AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 25, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. 1 /X/
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, California 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, California 94109
(Name and address of agent for service)
Please send copies of all communications to:
David M. Leahy, Esq. Mr. Harris A. Fricker
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.
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. |_|
PROSPECTUS MAY __, 2000
WHATIFI FUNDS
WHATIFI S&P 500 INDEX FUND
WHATIFI EXTENDED MARKET INDEX FUND
WHATIFI INTERNATIONAL INDEX FUND
WHATIFI TOTAL BOND INDEX FUND
WHATIFI MONEY MARKET FUND
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.
1
<PAGE>
TABLE OF CONTENTS
PAGE
PLEASE READ THIS PROSPECTUS....................................................
WHO CAN INVEST IN THE FUNDS?...................................................
WHAT IS THE INVESTMENT PHILOSOPHY BEHIND THE Whatifi FUNDS?....................
WHY INVEST IN INDEX FUNDS?.....................................................
WHAT IS A MASTER-FEEDER STRUCTURE?.............................................
WHAT FUNDS DOES Whatifi OFFER?.................................................
FUND PROFILES..................................................................
- -WHATIFI S&P 500 INDEX FUND.........................................
- -WHATIFI EXTENDED MARKET INDEX FUND.................................
- -WHATIFI INTERNATIONAL INDEX FUND...................................
- -WHATIFI TOTAL BOND INDEX FUND......................................
- -WHATIFI MONEY MARKET FUND..........................................
WHAT IS INDEXING?..............................................................
WHAT DOES IT MEAN TO DESCRIBE A FUND AS LARGE-CAP,
MID-CAP OR SMALL-CAP?..........................................................
MORE INFORMATION ON THE FUNDS..................................................
THE FUNDS' MANAGEMENT..........................................................
THE FUNDS' STRUCTURE...........................................................
PRICING OF FUND SHARES.........................................................
HOW TO BUY AND SELL SHARES OF THE WHATIFI FUNDS................................
BUYING A DIVIDEND..............................................................
DIVIDENDS, AND OTHER DISTRIBUTIONS.............................................
TAX CONSEQUENCES...............................................................
GLOSSARY.......................................................................
MORE INFORMATION...............................................................
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the Statement
of Additional Information, and if given or made, such information or
representations may not be relied upon as having been authorized by the Funds.
This Prospectus does not constitute an offer to sell securities in any state or
jurisdiction in which such offering may not lawfully be made.
(i)
<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 to
invest in. 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 the
Whatifi Funds Account Application process 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. You must also maintain your e-mail account.
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 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" because 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 fund's holdings are based upon the particular methodologies and
judgments of a portfolio manager.
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 December 31, 1999, BGFA and its
affiliates provided investment advisory services for over $782 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 investment sub-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 except that the Fund's performance will be lower because it accounts
for its fees and expenses. Like all mutual funds, each Fund is subject to
investment risks. You may lose money if you invest in the Funds.
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 Index Fund seeks to track a different
segment of the U.S. and international markets:
<TABLE>
<CAPTION>
<S> <C>
INDEX FUND SEEKS TO APPROXIMATE AS
CLOSELY AS PRACTICABLE BEFORE
FEES AND EXPENSES:
Whatifi S&P 500 Index Fund The total rate of return of the S&P 500
Index
Whatifi Extended Market Index Fund The performance of the Wilshire 4500
Index
Whatifi International Index Fund The performance of the Morgan Stanley
Capital International EAFE Index
- --------
* "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. The S&P 500 Fund is
not sponsored, endorsed, sold, or promoted by Standard & Poor's and Standard &
Poor's makes no representation, express or implied, regarding the advisability
of investing in the S&P 500 Fund.
2
<PAGE>
Whatifi Total Bond Index Fund The performance of the Lehman Brothers
Government/Corporate Bond Index
Whatifi Money Market Fund Provide shareholders with a high level of
income, while preserving capital and
liquidity, by investing in high-quality,
short-term investments.
</TABLE>
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.
FUND PROFILE --WHATIFI S&P 500 INDEX FUND
The following profile summarizes important aspects of the Whatifi S&P 500 Index
Fund.
INVESTMENT OBJECTIVE
The Fund's goal is to approximate as closely as practicable, before fees and
expenses, the total rate of return of the S&P 500 Index.
INVESTMENT STRATEGIES
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 Portfolio, a registered open-end management investment company
advised by BGFA. The Fund is a large capitalization fund. The S&P 500 Index
consists of the common stocks of 500 leading U.S. companies from a broad range
of industries. Each stock in the index contributes to the index in the same
proportion as the value of its shares. The Fund employs a passive management
strategy. The Fund does not invest directly in a
portfolio of securities.
Under normal market conditions, the S&P 500 Portfolio invests at least 90% of
its total assets in the stocks comprising the S&P 500 Index. Over time, 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 net assets before fees and expenses and that of the S&P 500 Index. A
correlation of 100% means the total return of the S&P 500 Portfolio's assets
would increase and decrease the same as the S&P 500 Index.
PRINCIPAL RISKS
The Fund's total return, like stock prices generally, will fluctuate within a
wide range, so you 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.
The Fund is also subject to tracking error risk, which is the risk that it will
not closely track the S&P 500 Index. For example, the S&P 500 Portfolio will
need to maintain cash to pay redemptions and expenses and this may affect the
performance of the S&P 500 Index Fund.
No attempt is made to individually select stocks because the S&P 500 Portfolio
is managed by determining which securities are to be bought or sold to
replicate, to the extent feasible, the S&P 500 Index.
PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund by showing changes in the Fund's performance from year to year. The bar
chart shows the year-by-year returns of the S&P 500 Portfolio corresponding to
the Fund, which returns have been adjusted to account for estimated expenses
payable at the Fund
level without taking into account fee waivers and reimbursements. The average
annual return tables compare the S&P 500 Portfolio's average annual return with
the return of the corresponding index for one and five years and since
inception. Past performance is not necessarily an indication of future
performance.
S&P 500 Portfolio [BAR CHART]
1994 -0.86% 1997 31.29%
1995 35.58% 1998 24.10%
1996 21.62% 1999 19.53%
During the period shown in the bar chart, the highest return for a calendar
quarter was
16.17% (quarter ended June 30, 1997, and the lowest return for a quarter was
- -11.04% (quarter ended September 30, 1998.
S&P 500 Portfolio Average Annual Total Returns (As of December 31, 1999)*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Five Years Since Inception -July 2, 1993**
3
<PAGE>
S&P 500 Portfolio 19.53% 26.28% 20.34%
S&P 500 Index 21.04% 28.55% 22.46%
</TABLE>
*The S&P 500 Portfolio's performance has been adjusted to reflect contractual
arrangements by which the Adviser pays all expenses of the Fund from the
advisory fee or its own resources. In the event such expenses are not paid by
the Adviser, the total expenses of the Fund will increase by any unpaid amounts
payable under the Administration Agreement as well as any allocated expenses of
the Master Portfolio and will cause the performance of the Fund to be lower.
**The S&P 500 Index is calculated from June 30, 1993.
FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund.
Shareholder Fees1
(paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions None
Redemption Fees
(within 120 days of purchase) 1.00%
Exchange Fees None
Annual Fund Operating Expenses
(expenses deducted from the Fund's assets)
Management Fees 0.80%
Distribution (12b-1) Fees None
Other Expenses 0.00%
Total Annual Fund Operating Expenses2 0.80%
Fee Waiver and Expense Reimbursement3 0.25%
Net Operating Expenses 0.55%
- ------------------
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. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of these periods. The example also assumes that your
investment has a 5% return each year, and that operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as shown below. The results apply whether or
not you redeem your investment at the end of each period.
One Year Three Years
$56 $176
This example should not be considered to represent actual expenses or
performance from the past or for the future.
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
AVAILABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
None
FUND PROFILE -- WHATIFI EXTENDED MARKET INDEX FUND
The following profile summarizes important aspects of Whatifi Extended Market
Index Fund.
INVESTMENT OBJECTIVE
The Fund's goal is to match as closely as practicable, before fees and expenses,
the performance of the Wilshire 4500 Index.*
INVESTMENT STRATEGIES
The Fund seeks to achieve its investment objective by investing all of its
assets in the Wilshire 4500 Index Master Portfolio (the "Extended Index
Portfolio"), a series of Master Investment Portfolios. The Extended Index
Portfolio invests in a representative sample of the securities comprising the
Wilshire 4500 Index. The Fund is a mid to small cap fund. The Wilshire 4500
Index consists 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.
The Fund employs a passive management strategy. The Fund does not invest
directly in a portfolio of securities.
Capitalizations of stocks included in the Wilshire 4500 Index range from less
than $1 million to in excess of $82 billion.
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). Under normal market conditions, the Extended Index Portfolio
invests at least 90% of its total assets in the stocks comprising 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. Over time, the Extended Index 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 before fees and
expenses and that of the Wilshire 4500 Index. A correlation of 100% means the
total return of the Extended Market Master Portfolio would increase and decrease
exactly the same as the Wilshire 4500 Index.
