Fund's administrative operations and
undertakes to perform the services described in Appendix B hereto. The Bank may,
from time to time, perform additional duties and functions which shall be set
forth in an amendment to such Appendix B executed by both parties. At such time,
the fee schedule included in Appendix C hereto shall be appropriately amended.
In performing all services under this Agreement, the Bank
shall act in conformity with the Fund's Articles and By-Laws and the 1940 Act,
as the same may be amended from time to time, and the investment objectives,
investment policies and other practices and policies set forth in the Fund's
Registration Statement, as the same may be amended from time to time.
Notwithstanding any item discussed herein, the Bank has no discretion over the
Fund's assets or choice of investments and cannot be held liable for any problem
relating to such investments.
4. Duties of the Fund.
(a) The Fund is solely responsible (through its transfer agent
or otherwise) for (i) providing timely and accurate reports ("Daily Sales
Reports") which will enable the Bank as Administrator to monitor the total
number of shares sold in each state on a daily basis and (ii) identifying any
exempt transactions ("Exempt Transactions") which are to be excluded from the
Daily Sales Reports.
(b) The Fund agrees to make its legal counsel available to the
Bank for instruction with respect to any matter of law arising in connection
with the Bank's duties hereunder, and the Fund further agrees that the Bank
shall be entitled to rely on such instruction without further investigation on
the part of the Bank.
5. Fees and Expenses.
(a) For the services to be rendered and the facilities to be
furnished by the Bank, as provided for in this Agreement, the Fund will
compensate the Bank in accordance with the fee schedule attached as Appendix C
hereto. Such fees do not include out-of-pocket disbursements (as delineated on
the fee schedule or other expenses with the prior approval of the Fund's
management) of the Bank for which the Bank shall be entitled to bill the Fund
separately and for which the Fund shall reimburse the Bank.
(b) The Bank shall not be required to pay any expenses
incurred by the Fund.
6. Limitation of Liability.
(a) The Bank, its directors, officers, employees and agents
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the performance of its obligations and
duties under this Agreement, except a loss resulting from willful
2
<PAGE>
misfeasance, bad faith or gross negligence in the performance of such
obligations and duties, or by reason of its reckless disregard thereof. The Fund
will indemnify the Bank, its directors, officers, employees and agents against
and hold it and them harmless from any and all losses, claims, damages,
liabilities or expenses (including legal fees and expenses) resulting from any
claim, demand, action or suit (i) arising out of the actions or omissions of the
Fund, including, but not limited to, inaccurate Daily Sales Reports and
misidentification of Exempt Transactions; (ii) arising out of the offer or sale
of any securities of the Fund in violation of (x) any requirement under the
federal securities laws or regulations, (y) any requirement under the securities
laws or regulations of any state, or (z) any stop order or other determination
or ruling by any federal or state agency with respect to the offer or sale of
such securities; or (iii) not resulting from the willful misfeasance, bad faith
or gross negligence of the Bank in the performance of such obligations and
duties or by reason of its reckless disregard thereof.
(b) The Bank may apply to the Fund at any time for
instructions and may consult counsel for the Fund, or its own counsel, and with
accountants and other experts with respect to any matter arising in connection
with its duties hereunder, and the Bank shall not be liable or accountable for
any action taken or omitted by it in good faith in accordance with such
instruction, or with the opinion of such counsel, accountants, or other experts.
The Bank shall not be liable for any act or omission taken or not taken in
reliance upon any document, certificate or instrument which it reasonably
believes to be genuine and to be signed or presented by the proper person or
persons. The Bank shall not be held to have notice of any change of authority of
any officers, employees, or agents of the Fund until receipt of written notice
thereof has been received by the Bank from the Fund.
(c) In the event the Bank is unable to perform, or is delayed
in performing, its obligations under the terms of this Agreement because of acts
of God, strikes, legal constraint, government actions, war, emergency
conditions, interruption of electrical power or other utilities, equipment or
transmission failure or damage reasonably beyond its control or other causes
reasonably beyond its control, the Bank shall not be liable to the Fund for any
damages resulting from such failure to perform, delay in performance, or
otherwise from such causes.
(d) Notwithstanding anything to the contrary in this
Agreement, in no event shall the Bank be liable for special, incidental or
consequential damages, even if advised of the possibility of such damages.
7. Termination of Agreement.
(a) The term of this Agreement shall be three years commencing
upon the date hereof (the "Initial Term"), unless earlier terminated as provided
herein. After the expiration of the Initial Term, the term of this Agreement
shall automatically renew for successive three-year terms (each a "Renewal
Term") unless notice of non-renewal is delivered by the non-renewing party to
the other party no later than ninety days prior to the expiration of the Initial
Term or any Renewal Term, as the case may be.
Either party hereto may terminate this Agreement prior to the expiration of
the Initial Term or any Renewal Term in the event the other party violates any
material provision of this Agreement, provided that the violating party does not
cure such violation within ninety days of receipt of
3
<PAGE>
written notice from the non-violating party of such violation.
(b) At any time after the termination of this Agreement, the
Fund may, upon written request, have reasonable access to the records of the
Bank relating to its performance of its duties as Administrator.
8. Miscellaneous.
(a) Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or the Bank shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund: whatifi Funds
790 Eddy Street
San Francisco, California 94109
Attention: Monica Chandra
With a copy to:
David M. Leahy, Esq.
Facsimile: 202-293-2275
To the Bank:
Investors Bank & Trust Company
200 Clarendon Street, P.O. Box 9130
Boston, MA 02117-9130
Attention: _____________, Director, Client Management
With a copy to: John E. Henry, General Counsel
(b) 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 without the written consent
of the other party.
(c) This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts, without regard to its conflict of
laws provisions.
(d) This Agreement may be executed in any number of
counterparts each of which shall be deemed to be an original and which
collectively shall be deemed to constitute only one instrument.