PRINCIPAL 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. Smaller
companies tend to have fewer products and services and have more limited
financial resources than larger companies. Their securities may also trade less
frequently and in smaller amounts than those of larger companies.
The Fund is also subject to tracking error risk, which is the risk that it will
not closely track the Wilshire 4500 Index. For example, the Extended Index
Portfolio will need to maintain cash to pay redemptions and expenses and this
may affect the performance of the Extended Market Index Fund.
No attempt is made to manage the portfolio of the Extended Index Portfolio using
economic, financial or market analyses. The Extended Index 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 Wilshire 4500
Index.
PERFORMANCE/RISK INFORMATION
Once the Extended Index Portfolio has a full calendar year of performance, bar
charts and annual return tables like those shown previously for the S&P 500
Portfolio will be included in the Prospectus. The purpose of including such
information is to show some of the risks of investing in the Fund such as the
changes in the Fund's performance from year to year, and how its average annual
returns compare with its corresponding index. Of course, investment performance
only shows how the Fund has performed in the past, it does not show how the Fund
will perform in the future.
FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund.
Shareholder Fees1
(paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions None
Redemption Fees (within 120 days of purchase) 1.00%
Exchange Fees None
Annual Fund
(expenses deducted from the Fund's assets)
Management Fees 0.80%
Distribution (12b-1) Fees None
Other Expenses 0.00%
Total Annual Fund Operating Expenses:2 0.80%
Fee Waiver and Expense Reimbursement3 0.25%
Net Operating Expenses 0.55%
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. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of these periods. The example also assumes that your
investment has a 5% return each year, and that operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as shown below. The results apply whether or
not you redeem your investment at the end of each period.
One Year Three Years
$56 $176
This example should not be considered to represent actual expenses or
performance from the past or for the future.
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
AVAILABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
None
FUND PROFILE -- WHATIFI INTERNATIONAL INDEX FUND
The following profile summarizes important aspects of Whatifi International
Index Fund.
INVESTMENT OBJECTIVE
The Fund's goal is to match as closely as practicable, before fees and expenses,
the performance of an international portfolio of common stocks represented by
the Morgan Stanley Capital International, Europe, Australia, Far East Free Index
(the "EAFE Index")*.
INVESTMENT STRATEGIES
The Fund seeks to achieve its investment objective by investing all of its
assets in the EAFE Index Master Portfolio (the "International Portfolio"), a
series of Master Investment Portfolio. The International Portfolio seeks to
match the total return performance of foreign stock markets by investing in
common stocks included in the EAFE Index. The Fund is an international markets
fund that broadly represents the performance of foreign markets. The EAFE Index
tracks securities of companies located in Europe, Australia and the Far East.
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
Fund employs a passive management strategy. The Fund does not invest directly in
a portfolio of securities. Companies comprising the EAFE Index are not limited
to a particular capitalization.
Each stock in the index contributes to the index in the same proportion as the
value of its shares. The International Portfolio invests substantially all of
its assets in the same stocks and in substantially the same percentages as the
International Portfolio 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.
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. Over time, the International Portfolio attempts to achieve in both rising
and falling markets, a correlation of at least 95% between
capitalization-weighted total return of its assets before fees and expenses and
the total return of the EAFE Index. A correlation of 100% would mean the total
return of the International Portfolio's assets would increase and decrease
exactly the same as the EAFE Index.
PRINCIPAL 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. This risk is increased to the extent the International Portfolio
invests in emerging markets, which can be volatile.
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.
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.
The Fund is also subject to tracking error risk , which is the risk that it will
not closely track the EAFE Index. For example, the International Portfolio will
need to maintain cash to pay redemptions and expenses and this may affect the
performance of the International Index Fund.
The Fund is subject to small company risk. Compared to larger, well-established
companies, smaller companies are more likely to have limited product lines,
limited capital resources and less experienced management. In addition,
securities of smaller companies are more likely to experience sharp swings in
market value and more difficult to sell at times at prices the Adviser deems
appropriate. Small company securities also offer greater potential for gains and
losses.
No attempt is made to manage the portfolio of the International Portfolio using
economic, financial or market analyses. The International Portfolio is managed
by determining which securities are to be purchase or sold to match to the
extent feasible, the capitalization range and returns of the EAFE Index.
PERFORMANCE/RISK INFORMATION
Once the International Portfolio has a full calendar year of performance, bar
charts and annual return tables like those shown previously for the S&P 500
Portfolio will be included in the Prospectus. The purpose of including such
information is to show some of the risks of investing in the Fund such as the
changes in the Fund's performance from year to year, and how its average annual
returns compare with its corresponding index. Of course, investment performance
only shows how the Fund has performed in the past, it does not show how the Fund
will perform in the future.
FEES AND EXPENSES
The following table describes the fees you would pay if you buy and hold shares
of the Fund.
Shareholder Fees1
(paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions None
Redemption Fees
(within 120 days of purchase) 1.00%
Exchange Fees None
Annual Fund Operating Expenses
(expenses deducted from the Fund's assets)
Management Fees 0.80%
Distribution (12b-1) Fees None
Other Expenses 0.00%
Total Annual Fund Operating Expenses2 0.80%
Fee Waiver and Expense Reimbursement3 0.25%
Net Operating Expenses 0.55%
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. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of these periods. The example also assumes that your
investment has a 5% return each year, and that operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as shown below. The results apply whether or
not you redeem your investment at the end of each period.
One Year Three Years
$56 $176
This example should not be considered to represent actual expenses or
performance from the past or for the future.
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
AVAILABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
None
FUND PROFILE -- WHATIFI TOTAL BOND INDEX FUND
The following profile summarizes important aspects of Whatifi Total Bond Index
Fund.
INVESTMENT OBJECTIVE
The Fund's goal is to approximate as closely as practicable, before fees and
expenses, the investment results that correspond to the total return performance
of fixed income securities in the aggregate, as represented by the Lehman
Brothers Government/Corporate Bond Index (the "LB Bond Index").*
INVESTMENT STRATEGIES
The Fund seeks to achieve its investment objective by investing all of its
assets in the Bond Index Master Portfolio (the "Bond Portfolio"), a series of
Master Investment Portfolio. The Total 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 Bond
Index or other securities or instruments that seek to approximate the
performance and investment characteristics of the LB Bond Index. The LB Bond
Index includes approximately 6500 fixed income securities, including U.S.
Government securities and investment grade corporate bonds each with an issue
size of at least $25 million and a remaining maturity of greater than one year.
The Fund employs a passive management strategy.
The Fund does not invest directly in a portfolio of securities.
Under normal market conditions, the Bond Portfolio will invest at least 65% of
its total 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 before fees and expenses 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.
PRINCIPAL RISKS
The Fund is subject to several risks, any of which could cause you 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.
The Fund is also subject to tracking error risk, which is the risk that it will
not closely track the LB Bond index. For example, the Bond Portfolio will need
to maintain cash to pay redemptions and expenses and this may affect the
performance of the Bond Portfolio.
PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund
by showing changes in the Fund's performance from year to year. The bar chart
shows the year-by-year returns of the Bond Portfolio corresponding to the Fund,
which returns have been adjusted to account for estimated expenses payable at
the Fund level without taking into account fee waivers and expense
reimbursements. The average annual return tables compare the Bond Portfolio's
average annual return with the return of the corresponding index for one and
five years and since inception. Past performance is not necessarily an
indication of future performance.
Bond Index Master Portfolio [BAR CHART]
1994 -4.64% 1997 8.83%
1995 17.89% 1998 8.59%
1996 1.32% 1999 -3.52%
During the period shown in the bar chart, the highest return for a calendar
quarter was
5.32% (quarter ended June 30, 1995) and the lowest return for a quarter was
- -4.12% (quarter ended March 31, 1994).
Bond Index Master Portfolio Average Annual Total Returns (As of December 31,
1999)*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Five Years Since Inception -July 2, 1993**
Bond Index Master Portfolio -3.52 6.37% 4.33%
LB Bond Index -2.15 7.60% 5.70%
</TABLE>
*The Bond Index Portfolio's performance has been adjusted to reflect contractual
arrangements by which the Adviser pays all expenses of the Fund from the
advisory fee or its own resources. In the event such expenses are not paid by
the Adviser, the total expenses of the Fund will increase by any unpaid amounts
payable under the Administration Agreement as well as any allocated expenses of
the Master Portfolio and will cause the performance of the Fund to be lower.
**The LB Bond Index is calculated from June 30, 1993.
FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund.
Shareholder Fees1
(paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions None
Redemption Fees
(within 120 days of purchase) 1.00%
Exchange Fees None
(expenses deducted from the Fund's assets) Annual Fund Operating Expenses
Management Fees 0.80%
Distribution (12b-1) Fees None
Other Expenses 0.00%
Total Annual Fund Operating Expenses2 0.80%
Fee Waiver and Expense Reimbursement3 0.25%
Net Operating Expenses 0.55%
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. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of these periods. The example also assumes that your
investment has a 5% return each year, and that operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as shown below. The results apply whether or
not you redeem your investment at the end of each period.
One Year Three Years
$56 $176
This example should not be considered to represent actual expenses or
performance from the past or for the future.
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS
Dividends, if any, are declared daily and distributed monthly.
INVESTMENT ADVISER
Whatifi Asset Management, Inc., San Francisco, California
AVAILABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
None
FUND PROFILE -- WHATIFI MONEY MARKET FUND
The following profile summarizes important aspects of Whatifi Money Market Fund.
INVESTMENT OBJECTIVE
The Fund seeks to provide shareholders with a high level of income, while
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 Master Portfolio, a series of Master Investment
Portfolio, 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 ("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.
PRINCIPAL RISKS
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.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund by showing changes in the Fund's performance from year to year. The bar
chart shows the year-by-year returns of the Money Market Portfolio corresponding
to the Fund, which returns have been adjusted to account for estimated expenses
payable at the Fund level without taking into account fee waivers and expense
reimbursements. As a result, the annual returns for the Fund would have been
lower than those shown below because the Fund has higher expenses than the
corresponding Money Market
Portfolio. The table shows how the Money Market's average annual returns for one
and five calendar years and since inception compare with the rate for 3-month
U.S. Treasury Bills. Past performance is not necessarily an indication of future
performance.
Money Market Portfolio [BAR CHART]
1994 3.29% 1997 4.81%
1995 5.21% 1998 4.82%
1996 4.67% 1999 4.44%
During the period shown in the bar chart, the highest return for a calendar
quarter was 0.68% (quarter ended June 30,1995) and the lowest return for a
quarter was -0.33% (quarter ended December 31, 1993.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
One Year Five Years Since Inception -July 2, 1993*
Money Market Master Portfolio 4.09% 4.41%% 4.02%
Treasury Bills (3 month) 4.74% 5.21%% 4.90%
</TABLE>
* The Money Market Master Portfolio's performance has been adjusted to reflect
contractual arrangements by which the Adviser pays all expenses of the Fund from
the advisory fee or its own resources. In the event such expenses are not paid
by the Adviser, the total expenses of the fund will increase by any unpaid
amounts payable under the Administration Agreement as well as any allocated
expenses of the Master Portfolio and will cause the performance of the fund to
be lower.
For yield information on the Money Market Fund, shareholders may telephone
1-877- whatifi (1-877-942-8434).
FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. Shareholder Fees1 (paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
and Other Distributions None
Redemption Fees (within 120 days of purchase) 1.00%
Exchange Fees None
(expenses deducted from the Fund's assets) Annual Fund Operating Expenses
Management Fees 0.80%
Distribution 12b-1 Fees None
Other Expenses 0.00%
Total Annual Fund Operating Expenses2 0.80%
Fee Waiver and Expense Reimbursement3 0.25%
Net Operating Expenses 0.55%
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. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of these periods. The example also assumes that your
investment has a 5% return each year, and that operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions, your costs would be as shown below. The results apply whether or
not you redeem your investment at the end of each period.
One Year Three Years
$56 $176
This example should not be considered to represent actual expenses or
performance from the past or for the future.
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS
Dividends, if any, are declared daily and distributed monthly.
INVESTMENT ADVISER
Whatifi Asset Management, Inc., San Francisco, California
AVAILABLE FOR IRAS
Yes
MINIMUM INITIAL INVESTMENT
None
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 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.
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.
The S&P 500 Fund. By seeking to track the total return of the S&P 500 Index, the
Fund seeks to approximate as closely as practicable, before fees and expenses
the
capitalization-weighted total return rate of return of the S&P 500 Index. 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 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
consists of 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. 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 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. All of these factors can
make foreign investments, especially those in emerging markets, more volatile
and potentially less liquid than U.S. investments.
The International Index Fund and the Extended Market Index Fund are both 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 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 Fund 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 Index and the LB Bond Index),
funds such as the Extended Market Index Fund, the International Index Fund and
the Total 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:
Each Fund reserves the right to reject any exchange request it believes
will increase transaction costs, or otherwise adversely affect other
shareholders. Specifically, exchange activity may be limited to 12
exchanges within a one year period per Fund or 1% of the Fund's NAV.
Each Fund may delay forwarding redemption proceeds for up to seven days
if the investor redeeming shares is engaged in excessive trading, or if
the amount of the redemption request otherwise would be disruptive to
efficient portfolio management, or would adversely affect the Fund.
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 79%; for all domestic bond funds, the average
turnover rate is approximately 148%, according 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 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 Total Bond Fund (the "Index Funds"): BGFA, 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 Money Market Fund and
the Money Market 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.
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 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, an Index Fund
cannot in any meaningful way modify its investment strategies to respond to
changes in the economy and may be particularly susceptible to general market
declines. An Index Fund's ability to track the performance of its 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 its corresponding Portfolio. Each 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 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.
Securities Lending: Each Portfolio in which the Funds invest may lend a portion
of its securities to certain high quality financial institutions in order to
earn income. These loans are fully collateralized. However, if the institution
defaults, the Funds' performance could be reduced.
THE FUNDS' MANAGEMENT
Investment Advisers. Under an investment advisory agreement 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
Financial Inc. 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:
<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 0.80% 0.55%
Extended Market Index
Fund 0.80% 0.55%
International Index Fund 0.80% 0.55%
Total Bond Index Fund 0.80% 0.55%
Money Market Fund 0.80% 0.55%
</TABLE>
Out of the fee received by the Adviser, the Adviser pays all expenses of
managing and operating the Funds including also the expenses of the Portfolios
except brokerage
expenses, taxes, interest, 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 December 31, 1999, BGFA and its affiliates provided investment advisory
services for over $782 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%
Extended Index Portfolio 0.08%
International Portfolio 0.15%*
Money Market Portfolio 0.10%
- -----------------------
* After assets reach $1 billion the investment sub-advisory fee payable to BGFA
will decline to 0.10% of the International Index Portfolio's average daily net
assets. The International Portfolio also imposes an annual administration fee of
0.25% of average daily net assets.
Each Fund bears a pro rata portion of the investment advisory fees paid by its
corresponding Portfolio; however, the Adviser has assumed payment for these
expenses.
The Funds' SAI contains detailed information about the Funds' 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 Total 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 Master Investment Portfolio, a separate
open-end investment company with a substantially similar 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 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 on the website www.whatifi.com 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 most national holidays and on Good
Friday.
Each Portfolio calculates the value of its assets 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
On-Line Investor Requirements
The Funds are available only to on-line investors. Each Fund requires you to
enter into an Internet Services Agreement which, among other things, requires
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. You may also receive other correspondence from Whatifi
Funds through your e-mail account. By opening an account and 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 will charge
you a $9 quarterly fee ($36 per annum) for delivery of Fund documents in paper
format.
Account Requirements
To open your account, you must complete the Whatifi Funds Account Application
process (the "Application"). The Application is available on the Adviser's
website at www.whatifi.com. While the Application is submitted electronically,
you may be required to submit additional information to verify your identity.
You can access the Application at www.whatifi.com through multiple electronic
gateways on the Internet, including: WebTV, Prodigy, AT&T Worldnet, Microsoft
Investor, CompuServe, and 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
1-877-942-8434 between 8:00 a.m. and 9 p.m. (Eastern Time), Monday through
Friday.
You may open your account using the following forms of payment: check, money
order, or electronic funds transfer. If by check or money order, make payable to
Whatifi Funds and mail to the Whatifi Funds, P.O. Box 182113, Columbus, Ohio
43218-2113.
When your account is opened, you will receive an account number so that you can
begin to wire funds. Send wired funds to:
c/o Whatifi Funds
Huntington National Bank
Columbus, Ohio ABA #044000024, Whatifi Funds Concentration Account
Account #01892047720
Shareholder 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 an Index Fund's net asset value changes daily, your purchase
price will be the next NAV determined after a Fund receives and accepts your
check or electronic funds transfer.
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 password so that each transaction is secure. By clicking on the
appropriate mutual fund order buttons, you can place an order to purchase,
withdraw, exchange or reallocate shares in a Fund. When you first open an
account, 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
<TABLE>
<CAPTION>
<S> <C>
For your initial investment in a Fund None
To buy additional shares of a Fund Minimum: $100
Continuing minimum investment Non-Retirement: $1000 within
30 days of initial purchase
Retirement: $500 within 90 days
of purchase
To invest in a Fund for your IRA or Roth IRA, None
To invest in a Fund for your Education IRA account None
To invest in a Fund for your UGMA/UTMA account None
</TABLE>
Your shares may be automatically redeemed or you may be charged an account
maintenance fee of $5 per quarter if, as a result of selling shares, you no
longer meet a Fund's minimum balance requirements. Before taking action to
automatically redeem your shares a Fund would notify you and give you at least
30 days to purchase more shares to bring your investment in the Fund to the
minimum balances described above. 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 withdrawal order, your
shares will be redeemed and the proceeds will be sent to you via check or
electronic transfer, based on your payment selection. 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. Please refer to the Fund Profiles for information on redemption
fees. 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.
Exchange Privilege
Shares of the Funds may be exchanged for each other at net asset value.