(e) The captions of this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
4
<PAGE>
9. Confidentiality. 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 as may be
required in the performance of duties hereunder or as otherwise required by law.
10. Use of Name. The Fund shall not use the name of the Bank or any of
its affiliates in any prospectus, sales literature or other material relating to
the Fund in a manner not approved by the Bank prior thereto in writing; provided
however, that the approval of the Bank shall not be required for any use of its
name which merely refers in accurate and factual terms to its appointment
hereunder or which is required by the Securities and Exchange Commission or any
state securities authority or any other appropriate regulatory, governmental or
judicial authority; provided further, that in no event shall such approval be
unreasonably withheld or delayed.
[Remainder of Page Intentionally Left Blank]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed and delivered by their duly authorized officers as of the date
first written above.
whatifi Funds
By:
Name:
Title:
INVESTORS BANK & TRUST COMPANY
By:
Name:
Title:
6
<PAGE>
Appendices
Appendix A..................................................Portfolios
Appendix B..................................................Services
Appendix C..................................................Fee Schedule
7
<PAGE>
FORM OF
THIRD PARTY FEEDER FUND
AGREEMENT
AMONG
whatifi Funds
[FUND DISTRIBUTOR]
AND
MASTER INVESTMENT PORTFOLIO
dated as of
February __, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I. REPRESENTATIONS AND WARRANTIES..............................
1.1 Trust.......................................................
1.2 MIP.........................................................
1.3 Distributor.................................................
ARTICLE II. COVENANTS...................................................
2.1 Trust.......................................................
2.2 MIP.........................................................
2.3 Reasonable Actions..........................................
ARTICLE III. INDEMNIFICATION.............................................
3.1 Trust.......................................................
3.2 Distributor.................................................
3.3 MIP.........................................................
ARTICLE IV. ADDITIONAL AGREEMENTS.......................................
4.1 Access to Information.......................................
4.2 Confidentiality.............................................
4.3 Obligations of Trust and MIP ...............................
ARTICLE V. TERMINATION, AMENDMENT......................................
5.1 Termination.................................................
5.2 Amendment...................................................
ARTICLE VI. GENERAL PROVISIONS..........................................
6.1 Expenses....................................................
6.2 Headings....................................................
6.3 Entire Agreement............................................
6.4 Successors..................................................
6.5 Governing Law...............................................
6.6 Counterparts................................................
6.7 Third Parties...............................................
6.8 Notices.....................................................
6.9 Interpretation..............................................
6.10 Operation of the Fund.......................................
6.11 Relationship of Parties; No Joint Venture, Etc. ............
6.12 Use of Name.................................................
Signatures
Schedule A
Schedule B
2
<PAGE>
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
____ day of _______________, 2000, by and among whatifi Funds, a Delaware
business trust (the "Trust"), for itself and on behalf of its series set forth
on Schedule A, the whatifi S&P 500 Index Fund, the whatifi Extended Market Index
Fund, the whatifi International Index Fund, the whatifi Bond Index Fund and the
whatifi Money Market Fund (each, a "Fund" and collectively, the "Funds") [Fund
Distributor] (the "Distributor"), [a _____________ corporation], and Master
Investment Portfolio ("MIP"), a Delaware business trust, for itself and on
behalf of its series set forth on Schedule<-1- 95>B (each, a "Portfolio" and
collectively, the "Portfolios").
WITNESSETH
WHEREAS, Trust and MIP are each registered under the Investment Company
Act of 1940 (the "1940 Act") as open-end management investment companies;
WHEREAS, each Fund and its corresponding Portfolio have the same
investment objective and substantially the same investment policies;
WHEREAS, each Fund desires to invest on an ongoing basis all or
substantially all of its investable assets (the "Assets") in exchange for a
beneficial interest in the corresponding Portfolio (the "Investment") on the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
made herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
1.1 Trust. Trust represents and warrants to MIP that:
(a) Organization. Trust is a business trust duly organized,
validly existing and in good standing under the laws of the State of
Delaware, and the Funds are duly and validly designated series of
Trust. Trust and each Fund has the requisite power and authority to own
its property and conduct its business as proposed to be conducted
pursuant to this Agreement.
(b) Authorization of Agreement. The execution and delivery of
this Agreement by Trust on behalf of the Funds and the conduct of
business contemplated
3
<PAGE>
hereby have been duly authorized by all necessary action on the part of
Trust's Board of Trustees and no other action or proceeding is
necessary for the execution and delivery of this Agreement by Funds, or
the performance by Funds of their obligations hereunder. This Agreement
when executed and delivered by Trust on behalf of the Funds shall
constitute a legal, valid and binding obligation of Trust, enforceable
against the Funds in accordance with its terms. No meeting of, or
consent by, shareholders of the Funds is necessary to approve or
implement the Investments.
(c) 1940 Act Registration. Trust is duly registered under the
Investment Company Act of 1940, as amended (the "1940 Act") as an
open-end management investment company, and such registration is in
full force and effect.
(d) SEC Filings. Trust has duly filed all forms, reports,
proxy statements and other documents (collectively, the "SEC Filings")
required to be filed with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"),
the Securities Exchange Act of 1934 (the "1934 Act") and the 1940 Act,
and the rules and regulations thereunder, (collectively, the
"Securities Laws") in connection with the registration of the Funds'
shares, any meetings of its shareholders and its registration as an
investment company. All SEC Filings relating to the Funds were prepared
to comply in all material respects in accordance with the requirements
of the applicable Securities Laws and do not, as of the date of this
Agreement, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided that Trust makes
no representation or warranty hereunder with respect to information
supplied by MIP or any service provider of MIP for use in Trust's SEC
filings, including but not limited to any written information contained
in MIP's current registration statement relating to the Portfolios.
(e) Fund Assets. Each Fund currently intends on an ongoing
basis to invest its Assets solely in the corresponding Portfolio,
although it reserves the right to invest Assets in other securities and
other assets and/or to redeem any or all units of the Portfolio at any
time without notice.
(f) Registration Statement. Trust has reviewed MIP's and the
Portfolios' most recent registration statement on Form NlA, as filed
with the SEC.
(g) Insurance. Trust has in force an errors and omissions
liability insurance policy insuring the Funds against loss up to
[$______] million for negligence or wrongful acts.
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<PAGE>
1.2 MIP. MIP represents and warrants to Trust that:
(a) Organization. MIP is a trust duly organized, validly
existing and in good standing under the laws of the State of Delaware
and the Portfolios are duly and validly designated series of MIP. MIP
and each Portfolio has the requisite power and authority to own its
property and conduct its business as now being conducted and as
proposed to be conducted pursuant to this Agreement.
(b) Authorization of Agreement. The execution and delivery of
this Agreement by MIP on behalf of the Portfolios and the conduct of
business contemplated hereby have been duly authorized by all necessary
action on the part of MIP's Board of Trustees and no other action or
proceeding is necessary for the execution and delivery of this
Agreement by the Portfolios, or the performance by the Portfolios of
their obligations hereunder and the consummation by the Portfolios of
the transactions contemplated hereby. This Agreement when executed and
delivered by MIP on behalf of the Portfolios shall constitute a legal,
valid and binding obligation of MIP and the Portfolios, enforceable
against MIP and the Portfolios in accordance with its terms. No meeting
of, or consent by, interestholders of the Portfolios is necessary to
approve the issuance of the Interests (as defined below) to the Funds.
(c) Issuance of Beneficial Interest. The issuance by MIP of
beneficial interests in the Portfolios ("Interests") in exchange for
the Investments by the corresponding Funds of their Assets has been
duly authorized by all necessary action on the part of the Board of
Trustees of MIP. When issued in accordance with the terms of this
Agreement, the Interests will be validly issued, fully paid and
non-assessable.
(d) 1940 Act Registration. MIP is duly registered as an
open-end management investment company under the 1940 Act and such
registration is in full force and effect.
(e) SEC Filings; Securities Exemptions. MIP has duly filed all
SEC Filings, as defined herein, relating to the Portfolios required to
be filed with the SEC under the Securities Laws. Interests in
Portfolios are not required to be registered under the 1933 Act,
because such Interests are offered solely in private placement
transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. In addition, Interests in the
Portfolios are either noticed or qualified for sale or exempt from
notice or qualification requirements under applicable securities laws
in those states and other jurisdictions in which Interests are offered
and sold. All SEC Filings relating to the Portfolios comply in all
material respects with the requirements of the applicable Securities
Laws and do not, as of the date of this Agreement, contain any untrue
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<PAGE>
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(f) Tax Status. Each Portfolio is taxable as a partnership for
federal income tax purposes under the Internal Revenue Code of 1986, as
amended (the "Code").
(g) Taxable and Fiscal Year. The taxable and fiscal year end
of each Portfolio is [_______________].
(h) Insurance. MIP has in force an errors and commissions
liability insurance policy insuring the Portfolios against loss up to
[$______] million for negligence and wrongful acts.
1.3 Distributor. Distributor represents and warrants to MIP that the
execution and delivery of this Agreement by Distributor have been duly
authorized by all necessary action on the part of Distributor and no other
action or proceeding is necessary for the execution and delivery of this
Agreement by Distributor, or the performance by Distributor of its obligations
hereunder. This Agreement when executed and delivered by Distributor shall
constitute a legal, valid and binding obligation of Distributor, enforceable
against Distributor in accordance with its terms.
ARTICLE II
COVENANTS
2.1 Trust. Trust covenants that:
(a) Advance Review of Certain Documents. Trust will furnish
MIP at least ten (10) business days prior to the earlier of filing or
first use, with drafts of the Funds' registration statement on Form
N-lA and any amendments thereto, and also will furnish MIP at least
five (5) business days prior to the earlier of filing or first use,
with drafts of any prospectus or statement of additional information
supplements. In addition, Trust will furnish or will cause to be
furnished to MIP at least three (3) business days prior to the earlier
of filing or first use, as the case may be, any proposed advertising or
sales literature that contains language that describes or refers to MIP
or the Portfolios and that was not previously approved by MIP. Trust
agrees that it will include in all such Fund documents any disclosures
that may be required by law, and that it will incorporate in all such
Fund documents any material and reasonable comments made by MIP. MIP
will not, however, in any way be liable to Trust for any errors or
omissions in such documents, whether or not MIP makes any objection
thereto, except to the extent such
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<PAGE>
errors or omissions result from information provided in the Portfolios'
1940 Act registration statement or otherwise provided by MIP for
inclusion therein. In addition, neither the Funds nor Distributor will
make any other written or oral representations about MIP or the
Portfolios other than those contained in such documents without MIP's
prior written consent.
(b) SEC and Blue Sky Filings. Trust will file all SEC Filings
required to be filed with the SEC under the Securities Laws in
connection with the registration of the Funds' shares, any meetings of
its shareholders, and its registration as a series of an investment
company. Trust will file such similar or other documents as may be
required to be filed with any securities commission or similar
authority by the laws or regulations of any state, territory or
possession of the United States, including the District of Columbia, in
which shares of the Funds are or will be noticed for sale ("State
Filings"). The Funds' SEC Filings will be prepared in all material
respects in accordance with the requirements of the applicable
Securities Laws, and, insofar as they relate to information other than
that supplied or required to be supplied by MIP, will not, at the time
they are filed or used to offer the Funds shares, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Funds' State Filings will be prepared in
accordance with the requirements of applicable state and federal law
and the rules and regulations thereunder.