Exchanges may only be made for shares of the Funds then offered for sale in your
state of residence and are subject to the applicable minimum initial investment
requirements. The exchange privilege may be modified or terminated by the Board
of Trustees upon 60 days' prior notice to you.
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 supporting documentation is designed to protect you and the Funds against
fraudulent transactions by unauthorized persons. The Funds will require
supporting documentation under the following circumstances:
- You wish to change the last name on your account.
- You wish to change the Social Security Number on your account.
- You wish to change the date of birth on your 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. See
"Dividends and Other Distributions" below for each Fund's dividends and
distributions schedule.
DIVIDENDS AND OTHER DISTRIBUTIONS
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.
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. A Fund's capital gain distributions
will be taxable at different rates depending upon the length of time the Fund
has held its assets.
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.
Each Fund will e-mail 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.
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). The funds do not charge any Rule 12b-1 fees.
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
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 202-
942-8090 for information about the operations of the Public Reference Room.
Reports and other information about the Funds are also available on the EDGAR
Database on the SEC's Internet site at http://www.sec.gov. Copies can also be
obtained, upon payment of a duplicating fee, by electronic request at the
following e-mail address: [email protected], or 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- 877-whatifi (1-877-942-8434)
http://www.whatifi.com
Investment Company Act file No.: 811-09741
- --------
1 The Funds will apply a $5 quarterly account maintenance fee upon shareholders
who fail to maintain a total (sum of investments in all of the Funds)
non-retirement account balance of $1,000 or a retirement account balance of
$500. This fee applies to the shareholder's total account with the Funds and is
not a fee charged to the Funds. The fee is waived for shareholders with at least
$10,000 invested in the Funds in the aggregate and for shareholders who have
enrolled in the automatic monthly savings program.
2 The expenses shown under Annual Fund Operating Expenses are based upon
contractual arrangements by which the Adviser pays all expenses of managing and
operating the Funds, including also the fees and expenses of the Portfolios,
except brokerage expenses, taxes, interest, and extraordinary expenses, from the
advisory fee or its own resources. In the event such expenses are not paid by
the Adviser, the total expenses of the Fund will increase by any unpaid amounts
payable under the Administration Agreement as well as any allocated expenses of
the Master Portfolio.
3 The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to waive its investment
advisory fee and reimburse expenses to the extent necessary to maintain Net
Operating Expenses at 0.55%. 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 the Trust only upon providing thirty days'
prior notice.
* "Wilshire Associates," "Wilshire 4500 Equity Index", "Wilshire 4500 Completion
Index" and "Wilshire 4500" are trademarks of Wilshire Associates, Inc. The Fund
is not sponsored, endorsed, sold or promoted by Wilshire Associates, Inc. and
Wilshire Associates, Inc. makes no representation, express or implied, regarding
the advisability of investing in the Fund.
1 The Funds will apply a $5 quarterly account maintenance fee upon shareholders
who fail to maintain a total (sum of investments in all of the Funds)
non-retirement account balance of $1,000 or a retirement account balance of
$500. This fee applies to the shareholder's account with the Funds and is not a
fee charged to the Funds. The fee is waived for shareholders with at least
$10,000 invested in all accounts in the aggregate. Shareholders who are enrolled
in the monthly savings plan have one year to reach the minimum balance for
non-retirement accounts and six months for retirement accounts without incurring
account maintenance fees.
2 The expenses shown under Annual Fund Operating Expenses are based upon
contractual arrangements by which the Adviser pays all expenses of managing and
operating the Funds, including also the fees and expenses of the Portfolios,
except brokerage expenses, taxes, interest, and extraordinary expenses, from the
advisory fee or its own resources. In the event such expenses are not paid by
the Adviser, the total expenses of the Fund will increase by any unpaid amounts
payable under the Administration Agreement as well as any allocated expenses of
the Master Portfolio.
3 The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to waive its investment
advisory fee and reimburse expenses to the extent necessary to maintain Net
Operating Expenses at 0.55%. 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 the Trust only upon providing thirty days'
prior notice.
* "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"). The International Index Fund is not sponsored,
endorsed, sold, or promoted by MSCI and MSCI makes no representation, express or
implied, regarding the advisability of investing in the International Index
Fund.
1 The Funds will apply a $5 quarterly account maintenance fee upon shareholders
who fail to maintain a total (sum of investments in all of the Funds)
non-retirement account balance of $1,000 or a retirement account balance of
$500. This fee applies to the shareholder's account with the Funds and is not a
fee charged to the Funds. The fee is waived for shareholders with at least
$10,000 invested in all accounts in the aggregate. Shareholders who are enrolled
in the monthly savings plan have one year to reach the minimum balance for
non-retirement accounts and six months for retirement accounts without incurring
account maintenance fees.
2 The expenses shown under Annual Fund Operating Expenses are based upon
contractual arrangements by which the Adviser pays all expenses of managing and
operating the Funds, including also the fees and expenses of the Portfolios,
except brokerage expenses, taxes, interest, and extraordinary expenses, from the
advisory fee or its own resources. In the event such expenses are not paid by
the Adviser, the total expenses of the Fund will increase by any unpaid amounts
payable under the Administration Agreement as well as any allocated expenses of
the Master Portfolio.
3 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 and reimburse expenses to the extent necessary to
maintain Net Operating Expenses at 0.55%. 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 Lehman Brothers Government/Corporate Bond Fund Index(R) is a trademark of
Lehman Brothers. The Total Bond Index Fund is not sponsored, endorsed, sold or
promoted by Lehman Brothers and Lehman Brothers makes no representation, express
or implied, regarding the advisability of investing in the Total Bond Index
Fund.
1 The Funds will apply a $5 quarterly account maintenance fee upon shareholders
who fail to maintain a total (sum of investments in all of the Funds)
non-retirement account balance of $1,000 or a retirement account balance of
$500. This fee applies to the shareholder's account with the Funds and is not a
fee charged to the Funds. The fee is waived for shareholders with at least
$10,000 invested in all accounts in the aggregate. Shareholders who are enrolled
in the monthly savings plan have one year to reach the minimum balance for
non-retirement accounts and six months for retirement accounts without incurring
account maintenance fees.
2 The expenses shown under Annual Fund Operating Expenses are based upon
contractual arrangements by which the Adviser pays all expenses of managing and
operating the Funds, including also the fees and expenses of the Portfolios,
except brokerage expenses, taxes, interest, and extraordinary expenses, from the
advisory fee or its own resources. In the event such expenses are not paid by
the Adviser, the total expenses of the Fund will increase by any unpaid amounts
payable under the Administration Agreement as well as any allocated expenses of
the Master Portfolio.
3 The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to waive its investment
advisory fee and reimburse expenses to the extent necessary to maintain Net
Operating Expenses at 0.55%. 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 the Trust only upon providing thirty days'
prior notice.
1 The Funds will apply a $5 quarterly account maintenance fee upon shareholders
who fail to maintain a total (sum of investments in all of the Funds)
non-retirement account balance of $1,000 or a retirement account balance of
$500. This fee applies to the shareholder's account with the Funds and is not a
fee charged to the Funds. The fee is waived for shareholders with at least
$10,000 invested in all accounts in the aggregate. Shareholders who are enrolled
in the monthly savings plan have one year to reach the minimum balance for
non-retirement accounts and six months for retirement accounts without incurring
account maintenance fees.
2 The expenses shown under Annual Fund Operating Expenses are based upon
contractual arrangements by which the Adviser pays all expenses of managing and
operating the Funds, including also the fees and expenses of the Portfolios,
except brokerage expenses, taxes, interest, and extraordinary expenses, from the
advisory fee or its own resources. In the event such expenses are not paid by
the Adviser, the total expenses of the Fund will increase by any unpaid amounts
payable under the Administration Agreement as well as any allocated expenses of
the Master Portfolio.
3 The Adviser has entered into a written expense limitation and reimbursement
agreement with the Trust, under which it has agreed to waive its investment
advisory fee and reimburse expenses to the extent necessary to maintain Net
Operating Expense at 0.55%. 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 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 to the extent necessary to
maintain total operating expenses at 0.55% of each Fund's average daily net
assets. This waiver of fees and reimbursement of expenses is subject to possible
reimbursement of the Adviser by the Funds within three years of the Funds'
commencement of operations if the reimbursement by the Funds can be implemented
within the stated expense limitations. 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.
4
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Whatifi Funds
Whatifi S&P 500 Index Fund
Whatifi Extended Market Index Fund
Whatifi International Index Fund
Whatifi Total Bond Index Fund
Whatifi Money Market Fund
May __, 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 Total 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 May
__, 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.
5
<PAGE>
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......................................................................
6
<PAGE>
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 Fund is a large cap fund. A large cap company means
a company with a market capitalization of over $10 billion. Its goal is to track
the total return of the S&P 500 Index. The Fund tracks the Index by seeking to
approximate as closely as
practicable, before fees and expenses, the capitalization-weighted total rate of
return1 of Standard & Poor's 500 Composite Stock Price Index (the "S&P 500
Index")2. 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" and together, the "Portfolios"). 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. Small to
mid cap companies have market capitalizations ranging from less than $1 million
to $__ billion. 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.
The Fund employs a passive management strategy designed to track the performance
of the Wilshire 4500 Equity Index3. 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 Master 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 track the
total return performance of foreign stock markets by investing in common stocks
included in the Morgan Stanley Capital International Europe, Austria, Far East
Free Index (The "EAFE Index")4. The Fund seeks to achieve its investment
objective by investing all of its assets in the International Index Master
Portfolio (the "International Portfolio"), a series of MIP. 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.
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 Total Bond Index Fund. The Total Bond Index Fund seeks to track 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").5 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 $150 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 LB
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 income, while preserving capital and liquidity.
The Money Market Fund invests all of its assets in the Money Market Master
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.
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 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, Extended Index, 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 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 Index, 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 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 Index, 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 Index, 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 Index, 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 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
Investor Services ("Moodys") or "A-1+" or "A-1" by Standard and Poors ("S&P"),
or, if unrated, of comparable quality as determined by the Portfolio's
investment adviser; (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 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 Index, 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
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, 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 Index, 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 Index, 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.
Investment Company Securities. The S&P 500, Extended Index, 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 Investment Company Act of 1940, as amended
(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 Index, International and
Bond Portfolios may invest up to 15% (10% in the case of the Money Market Fund)
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 Index Portfolio's portfolio may, contain securities of such foreign
issuers, as well as American Depositary Receipts ("ADRs") and similar
instruments, which will subject the International Portfolio and may subject the
S&P 500 Portfolio and the Extended Index 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. ADRS
(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 Index, 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 Portfolios may
invest. To the extent that such investments are consistent with its investment
objective, each of the S&P 500, Extended Index, 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 Index, 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.
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 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 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 (100% in the case of the Money
Market Fund), 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 and the Money Market Fund may each 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) each of the S&P 500 Index
Fund, the Extended Index Fund and the International Index Fund may borrow
up to 20% 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 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 this investment restriction, an Index 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 Index Fund,
the International Index Fund, and the Total Bond Index Fund will
concentrate in obligations to approximately 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 or commodity contracts (except that a Fund may
invest in securities of an issuer which invests or deals in commodities
or commodity contracts). This restriction shall not prohibit the S&P
500 Index Fund, the Extended 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.
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.
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% (10% in the case of the Money Market
Fund) 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 Index, 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 Index, 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.
With respect to the International Portfolio, this limitation does not apply
to foreign currency transactions, including without limitation, forward
currency contracts.
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 Index
Portfolio, and the International Portfolio may borrow up to 20% of the
current valueof 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 Index 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 Index Portfolio and the
International Portfolio, any industry in which 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 Index 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 Index, International, and Bond Portfolios: Non-Fundamental
Investment Restrictions
The S&P 500 Extended Index, 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.
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, 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) 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>
Position(s) Held with Principal Occupation(s)
Name, Address, and Age the Fund During the Past 5 Years
- ----------------------- -------- -----------------------
Harris A. Fricker (35) * Chairman of the Board Chairman of the Board, President
Whatifi Asset Management, Inc. and President and Chief Executive Officer of
790 Eddy Street Whatifi Asset Management, Inc.
San Francisco, California (the "Adviser") and its parent
94109 company, Whatifi Financial Inc.
(July 1999 - Present); Consultant
to X.com Corporation Internet
financial services) (March
1999 -July 1999); Senior Vice
President and Director, Dundee
Securities Corp. (investment dealer)
(March 1998 - March 1999); Managing
Director, Institutional Equities,
(Canaccord Capital Corp. (investment
dealer) February 1995 - March 1998)
</TABLE>
- --------
1 "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.
2 "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. The S&P 500 Index
Fund is not sponsored, endorsed, sold, or promoted by Standard & Poor's and
Standard & Poor's makes no representation, express or implied, regarding the
advisability of investing in the S&P 500 Index Fund.
3 The Wilshire 4500 Index(R) and related marks are trademarks of Wilshire
Associates, Inc. ("Wilshire Associates"). The Extended Index Fund is not
sponsored, endorsed, sold, or promoted by Wilshire Associates and Wilshire
Associates makes no representation, express or implied, regarding the
advisability of investing in the Extended Index Fund.
4 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"). The International Index Fund is not sponsored,
endorsed, sold, or promoted by MSCI and MSCI makes no representation, express or
implied, regarding the advisability of investing in the International Fund.
5 The Lehman Brothers Government/Corporate Bond Fund Index(R) is a trademark of
Lehman Brothers. The Bond Index Fund is not sponsored, endorsed, sold or
promoted by Lehman Brothers and Lehman Brothers makes no representation, express
or implied, regarding the advisability of investing in the Bond Index Fund.
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Position(s) Held with Principal Occupation(s)
Steven J. Dixon (39) * Trustee and Vice Chief Financial Officer, the
Whatifi Asset Management, Inc. President Adviser and its parent company,
790 Eddy Street Whatifi Financial Inc. (July 1999 -Present);
Chief Financial Officer,
San Francisco, California X.Com Corporation - (Internet
94109 financial services) (July 1999);
Executive Vice President and
Deputy Treasurer, Bank of
America (August 1985-June
1999)
Shon Goel (53) Trustee President and Chief Executive
Officer, The Lantis Corporation
(ground support equipment for
aviation industry) (1974-1999)
Kenneth Crouse (35) Trustee Managing Member, Investment
Management, Twinrock Capital
Management LLC (November
1999 - Present); Senior
Associate, Broadview
International (investment
banking). August 1996-May
1999); Student, Harvard Business
School (September 1994 - May
1996).
Warner Henderson (49) Trustee President and Chief Executive
Officer,
Aequitas
Investment
Advisors
(investment
advice
since
1990.)
Curtis W. Barnes (46) Secretary November 1999 to present, Vice
President-Administration Services
BISYS Fund Services; 1995-1999
Officer, Administration Services,
BISYS; prior to joining BISYS,
employed with John Hancock
Advisers for more than 11 years.
3
<PAGE>
Position(s) Held with Principal Occupation(s)
Steven Pierce (34) Treasurer Mr. Pierce has been Director of
Financial Services of BISYS Fund
Services, Inc. since 1996 Mr.
Pierce also serves as Treasurer
of Institutional Investors Capital
Appreciation Fund, Inc. and as an
officer to other mutual funds
registered under the 1940 Act
who are clients of BISYS. From
1996 to 1998, Mr. Pierce was the
Manager of Financial Operations
at CNA Insurance. From 1994 to
1996, he was a Trust Officer at
First Chicago NBD Corporation.
From 1989 to 1994, he was a
Senior Financial Accountant at
Kemper Financial Services.
Irimga McKay (39) Vice President November 1988 to present,
Senior Vice President, Client
Services of BISYS Fund
Services.
Gregory T. Maddox (31) Vice President April 1991 to present, Vice
President, Client Services of
BISYS Fund Services.
Alaina Metz (36) Assistant Secretary June 1995 to present, Chief
Administration Officer of BISYS
Fund Services. Supervisor of
Alliance Capital Management for
more than five years prior to
joining BISYS.
</TABLE>
- -----------------------------
(*) Denotes "interested person" as such term is defined in the 1940 Act.
The Trust pays each non-affiliated Trustee a quarterly fee of $500 per Board
meeting. The Chairman of the Audit Committee is paid an additional $500 per
year. 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 from the Trust for the current fiscal year:
Estimated Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Trustee Aggregate Compensation Total Compensation From
-------
from the Funds Funds and Trust Expected to
--------------
be Paid to Trustees (1)
Harris A. Fricker None None
Steven J. Dixon None None
Shon Goel $2,000 $2,000
Kenneth Crouse $2,000 $2,000
Warner Henderson $2,000 $2,000
</TABLE>
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 May 22, 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.
The Funds, the Adviser and the Funds' principal underwriter have adopted Codes
of Ethics which permit their personnel to invest in securities, including
securities which may be purchased or held by the Master Portfolios.
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
Financial Inc., 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, each Fund
pays the Adviser an investment advisory fee at an annual rate equal to 0.80% of
its average daily net assets.
The Portfolios' Investment Sub-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 December 31, 1999, BGFA and its
affiliates provided investment advisory services for over $782 billion of
assets. Barclays Bank PLC has been involved in banking in the United Kingdom for
over 300
years. Pursuant to Investment Advisory Contracts (the "Advisory Contracts") with
the Portfolios, BGFA provides investment guidance and policy direction in
connection with the management of the Portfolio's assets. Pursuant to the
Advisory Contracts, BGFA furnishes to the Portfolios' 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. In addition, the International
Index Portfolio charges
an annual administrative fee of 0.10% of its average daily net assets.
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, 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. BISYS Fund Services Ohio, Inc. ("BISYS"), 3435
Stelzer Road, Columbus, Ohio 43219, serves as the Funds' administrator. As the
Funds' administrator, BISYS 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. BISYS also furnishes office space
and certain facilities required for conducting the business of the Funds.