(c) 1940 Act Registration. Trust will be duly registered as an
open-end management investment company under the 1940 Act.
(d) Tax Status. The Funds will qualify for treatment as
regulated investment companies under Subchapter M of the Code for any
taxable year during which this Agreement continues in effect, except to
the extent that a failure to so qualify may result from any action or
omission of the corresponding portfolio or MIP.
(e) Fiscal Year. Each Fund shall take appropriate action to
adopt and maintain the same fiscal year end as the corresponding
Portfolio (currently the last day of
------------).
(f) Proxy Voting. If requested to vote on matters pertaining
to MIP or the Portfolios, the Funds will vote such shares in accordance
with applicable law.
(g) Compliance with Laws. Trust shall comply, in all material
respects, with all applicable laws, rules and regulations in connection
with conducting its operations as
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<PAGE>
a registered investment company.
(h) Year 2000 Readiness. Trust shall use its best efforts to
ensure the readiness of its computer systems, or those used by it in
the performance of its duties, to properly process information and data
from and after January<-1- 95>1, 2000. Trust shall promptly notify MIP
of any significant problems that arise in connection with such
readiness.
2.2 MIP. MIP covenants that:
(a) Signature Pages. MIP shall promptly provide all required
signature pages to Trust for inclusion in any SEC Filings of Trust,
provided Trust is in material compliance with its covenants and other
obligations under this Agreement at the time such signature pages are
provided and included in the SEC Filing. Trust and Distributor
acknowledge and agree that the provision of such signature pages does
not constitute a representation by MIP, its Trustees or Officers, that
such SEC Filing complies with the requirements of the applicable
Securities Laws, or that such SEC Filing does not contain any untrue
statement of a material fact or does not omit to the state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except with respect to information provided by
MIP for inclusion in such SEC Filing or for use by Trust in preparing
such filing, which shall in any event include any written information
obtained from MIP's current registration statement on Form N-1A.
(b) Redemption. Except as otherwise provided in this Section
2.2(b), redemptions of Interests owned by the Funds will be effected
pursuant to Section 2.2(c). In the event a Fund desires to withdraw its
entire Investment from the corresponding Portfolio, either by
submitting a redemption request or by terminating this Agreement in
accordance with Section<-1- 95>5.1 hereof, such Portfolio, unless
otherwise agreed to by the parties, and in all cases subject to
Sections 17 and 18 of the 1940 Act and the rules and regulations
thereunder, will effect such redemption "in kind" and in such a manner
that the securities delivered to the Fund or its custodian for the
account of the Fund mirror, as closely as practicable, the composition
of the Portfolio immediately prior to such redemption. Each Portfolio
further agrees that, to the extent legally possible, it will not take
or cause to be taken any action without Trust's prior approval that
would cause the withdrawal of a Fund's Investments to be treated as a
taxable event to the Fund. The Portfolios further agree to conduct
their activities in accordance with all applicable requirements of
Regulation<-1- 95>1.731-2(e) under the Code or any successor
regulation.
(c) Ordinary Course Redemptions. The Portfolios will
effect redemptions of
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<PAGE>
Interests in accordance with the provisions of the 1940 Act and the
rules and regulations thereunder, including, without limitation,
Section 17 thereof. All redemption requests other than a withdrawal of
a Fund's entire Investment in the corresponding Portfolio under Section
2.2(b) or, at the sole discretion of MIP, a withdrawal (or series of
withdrawals over any three (3) consecutive business days) of an amount
that exceeds 10% of a Portfolio's net asset value, will be effected in
cash at the next determined net asset value after the redemption
request is received. The Portfolios will use their best efforts to
settle redemptions on the business day following the receipt of a
redemption request by a Fund and if such next business day settlement
is not practicable, will immediately notify the Fund regarding the
anticipated settlement date, which shall in all events be a date
permitted under the 1940 Act.
(d) SEC Filings. MIP will file all SEC Filings required to be
filed with the SEC under the Securities Laws in connection with any
meetings of the Portfolios' investors and its registration as an
investment company and will provide copies of all such definitive
filings to Trust. The Portfolios' SEC Filings will comply in all
material respects with the requirements of the applicable Securities
Laws, and will not, at the time they are filed or used, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) 1940 Act Registration. MIP will remain duly registered as
an open-end management investment company under the 1940 Act.
(f) Tax Status. Based upon applicable IRS interpretations and
rulings and Treasury Regulations, each Portfolio will continue to be
treated as a partnership for federal income tax purposes. Each
Portfolio will continue to satisfy (i) the income test imposed on
regulated investment companies under Section 851(b)(2) of the Code and
(ii) the asset test imposed on regulated investment companies under
Section 851(b)(3) of the Code as if such Sections applied to it for so
long as this Agreement continues in effect. MIP agrees to forward to
Trust prior to the Funds' initial Investment a copy of its opinion of
counsel or private letter ruling relating to the tax status of the
Portfolios and agrees that Trust and the Funds may rely upon such
opinion or ruling during the term of this Agreement.
(g) Securities Exemptions. Interests in the Portfolios have
been and will continue to be offered and sold solely in private
placement transactions which do not involve any "public offering"
within the meaning of Section 4(2) of the 1933 Act or require
registration or notification under any state law.
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(h) Advance Notice of Certain Changes. MIP shall provide Trust
with at least one hundred twenty (120) days' advance notice, or such
lesser time as may be agreed to by the parties, of any change in a
Portfolio's investment objective, and at least sixty (60) days' advance
notice, or if MIP has knowledge or should have knowledge that one of
the following changes is likely to occur more than sixty (60) days in
advance of such event, notice shall be provided as soon as reasonably
possible after MIP obtains or should have obtained such knowledge, of
any material change in a Portfolio's investment policies or activities,
any material increase in a Portfolio's fees or expenses, or any change
in a Portfolio's fiscal year or time for calculating net asset value
for purposes of Rule 22c1.