Additionally, the Funds, the Adviser and BISYS have entered into an Omnibus Fee
Agreement in which the amount of compensation due and payable to BISYS by the
Adviser pursuant to the Administration, and Transfer Agency Agreements shall be
the greater of (i) $150,000 per Fund annually and (ii) an annual fee payable
monthly ranging from .15% of the Trust's assets of up to $1 billion and .05% of
the Trust's assets in excess of $10 billion. Notwithstanding the foregoing, the
Trust hereby agrees that, in the event the Adviser shall fail at any time to (i)
make timely payment of fees that are due and payable under the Fee Agreement,
(ii) reimburse the Administrator for expenses incurred in accordance with the
Administration Agreement within a reasonable time following the receipt of an
invoice for such expenses, or (iii) make any other payment in a timely manner
that shall become due and payable to the Administrator hereunder, then the Trust
shall immediately make or cause to be made a payment of such fees and/or
reimbursable expenses.
Principal Underwriter of the Funds. BISYS Fund Services Limited Partnership
d/b/a/ BISYS Fund Services ("BISYS LP"), 3435 Stelzer Road, Columbus, Ohio 43219
serves as principal underwriter of the Funds. BISYS LP receives no compensation
in its capacity as the Funds' distributor. BISYS LP uses its best efforts to
distribute the Funds' shares, which shares are offered for sale by the Funds
continuously at their net asset values without the imposition of any sales
charge.
Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing Agent. BISYS
also acts as transfer agent, dividend disbursing agent and shareholder servicing
agent for the Funds. Under its agreement with the Funds, as transfer, dividend
disbursing and 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.
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. Investors Bank & Trust Company, ("IBT") 200 Clarendon Street, Boston,
Massachusetts 02111 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, including fund accounting services, 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 the Funds and
the Portfolios. As of the date of this SAI, the coadministrators of the
Portfolios pay IBT for all custodial services provided to the Funds and the
Portfolios. However, beginning on February 22, 2001, IBT will be entitled to
receive a custody fee of up to 0.01% from the Extended Index Portfolio.
Independent Auditors. KPMG LLP, Three Embarcadero Center, San Francisco,
California 94110 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.
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.
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, the
Extended Index Portfolio and the International Index 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 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.
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
Pricing of Fund Shares. The net asset value per share of a Fund is calculated by
deducting all liabilities incurred or accrued from the valuation of the Fund's
total assets (including accrued but undistributed income. The resulting net
assets are then divided by the number of shares of the Fund outstanding at the
time of valuation. The result (to the nearest cent) is the net asset value. The
net asset value of the S&P 500 Index Fund, the Extended 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
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).
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.
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."
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 (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 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 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. In addition, a Fund's performance
may include performance of the Master Portfolio prior to the effectiveness of
the Fund. Such Master Portfolio's performance has been restated to reflect
contractual arrangements by which the Adviser pays all expenses of the Fund from
the advisory fee or its own resources. In the event such expenses are not paid
by the Adviser, the total expenses of the Fund will increase by any unpaid
amounts payable under the Administration Agreement as well as any allocated
expenses of the Master Portfolio and will cause the performance of the fund to
be lower.
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 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 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.
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, 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 May __, 2000, and
related notes to the statements of assets and liabilities, and the independent
auditors' report are included herewith.
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:
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.
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.
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
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.
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(To be Filed by Amendment)
4
<PAGE>
PART C:
OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Item 23. Exhibits
(a) Trust Instrument; Certificate of Trust
(b) By-laws
(c) Instruments Defining Rights of Security Holders: Not applicable
(d) Form of Investment Advisory Agreement between Whatifi Asset Management,
Inc. and the Registrant
(e) Form of Underwriting Agreement among BISYS Fund Services Limited
Partnership d/b/a BISYS Fund Services ("BISYS LP"), Whatifi Asset
Management, Inc. and the Registrant:
(f) Bonus or Profit Sharing Contracts: Not applicable
(g) Form of Custodian Agreement among Whatifi Asset Management, Inc., Investors
Bank & Trust Company, and the Registrant
(h) Other Material Contracts:
(i) Form of Administration Agreement among Whatifi Asset Management, Inc.,
BISYS Fund Services Ohio Inc. ("BISYS") and the Registrant
(ii) Form of Transfer Agent, Dividend Disbursing Agent and Shareholder Servicing
Agent Agreement among Whatifi Asset Management, Inc., BISYS and
Registrant
(iii) Form of Whatifi Funds Internet Services Agreement
(iv) Form of Third Party Feeder Fund Agreement among Whatifi Asset Management,
Inc., Master Investment Portfolio, and the Registrant
(v) Consent to Use of Name*
(vi) Consent to Service as a Trustee*
(i) Opinion and Consent of Counsel
(j) Consent of Independent Auditors (To be Filed by Amendment)
(k) Omitted Financial Statements: Not applicable
(l) Subscription Agreement between Whatifi Asset Management, Inc. and the Registrant
(m) Rule 12b-1 Plan: Not applicable
(n) Financial Data Schedules: Not applicable
(o) Rule 18f-3 Plan: Not applicable
(p) Powers of Attorney
</TABLE>
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 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:
<TABLE>
<CAPTION>
<S> <C> <C>
Directors and Officers of Title/Status with Investment Other Business Connections
Investment Adviser Adviser
Harris A. Fricker President and Chief Executive President and Chief Executive
Officer Officer, Whatifi Financial Inc.
</TABLE>
- --------
* Incorporated in part by reference to the Trust's initial Registration
Statement filed on December 22, 1999.
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Directors and Officers of Title/Status with Investment Other Business Connections
Steven J. Dixon Chief Financial Officer Chief Financial Officer, Whatifi
Financial Inc.
Stephen J. Cucchiaro Chief Investment Officer Chief Investment Officer, Whatifi
Financial Inc., President,
Windward Capital, Inc.
</TABLE>
Item 27. Principal Underwriters
Shares of the Funds are distributed by BISYS LP (a). In addition to the
Registrant, BISYS LP or its affiliates act as distributor to the following
investment companies: Alpine Equity Trust, American Independence Funds Trust,
American Performance Funds, AmSouth Funds, The BB&T Mutual Funds Group, The
Coventry Group, The Eureka Funds, Fifth Third Funds, Governor Funds, Hirtle
Callaghan Trust, HSBC Funds Trust and HSBC Mutual Funds Trust, The Infinity
Mutual Funds, Inc., Magna Funds, Mercantile Mutual Funds, Inc., Metamarkets.com,
Myers Investment Trust, MMA Praxis Mutual Funds, M.S.D.&T. Funds, Pacific
Capital Funds, Republic Advisor Funds Trust, Republic Funds Trust, Summit
Investment Trust, USAllianz Funds, USAllianz Funds Variable Insurance Products
Trust, Variable Insurance Funds, The Victory Portfolios, The Victory Variable
Insurance Funds, Vintage Mutual Funds, Inc. (b) Directors and executive officers
of the Distributor are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Name Position with Underwriter Position with Fund
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, NJ 07424
BISYS Fund Services, Inc. Sole General Partner None
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
Officers:
Dennis Sheehan* Executive Officer
William Tomko* Supervising Principal
Gregory A. Trichtinger* Vice President
Andrew Corbin* Vice President
Robert Tuch* Assistant Secretary
Olu T. Lawal* Finance Operations
- ------------------------
* Principal Business Address is 3435 Stelzer Road, Columbus, Ohio 43219
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 the Funds' investment adviser,
Whatifi Asset Management, Inc., 790 Eddy Street, San Francisco, California
94109, the Funds' custodian, Investors Bank & Trust Company, 200 Clarendon
Street, Boston, Massachusetts, 02111 and the Funds' administrator and transfer
agent, BISYS Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, Ohio 43219.
Item 29. Management Services
Not applicable
Item 30. Undertakings:
Not applicable
6
<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
Pre-Effective Amendment No. 1 to its Registration Statement to be signed on its
behalf by the undersigned, duly authorized, in San Francisco, California 94109
on the 23rd day of May, 2000.
Whatifi Funds
(Registrant)
By: /s/ Harris A. Fricker
-----------------------------
Name: Harris A. Fricker
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:
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/Harris A. Fricker Chairman of the Board of
- ---------------------------Trustees and President May 23, 2000
Harris A. Fricker
/s/Steven J. Dixon
- --------------------------- Trustee May 23, 2000
Steven J. Dixon
* Trustee May 23, 2000
- -----------------------------
Shon Goel
* Trustee May 23, 2000
- -----------------------------
Kenneth Crouse
* Trustee May 23, 2000
- -----------------------------
Warner Henderson
/s/Steven Pierce
- -------------------------- Treasurer and
Steven Pierce Chief Financial Officer May 23, 2000
* David M. Leahy signs this document pursuant to powers of attorney filed
herewith.
* By /s/David M. Leahy
- ------------------
David M. Leahy
Attorney-in-Fact
7
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the undersigned has duly caused this Pre-Effective
Amendment No. 1 to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Little Rock, State of Arkansas on the 23rd day of
May, 2000.
MASTER INVESTMENT PORTFOLIO
BOND INDEX MASTER PORTFOLIO
EXTENDED INDEX MASTER PORTFOLIO
S&P 500 INDEX MASTER PORTFOLIO
MONEY MARKET MASTER PORTFOLIO
By /s/ Richard H. Blank, Jr.