(i) Compliance with Laws. MIP shall comply, in all material
respects, with all applicable laws, rules and regulations in connection
with conducting its operations as a registered investment company.
(j) Proxy Costs. If and to the extent that: (i) MIP submits a
matter to a vote of a Portfolio's Interestholders; (ii) the
corresponding Fund determines that it is necessary or appropriate to
solicit proxies from its shareholders in order to vote its Interests;
and (iii) MIP agrees to assume the costs associated with soliciting
proxies from the shareholders of any other feeder fund that invests
substantially all of its investable assets in such Portfolio, then MIP
shall assume the costs associated with soliciting proxies from the
shareholders of the Fund.
(k) Year 2000 Readiness. MIP shall use its best efforts to
ensure the readiness of its computer systems, or those used by it in
the performance of its duties, to properly process information and data
from and after January<-1- 95>1, 2000. MIP shall promptly notify Trust
of any significant problems that arise in connection with such
readiness.
2.3 Reasonable Actions. Each party covenants that it will, subject to
the provisions of this Agreement, from time to time, as and when requested by
another party or in its own discretion, as the case may be, execute and deliver
or cause to be executed and delivered all such documents, assignments and other
instruments, take or cause to be taken such actions, and do or cause to be done
all things reasonably necessary, proper or advisable in order to conduct the
business contemplated by this Agreement and to carry out its intent and purpose.
ARTICLE III
INDEMNIFICATION
3.1 Trust
(a) Trust agrees to indemnify and hold harmless MIP, the
Portfolios and the
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Portfolios' investment adviser, and any director/trustee, officer,
employee or agent of MIP, the Portfolio or Portfolios' investment
adviser (in this Section, each, a "Covered Person" and collectively,
"Covered Persons"), against any and all losses, claims, demands,
damages, liabilities or expenses (including, with respect to each
Covered Person, the reasonable cost of investigating and defending
against any claims therefor and any counsel fees incurred in connection
therewith, except as provided in subparagraph (b)) ("Losses"), that:
(i) arise out of or are based upon any violation or
alleged violation of any of the Securities Laws, or any other
applicable statute, rule, regulation or common law, or are
incurred in connection with or as a result of any formal or
informal administrative proceeding or investigation by a
regulatory agency, insofar as such violation or alleged
violation, proceeding or investigation arises out of or is
based upon any direct or indirect omission or commission (or
alleged omission or commission) by Trust or by any of its
trustees/directors, officers, employees or agents, but only
insofar as such omissions or commissions relate to the Funds;
or
(ii) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact
contained in any advertising or sales literature, prospectus,
registration statement, or any other SEC Filing relating to
the Funds, or any amendments or supplements to the foregoing
(in this Section, collectively "Offering Documents"), or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was not made in the Offering Documents in
reliance upon and in conformity with MIP's registration
statement on Form N-1A and other written information furnished
by MIP to the Funds or by any service provider of MIP for use
therein or for use by the Funds in preparing such documents,
including but not limited to any written information contained
in MIP's current registration statement on Form N1A;
provided, however, that in no case shall Trust be liable for
indemnification hereunder with respect to any claims made against any
Covered Person unless a Covered Person shall have notified Trust in
writing within a reasonable time after the summons, other first legal
process, notice of a federal, state or local tax deficiency, or formal
initiation of a regulatory investigation or proceeding giving
information of the nature of the claim shall have properly been served
upon or provided to a Covered Person seeking
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indemnification. Failure to notify Trust of such claim shall not
relieve Trust from any liability that it may have to any Covered Person
otherwise than on account of the indemnification contained in this
Section.
(b) Trust will be entitled to participate at its own expense
in the defense or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but if Trust elects to assume
the defense, such defense shall be conducted by counsel chosen by
Trust. In the event Trust elect(s) to assume the defense of any such
suit and retain such counsel, each Covered Person in the suit may
retain additional counsel but shall bear the fees and expenses of such
counsel unless (A) Trust shall have specifically authorized the
retaining of and payment of fees and expenses of such counsel or (B)
the parties to such suit include any Covered Person and Trust, and any
such Covered Person has been advised in a written opinion by counsel
reasonably acceptable to Trust that one or more legal defenses may be
available to it that may not be available to Trust, in which case Trust
shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and expenses of one
counsel to all such persons. Trust shall not be required to indemnify
any Covered Person for any settlement of any such claim effected
without its written consent, which consent shall not be unreasonably
withheld or delayed. The indemnities set forth in paragraph (a) will be
in addition to any liability that Trust might otherwise have to Covered
Persons.
3.2 Distributor
(a) Distributor agrees to indemnify and hold harmless MIP, the
Portfolios and the Portfolios' investment adviser, and any
director/trustee, officer, employee or agent of MIP, the Portfolios or
Portfolios' investment adviser (in this Section, each, a "Covered
Person" and collectively, "Covered Persons"), against any and all
losses, claims, demands, damages, liabilities or expenses (including,
with respect to each Covered Person, the reasonable cost of
investigating and defending against any claims therefor and any counsel
fees incurred in connection therewith, except as provided in
subparagraph (b)) ("Losses"), that:
(i) arise out of or are based upon any violation or
alleged violation of any of the Securities Laws, or any other
applicable statute, rule, regulation or common law, or are
incurred in connection with or as a result of any formal or
informal administrative proceeding or investigation by a
regulatory agency, insofar as such violation or alleged
violation, proceeding or investigation arises out of or is
based upon any direct or indirect omission or commission (or
alleged omission or commission) by Trust or Distributor or by
any of its or their trustees/directors, officers, employees or
agents, but only insofar as such
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<PAGE>
omissions or commissions relate to the Funds; or
(ii) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact
contained in any advertising or sales literature, prospectus,
registration statement, or any other SEC Filing relating to
the Funds, or any amendments or supplements to the foregoing
(in this Section, collectively "Offering Documents"), or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was not made in the Offering Documents in
reliance upon and in conformity with MIP's registration
statement on Form N-1A and other written information furnished
by MIP to the Funds or by any service provider of MIP for use
therein or for use by the Funds in preparing such documents,
including but not limited to any written information contained
in MIP's current registration statement on Form N1A;
provided, however, that in no case shall Distributor be liable
for Losses to the extent Trust pays the amount of such Losses to the
Covered Person under Section<-1- 95>3.1(a) hereof, nor shall
Distributor be liable for indemnification hereunder with respect to any
claims made against any Covered Person unless a Covered Person shall
have notified Distributor in writing within a reasonable time after the
summons, other first legal process, notice of a federal, state or local
tax deficiency, or formal initiation of a regulatory investigation or
proceeding giving information of the nature of the claim shall have
properly been served upon or provided to a Covered Person seeking
indemnification. Failure to notify Distributor of such claim shall not
relieve Distributor from any liability that it may have to any Covered
Person otherwise than on account of the indemnification contained in
this Section.