---------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Signatures Title Date
---------- ----- ----
/s/ Richard H. Blank, Jr. Secretary and Treasurer May 23, 2000
____________________ (Principal Financial Officer)
Richard H. Blank, Jr.
* Trustee May 23, 2000
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Jack S. Euphrat*
* Chairman, President May 23, 2000
____________________ (Principal Executive Officer),
R. Greg Feltus* and Trustee
* Trustee May 23, 2000
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W. Rodney Hughes*
* Trustee May 23, 2000
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Lee Soong
</TABLE>
* Richard H. Blank, Jr. signs this document pursuant to powers of attorney
as previously filed.
*By /s/ Richard H. Blank, Jr.
----------------------
Richard H. Blank, Jr.
Attorney-in-Fact
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<PAGE>
EXHIBIT LIST
Exhibit No. Exhibit Name
23(a)(i) Trust Instrument
23(a)(ii) Certificate of Trust
23(d) Form Investment Advisory Agreement
23(e) Form of Underwriting Agreement
23(g) Form of Custodian Agreement
23(h)(i) Form of Administration Agreement
23(h)(ii) Form of Transfer Agency Agreement
23(h)(iii) Form of Whatifi Funds Internet Services Agreement
23(h)(iv) Form of Third Party Feeder Fund Agreement
23(h)(v) Consent to Use of Name
23(h)(vi) Consent to Service as Trustee
23(i) Opinion and Consent of Counsel
23(l) Subscription Agreement
23(m) Powers of Attorney
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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 94105
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
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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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(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
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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.
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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.
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(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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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.
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(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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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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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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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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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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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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<PAGE>
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.
/s/ Harris A. Fricker
Trustee and not individually
THE PRINCIPAL PLACE OF BUSINESS
OF THE TRUST IS:
790 Eddy Street
San Francisco, California 94105
<PAGE>
State of Delaware
Amended and Restated Certificate of Trust
Of
whatifi Funds
This Amended and Restated Certificate of Trust is being executed as of the
21st day of December 1999 for the purpose of amending the business trust
originally organized on December 15, 1999 pursuant to the Delaware Business
Trust Act, 12 Del. C. ss.ss.3801 et. seq. (the "Act").
The undersigned hereby certifies as follows:
1. Name. The name of the business trust is the whatifi Funds (the "Trust").
----
2. Registered Investment Company. The Trust is or will become a registered
----------------------------- investment company under the Investment
Company Act of 1940, as amended.
3. Registered Office and Registered Agent. The registered office of the
-------------------------------------- Trust in the State of Delaware is
located at 1209 Orange Street, Wilmington, Delaware 19801. The name of the
registered agent of the Trust for service of process at such location is
The Corporation Trust Company.
4. Notice of Limitation of Liabilities of Series. Notice is hereby
given that the Trust is or may hereafter be constituted a series trust. The
debts, liabilities, obligations, and expenses incurred, contracted for or
otherwise existing with respect to any particular series of the Trust shall be
enforceable against the assets of such series only, and not against the assets
of the Trust generally.
5. Reservation of Rights. The trustees of the Trust, as set forth in its
--------------------- governing instruments, reserve the right to amend,
alter, change, or repeal any provisions contained in this Certificate of
Trust, in the manner now or hereafter prescribed by statute.
6. Effective Date. This Certificate of Trust shall become effective
-------------- immediately upon filing with the Office of the Secretary of
State of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the trustee of the Trust,
has duly executed this Certificate of Trust as of the day and year first above
written.
/s/ Harris A. Fricker
Harris A. Fricker
Trustee and not individually
<PAGE>
INVESTMENT ADVISORY AGREEMENT
Whatifi Funds
AGREEMENT, effective as of May 23, 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.
1
<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, registration fees, 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. 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.
15. 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.
(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.
7
<PAGE>
(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 May 23, 2000.
Whatifi Funds
By: /s/ Harris A. Fricker
---------------------
Name: Harris A. Fricker
Title: Chairman of the Board and
President
Whatifi Asset Management, Inc.
By: /s/ Harris A. Fricker
---------------------
Name: Harris A. Fricker
Title: Chairman of the Board and
President
8
<PAGE>
EXHIBIT A
Name of Fund Advisory Fee
Whatifi S&P 500 Index Fund 0.80%
Whatifi Extended Market Index Fund 0.80%
Whatifi International Index Fund 0.80%
Whatifi Total Bond Index Fund 0.80%
Whatifi Money Market Fund 0.80%
9
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made this 22nd day of May, 2000, between WHATIFI FUNDS (the
"Trust"), a Delaware business trust having its principal place of business at
790 Eddy Street, Suite B, San Francisco, California 94109, and BISYS FUND
SERVICES LIMITED PARTNERSHIP D/B/A BISYS FUND SERVICES (Distributor"), having
its principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
organized as a Delaware business trust and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
shares of beneficial interest or common stock ("Shares") of each of the
investment portfolios of the Trust (such portfolios being referred to
individually as a "Fund" and collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
1.1 Distributor will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Trust then in
effect under the Securities Act of 1933, as amended (the "Securities Act"). As
used in this Agreement, the term "registration statement" shall mean Parts A
(the prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of prospectus and Statement of Additional Information used
by the Funds for delivery to shareholders and prospective shareholders after the
effective dates of the above referenced registration statements, together with
any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit
orders for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation. The
Trust understands that Distributor is now and may in the future be the
distributor of the shares of several investment companies or series (together,
"Investment Companies") including Companies having investment objectives similar
to those of the Trust. The Trust further understands that investors and
potential investors in the Trust may invest in shares of such other Investment
Companies. The Trust agrees that Distributor's duties to such Investment
Companies shall not be deemed in conflict with its duties to the Trust under
this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate activities which
it deems reasonable, which are primarily intended to result in the sale of the
Shares, including, but not limited to, advertising, compensation of
underwriters, dealers and sales personnel, the printing and mailing of
prospectuses to other than current Shareholders, and the printing and mailing of
sales literature.
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1.3 In its capacity as distributor of the Shares, all
activities of Distributor and its partners, agents, and employees shall comply
with all applicable laws, rules and regulations, including, without limitation,
the 1940 Act, all rules and regulations promulgated by the Commission thereunder
and all rules and regulations adopted by any securities association registered
under the Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during
normal business hours, to respond to telephone questions with respect to the
Trust.
1.5 Distributor will transmit any orders received by it for
purchase or redemption of the Shares to the transfer agent and custodian for the
Funds.
1.6 Whenever in their judgment such action is warranted by
unusual market, economic or political conditions, or by abnormal circumstances
of any kind, the Trust's officers may decline to accept any orders for, or make
any sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal
if it chooses to enter into selling agreements with selected dealers or others.
1.8 The Trust agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as Distributor may designate.
1.9 The Trust shall furnish from time to time, for use in
connection with the sale of the Shares, such information with respect to the
Funds and the Shares as Distributor may reasonably request; and the Trust
warrants that the statements contained in any such information shall fairly show
or represent what they purport to show or represent. The Trust shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements of
the Funds' books and accounts prepared by the Trust, (b) a monthly itemized list
of the securities in the Funds, (c) monthly balance sheets as soon as
practicable after the end of each month, and (d) from time to time such
additional information regarding the financial condition of the Funds as
Distributor may reasonably request.
1.10 The Trust represents to Distributor that, with respect to
the Shares, all registration statements and prospectuses filed by the Trust with
the Commission under the Securities Act have been carefully prepared in
conformity with requirements of said Act and rules and regulations of the
Commission thereunder. The registration statement and prospectus contain all
statements required to be stated therein in conformity with said Act and the
rules and regulations of said Commission and all statements of fact contained in
any such registration statement and prospectus are true and correct.
Furthermore, neither any registration statement nor any prospectus includes an
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
to a purchaser of the Shares. The Trust may, but shall not be obligated to,
propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus as, in the light
of future developments, may, in the opinion of the Trust's counsel, be necessary
or advisable. If the
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Trust shall not propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Trust of a written request
from Distributor to do so, Distributor may, at its option, terminate this
Agreement. The Trust shall not file any amendment to any registration statement
or supplement to any prospectus without giving Distributor reasonable notice
thereof in advance; provided, however, that nothing contained in this Agreement
shall in any way limit the Trust's right to file at any time such amendments to
any registration statement and/or supplements to any prospectus, of whatever
character, as the Trust may deem advisable, such right being in all respects
absolute and unconditional.