(b) Distributor will be entitled to participate at its own
expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but if Distributor
elects to assume the defense, such defense shall be conducted by
counsel chosen by Distributor. In the event Distributor elects to
assume the defense of any such suit and retain such counsel, each
Covered Person in the suit may retain additional counsel but shall bear
the fees and expenses of such counsel unless (A) Distributor shall have
specifically authorized the retaining of and payment of fees and
expenses of such counsel or (B) the parties to such suit include any
Covered Person and Distributor, and any such Covered Person has been
advised in a written opinion by counsel reasonably acceptable to
Distributor that one or more legal defenses may be
13
<PAGE>
available to it that may not be available to Distributor, in which case
Distributor shall not be entitled to assume the defense of such suit
notwithstanding its obligation to bear the fees and expenses of one
counsel to all such persons. Distributor shall not be required to
indemnify any Covered Person for any settlement of any such claim
effected without its written consent, which consent shall not be
unreasonably withheld or delayed. The indemnities set forth in
paragraph (a) will be in addition to any liability that Distributor
might otherwise have to Covered Persons.
3.3 MIP.
(a) MIP agrees to indemnify and hold harmless Trust, the
Funds, Distributor, and any affiliate providing services to Trust
and/or the Funds, and any trustee/director, officer, employee or agent
of any of them (in this Section, each, a "Covered Person" and
collectively, "Covered Persons"), against any and all losses, claims,
demands, damages, liabilities or expenses (including, with respect to
each Covered Person, the reasonable cost of investigating and defending
against any claims therefor and any counsel fees incurred in connection
therewith, except as provided in subparagraph (b)) ("Losses"), that:
(i) arise out of or are based upon any violation or
alleged violation of any of the Securities Laws, or any other
applicable statute, rule, regulation or common law or are
incurred in connection with or as a result of any formal or
informal administrative proceeding or investigation by a
regulatory agency, insofar as such violation or alleged
violation, proceeding or investigation arises out of or is
based upon any direct or indirect omission or commission (or
alleged omission or commission) by MIP, or any of its
trustees, officers, employees or agents; or
(ii) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact
contained in any advertising or sales literature, or any other
SEC Filing relating to the Portfolios, or any amendments to
the foregoing (in this Section, collectively, the "Offering
Documents") relating to the Portfolios, or arise out of or are
based upon the omission or alleged omission to state therein,
a material fact required to be stated therein, or necessary to
make the statements therein in light of the circumstances
under which they were made, not misleading; or
(iii) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact
contained in any Offering Documents relating to Trust or the
Funds, or arise out of or are based upon the omission or
alleged
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omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in
light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Funds
by MIP for use therein or for use by the Funds in preparing
such documents, including but not limited to any written
information contained in MIP's current registration statement
on Form N-1A.
provided, however, that in no case shall MIP be liable for
indemnification hereunder with respect to any claims made against any
Covered Person unless a Covered Person shall have notified MIP in
writing within a reasonable time after the summons, other first legal
process, notice of a federal, state or local tax deficiency, or formal
initiation of a regulatory investigation or proceeding giving
information of the nature of the claim shall have properly been served
upon or provided to a Covered Person seeking indemnification. Without
limiting the generality of the foregoing, Portfolio's indemnity to
Covered Persons shall include all relevant liabilities of Covered
Persons under the Securities Laws, as if the Offering Documents
constitute a "prospectus" within the meaning of the 1933 Act, and MIP
had registered its interests under the 1933 Act pursuant to a
registration statement meeting the requirements of the 1933 Act.
Failure to notify MIP of such claim shall not relieve MIP from any
liability that it may have to any Covered Person otherwise than on
account of the indemnification contained in this Section.
(b) MIP will be entitled to participate at its own expense in
the defense or, if it so elects, to assume the defense of any suit
brought to enforce any such liability, but, if MIP elects to assume the
defense, such defense shall be conducted by counsel chosen by MIP. In
the event MIP elects to assume the defense of any such suit and retain
such counsel, each Covered Person in the suit may retain additional
counsel but shall bear the fees and expenses of such counsel unless (A)
MIP shall have specifically authorized the retaining of and payment of
fees and expenses of such counsel or (B) the parties to such suit
include any Covered Person and MIP, and any such Covered Person has
been advised in a written opinion by counsel reasonably acceptable to
MIP that one or more legal defenses may be available to it that may not
be available to MIP, in which case MIP shall not be entitled to assume
the defense of such suit notwithstanding its obligation to bear the
fees and expenses of one counsel to such persons. MIP shall not be
required to indemnify any Covered Person for any settlement of any such
claim effected without its written consent, which consent shall not be
unreasonably withheld or delayed. The indemnities set forth in
paragraph (a) will be in addition to any liability that MIP might
otherwise have to Covered Persons.
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Access to Information. Throughout the life of this Agreement, Trust
and MIP shall afford each other reasonable access at all reasonable times to
such party's officers, employees, agents and offices and to all relevant books
and records and shall furnish each other party with all relevant financial and
other data and information as such other party may reasonably request.
4.2 Confidentiality. Each party agrees that it shall hold in strict
confidence all data and information obtained from another party (unless such
information is or becomes readily ascertainable from public or published
information or trade sources or public disclosure of such information is
required by law) and shall ensure that its officers, employees and authorized
representatives do not disclose such information to others without the prior
written consent of the party from whom it was obtained, except if disclosure is
required by the SEC, any other regulatory body, the Funds' or Portfolios'
respective auditors, or in the opinion of counsel to the disclosing party such
disclosure is required by law, and then only with as much prior written notice
to the other parties as is practical under the circumstances. Each party hereto
acknowledges that the provisions of this Section 4.2 shall not prevent Trust or
MIP from filing a copy of this Agreement as an exhibit to a registration
statement on Form N1A as it relates to the Funds or Portfolios, respectively,
and that such disclosure by Trust or MIP shall not require any additional
consent from the other parties.
4.3 Obligations of Trust and MIP. MIP agrees that the financial
obligations of Trust under this Agreement shall be binding only upon the assets
of the Funds, and that except to the extent liability may be imposed under
relevant Securities Laws, MIP shall not seek satisfaction of any such obligation
from the officers, agents, employees, trustees or shareholders of Trust or the
Funds, and in no case shall MIP or any covered person have recourse to the
assets of any series of the Trust other than the Funds. Trust agrees that the
financial obligations of MIP under this Agreement shall be binding only upon the
assets of the Portfolios and that, except to the extent liability may be imposed
under relevant Securities Laws, Trust shall not seek satisfaction of any such
obligation from the officers, agents, employees, trustees or shareholders of MIP
or other classes or series of MIP.
ARTICLE V
TERMINATION, AMENDMENT
5.1 Termination. This Agreement may be terminated at any time by the
mutual agreement in writing of all parties, or by any party on ninety (90) days'
advance written notice to the other parties hereto; provided, however, that
nothing in this Agreement shall limit Trust's
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right to redeem all or a portion of its units of the Portfolios in accordance
with the 1940 Act and the rules thereunder. The provisions of Article III and
Sections 4.2 and 4.3 shall survive any termination of this Agreement.
5.2 Amendment. This Agreement may be amended, modified or supplemented
at any time in such manner as may be mutually agreed upon in writing by the
parties.
ARTICLE VI
GENERAL PROVISIONS
6.1 Expenses. All costs and expenses incurred in connection with this
Agreement and the conduct of business contemplated hereby shall be paid by the
party incurring such costs and expenses.
6.2 Headings. The headings and captions contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.3 Entire Agreement. This Agreement sets forth the entire
understanding between the parties concerning the subject matter of this
Agreement and incorporates or supersedes all prior negotiations and
understandings. There are no covenants, promises, agreements, conditions or
understandings, either oral or written, between the parties relating to the
subject matter of this Agreement other than those set forth herein. This
Agreement may be amended only in a writing signed by all parties.
6.4 Successors. Each and all of the provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement, nor any rights herein granted may be assigned to, transferred to or
encumbered by any party, without the prior written consent of the other parties
hereto.
6.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without regard to the
conflicts of laws provisions thereof; provided, however, that in the event of
any conflict between the 1940 Act and the laws of California, the 1940 Act shall
govern.
6.6 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing one or more counterparts.
6.7 Third Parties. Except as expressly provided in Article III,
nothing herein
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expressed or implied is intended or shall be construed to confer upon or give
any person, other than the parties hereto and their successors or assigns, any
rights or remedies under or by reason of this Agreement.
6.8 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made when delivered in person or three days after being sent by certified or
registered United States mail, return receipt requested, postage prepaid,
addressed:
If to Trust:
Monica Chandra
whatifi Asset Management, Inc.
790 Eddy Street
San Francisco, California 94109
with copies to:
David M. Leahy, Esq.
Facsimile: 202-293-2275
If to Distributor:
If to MIP:
Chief Operating Officer
Master Investment Portfolio
c/o Stephens Inc.
111 Center Street
Little Rock, AR 72201
6.9 Interpretation. Any uncertainty or ambiguity existing herein shall
not be interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arms' length agreements.
6.10 Operation of the Funds. Except as otherwise provided herein, this
Agreement shall not limit the authority of the Funds, Trust or Distributor to
take such action as they may deem appropriate or advisable in connection with
all matters relating to the operation of the
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Funds and the sale of their shares.
6.11 Relationship of Parties; No Joint Venture, Etc. It is understood
and agreed that neither Trust nor Distributor shall hold itself out as an agent
of MIP with the authority to bind such party, nor shall MIP hold itself out as
an agent of Trust or Distributor with the authority to bind such party.
6.12 Use of Name. Except as otherwise provided herein or required by
law (e.g., in Trust's Registration Statement on Form N-1A), neither Trust, the
Funds nor Distributor shall describe or refer to the name of MIP, the Portfolios
or any derivation thereof, or any affiliate thereof, or to the relationship
contemplated by this Agreement in any advertising or promotional materials
without the prior written consent of MIP, nor shall MIP describe or refer to the
name of Trust, the Funds or Distributor or any derivation thereof, or any
affiliate thereof, or to the relationship contemplated by this Agreement in any
advertising or promotional materials without the prior written consent of Trust,
the Funds or Distributor, as the case may be. In no case shall any such consents
be unreasonably withheld or delayed. In addition, the party required to give its
consent shall have at least three (3) business days prior to the earlier of
filing or first use, as the case may be, to review the proposed advertising or
promotional materials.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the date
first written above.
whatifi Funds on behalf of itself and the whatifi S&P 500 Index Fund
whatifi Extended Market Index Fund whatifi International Index Fund whatifi
Bond Index Fund whatifi Money Market Fund
By:......................................................
Name: Monica Chandra
Title:
[Distributor]
By:......................................................
Name:
Title:
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MASTER INVESTMENT PORTFOLIO,
on behalf of itself and [_____________]
MASTER PORTFOLIOS
By: ...............................................
Name:
Title:
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<PAGE>
SCHEDULE A
whatifi Funds
whatifi S&P 500 Index Fund
whatifi Extended Market Index Fund
whatifi International Index Fund
whatifi Bond Index Fund
whatifi Money Market Fund
Approved: [________, 2000]
21
21
<PAGE>
SCHEDULE B
MASTER INVESTMENT PORTFOLIOS
[________] Master Portfolio
[________] Master Portfolio
Approved: [________, 1999]
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<PAGE>
whatifi Funds
CONSENT TO USE OF NAME
WHEREAS, whatifi.com Corporation (the "Company") has created a mutual
fund to be known as whatifi Funds (the "Trust");
WHEREAS, the Trust is of the type known as a series fund and consists
of separate series of shares (each a "Fund" and together, the "Funds"); and
WHEREAS, it is advantageous for the Company to have the Trust and the Funds
created use the name whatifi;
NOW, THEREFORE, in consideration of the benefits to be derived by the
Company and the promises made herein, the parties hereby agree as follows:
1. The Company consents to the use by the Trust and its Funds of the
identifying name "whatifi," which is a property right of the Company.
2. The Trust and its Funds agree to use the name "whatifi" only as a
component of their names and for no other purposes, and will not purport to
grant to any third party the right to use the name "whatifi" for any purpose.
3. The Company or any corporate affiliate of the Company may use or
grant to others the right to use the name "whatifi" as all or a portion of a
corporate or business name or for any commercial purpose, including a grant of
such right to any other investment company. At the request of the Company, the
Trust and its Funds will take such action as may be required to provide their
consent to the use of the name "whatifi" by the Company, or any corporate
affiliate of the Company, or by any person to whom the Company or any affiliate
of the Company shall have granted the right to use of the name "whatifi".
4. Upon the termination of any investment advisory or management
agreement or underwriting agreement into which the Company or any affiliate of
the Company and the Trust and its Funds may enter, the Trust and its Funds
shall, upon the request of the Company, cease to use the name "whatifi" as a
component of their names, and shall not use such names as a part of their names
or for any other commercial purpose, and shall cause the officers and trustees
of the Trust and the Funds to take any and all actions which the Company may
request to effect the foregoing and to reconvey to the Company or such corporate
affiliate any and all rights to such name.
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5. The Certificate of Trust of the Trust is on file with the Secretary
of State of The State of Delaware, and notice is hereby given that this
Agreement is made and executed on behalf of the Trust, and not by the trustees
or officers of the Trust individually, and the obligations of or arising out of
this Agreement are not binding upon the trustees, officers or shareholders of
the Trust individually, but are binding only upon the assets and the property of
the Trust and its Funds.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this ____ day of December, 2000.
whatifi.com Corporation
By: /s/
-----------------------------
whatifi Funds
By: /s/
-----------------------------
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CONSENT OF PERSON ABOUT TO BECOME TRUSTEE
The undersigned person is named as a Trustee of whatifi Funds in the
Statement of Additional Information included as a part of the Registration
Statement on Form N-1A filed by whatifi Funds under the Investment Company Act
of 1940, as amended, and the Securities Act of 1933, as amended, and hereby
consents to the use of his name in such Statement of Additional Information.
David M. Leahy /s/ David M. Leahy December 22, 1999
SUBSCRIPTION AGREEMENT
February __, 2000
whatifi Funds
790 Eddy Street
San Francisco, California 94109
Ladies and Gentlemen:
Whatifi Funds (the "Trust") proposes to issue and sell to the public
its shares of beneficial interest without par value (the "Shares") pursuant to a
registration statement on Form N-1A (the "Registration Statement") filed with
the Securities and Exchange Commission. The Trust currently consists of five
series namely, the Whatifi S&P 500 Index Fund, the Whatifi Extended Market Index
Fund, the Whatifi International Index Fund, the Whatifi Bond Index Fund and the
Whatifi Money Market Fund (each a "Fund" and together, the "Funds"). In order to
provide the Trust with a net worth of at least $100,000 as required by Section
14 of the Investment Company Act of 1940, as amended, Whatifi Asset Management,
Inc. (the "Adviser") hereby offers to purchase 2,000 Shares of each Fund at a
price of $10.00 per Share prior to the effective date of the Registration
Statement.
The Adviser will make payment for the Shares by delivery of a certified
or official bank check in the amount of $100,000 payable to the order of the
Trust or by wire transfer prior to the date specified by the Trust as the
proposed effective date of the Registration Statement.
The Adviser represents and warrants to the Trust that the Shares are
being acquired by the Adviser for investment and not with a view to the resale
or further distribution thereof and that the Adviser has no present intention to
redeem the Shares.
The name Whatifi Funds is the designation of the Trustees under the
Certificate of Trust, dated December 15, 1999, as amended from time to time. The
Certificate of Trust has been filed with the Secretary of State of the State of
Delaware. The obligations of the Trust are not personally binding upon, nor
shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust, but the Trust's
property only shall be bound.
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Please confirm that the foregoing correctly sets forth the agreement
with the Trust.
Very truly yours,
--------------------------------
By:
whatifi Asset Management, Inc.
Confirmed, as of the date first above written.
By: __________________________
whatifi Funds
Chairman of the Board of
Trustees and President
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