1.11 The Trust authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the sale
of the Shares. The Trust agrees to indemnify, defend and hold Distributor, its
several partners and employees, and any person who controls Distributor within
the meaning of Section 15 of the Securities Act free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which Distributor, its partners
and employees, or any such controlling person, may incur under the Securities
Act or under common law or otherwise, arising out of or based upon (i) any
untrue statement, or alleged untrue statement, of a material fact contained in
any registration statement or any prospectus, (ii) any omission, or alleged
omission, to state a material fact required to be stated in any registration
statement or any prospectus or necessary to make the statements in either
thereof not misleading or (iii) any Trust advertisement or sales literature that
is not in compliance with applicable laws, rules or regulations (including, but
not limited to the Conduct Rules of the National Association of Securities
Dealers, Inc.); provided, however, that the Trust's agreement to indemnify
Distributor, its partners or employees, and any such controlling person shall
not be deemed to cover any claims, demands, liabilities or expenses arising out
of any statements or representations as are contained in any prospectus,
advertisement or sales literature and in such financial and other statements as
are furnished in writing to the Trust by Distributor and used in the answers to
the registration statement or in the corresponding statements made in the
prospectus, advertisement or sales literature, or arising out of or based upon
any omission or alleged omission to state a material fact in connection with the
giving of such information required to be stated in such answers or necessary to
make the answers not misleading; and further provided that the Trust's agreement
to indemnify Distributor and the Trust's representations and warranties
hereinbefore set forth in paragraph 1.10 shall not be deemed to cover any
liability to the Trust or its Shareholders to which Distributor would otherwise
be subject by reason of willful misfeasance, bad faith or negligence in the
performance of its duties, or by reason of Distributor's reckless disregard of
its obligations and duties under this Agreement. The Trust's agreement to
indemnify Distributor, its partners and employees and any such controlling
person, as aforesaid, is expressly conditioned upon the Trust being notified of
any action brought against Distributor, its partners or employees, or any such
controlling person, such notification to be given by letter or by telegram
addressed to the Trust at its principal office in Columbus, Ohio and sent to the
Trust by the person against whom such action is brought, within 10 days after
the summons or other first legal process shall have been served. The failure to
so notify the Trust of any such action shall not relieve the Trust from any
liability which the Trust may have to the person against whom such action is
brought by reason of any such untrue, or allegedly untrue, statement or
omission, or alleged omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph 1.11. The Trust will be entitled
to assume the defense of any suit brought to enforce any such claim, demand or
liability, but,
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in such case, such defense shall be conducted by counsel of good standing chosen
by the Trust and approved by Distributor, which approval shall not be
unreasonably withheld. In the event the Trust elects to assume the defense of
any such suit and retain counsel of good standing approved by Distributor, the
defendant or defendants in such suit shall bear the fees and expenses of any
additional counsel retained by any of them; but in case the Trust does not elect
to assume the defense of any such suit, or in case Distributor reasonably does
not approve of counsel chosen by the Trust, the Trust will reimburse
Distributor, its partners and employees, or the controlling person or persons
named as defendant or defendants in such suit, for the fees and expenses of any
counsel retained by Distributor or them. The Trust's indemnification agreement
contained in this paragraph 1.11 and the Trust's representations and warranties
in this Agreement shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of Distributor, its partners and
employees, or any controlling person, and shall survive the delivery of any
Shares.
This Agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Trust agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Trust or any of its officers or
Directors in connection with the issue and sale of any Shares.
1.12 Distributor agrees to indemnify, defend and hold the
Trust, its several officers and Trustees/Directors (hereinafter referred to as
"Directors") and any person who controls the Trust within the meaning of Section
15 of the Securities Act free and harmless from and against any and all claims,
demands, liabilities and expenses (including the costs of investigating or
defending such claims, demands, or liabilities and any counsel fees incurred in
connection therewith) which the Trust, its officers or Directors or any such
controlling person, may incur under the Securities Act or under common law or
otherwise, but only to the extent that such liability or expense incurred by the
Trust, its officers or Directors or such controlling person resulting from such
claims or demands, shall arise out of or be based upon any untrue, or alleged
untrue, statement of a material fact contained in information furnished in
writing by Distributor to the Trust and used in the answers to any of the items
of the registration statement or in the corresponding statements made in the
prospectus, or shall arise out of or be based upon any omission, or alleged
omission, to state a material fact in connection with such information furnished
in writing by Distributor to the Trust required to be stated in such answers or
necessary to make such information not misleading. Distributor's agreement to
indemnify the Trust, its officers and Directors, and any such controlling
person, as aforesaid, is expressly conditioned upon Distributor being notified
of any action brought against the Trust, its officers or Directors, or any such
controlling person, such notification to be given by letter or telegram
addressed to Distributor at its principal office in Columbus, Ohio, and sent to
Distributor by the person against whom such action is brought, within 10 days
after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such action,
with counsel of its own choosing, satisfactory to the Trust, if such action is
based solely upon such alleged misstatement or omission on Distributor's part,
and in any other event the Trust, its officers or Directors or such controlling
person shall each have the right to participate in the defense or preparation of
the defense of any such action. The failure to so notify Distributor of any such
action shall not relieve Distributor from any liability which Distributor may
have to the Trust, its officers or Directors, or to such controlling person by
reason of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of
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Distributor's indemnity agreement contained in this paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Trust if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the Securities Act or if and so long as a current prospectus as required by
Section 10(b)(2) of said Act is not on file with the Commission; provided,
however, that nothing contained in this paragraph 1.13 shall in any way restrict
or have an application to or bearing upon the Trust's obligation to repurchase
Shares from any Shareholder in accordance with the provisions of the Trust's
prospectus, Declaration of Trust/Articles of Incorporation, or Bylaws.
1.14 The Trust agrees to advise Distributor as soon as
reasonably practical by a notice in writing delivered to Distributor or its
counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or
for additional information;
(b) in the event of the issuance by the
Commission of any stop order suspending the
effectiveness of the registration statement
or prospectus then in effect or the
initiation by service of process on the
Trust of any proceeding for that purpose;
(c) of the happening of any event that makes
untrue any statement of a material fact made
in the registration statement or prospectus
then in effect or which requires the making
of a change in such registration statement
or prospectus in order to make the
statements therein not misleading; and
(d) of all action of the Commission with respect
to any amendment to any registration
statement or prospectus which may from time
to time be filed with the Commission.
For purposes of this section, informal requests by or acts of the Staff of
the Commission shall not be deemed actions of or requests by the Commission.
1.15 Distributor agrees on behalf of itself and its partners
and employees to treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust and its prior,
present or potential Shareholders, and not to use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder, except, after prior notification to and approval in writing by the
Trust, which approval shall not be unreasonably withheld and may not be withheld
where Distributor may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
1.16 This Agreement shall be governed by the laws of the State of Ohio.
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1.17 In the event Distributor purchases the initial shares of
the Trust for purposes of satisfying the minimum net worth requirements set
forth in Section 14 (a) of the 1940 Act, and a notice of termination is
subsequently given or this Agreement is otherwise terminated pursuant to Section
6 herein for any reason prior to the time that organizational expenses incurred
by the Trust have been fully amortized, then the Trust shall either (i) cause
the successor distributor of the shares (the "Successor Distributor") to pay to
Distributor, within ten (10) days prior to the termination of this Agreement, an
amount of cash that is sufficient to purchase the initial shares that are held
by Distributor or (ii) enable Distributor to redeem the initial shares of the
Trust that it holds by causing the Successor Distributor to contribute to the
Trust, within ten (10) days prior to the termination of this Agreement, any
unamortized organizational costs in the same proportion as the number of initial
shares being redeemed bears to the number of initial shares outstanding at the
time of such contribution. In the latter case, Distributor shall be entitled to
redeem any or all of the initial shares that it holds and receive redemption
proceeds without any reduction in the amount of such proceeds, prior to the
termination of this Agreement.
2. Fee.
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If applicable, Distributor shall receive from the Funds
identified in a Distribution and Shareholder Service Plan or similar plan (the
"Distribution Plan Funds") a distribution fee at the rate and upon the terms and
conditions set forth in such Plan. The distribution fee shall be accrued daily
and shall be paid on the first business day of each month, or at such time(s) as
the Distributor shall reasonably request. To the extent a Distribution and
Shareholder Service Plan or similar plan has been adopted by the Trust, such
Plan shall be appended hereto as an exhibit.
3. Sale and Payment.
-----------------
Shares of a Fund may be subject to a sales load and may be
subject to the imposition of a distribution fee pursuant to the Distribution and
Shareholder Service Plan referred to above. To the extent that Shares of a Fund
are sold at an offering price which includes a sales load or at net asset value
subject to a contingent deferred sales load with respect to certain redemptions
(either within a single class of Shares or pursuant to two or more classes of
Shares), such Shares shall hereinafter be referred to collectively as "Load
Shares" (in the case of Shares that are sold with a front-end sales load or
Shares that are sold subject to a contingent deferred sales load), "Front-End
Load Shares" or "CDSL Shares" and individually as a "Load Share," a "Front-End
Load Share" or a "CDSL Share." A Fund that contains Front-End Load Shares shall
hereinafter be referred to collectively as "Load Funds" or "Front-End Load
Funds" and individually as a "Load Fund" or a "Front-end Load Fund." A Fund that
contains CDSL Shares shall hereinafter be referred to collectively as "Load
Funds" or "CDSL Funds" and individually as a "Load Fund" or a "CDSL Fund." Under
this Agreement, the following provisions shall apply with respect to the sale
of, and payment for, Load Shares.
3.1 Distributor shall have the right to purchase Load Shares
at their net asset value and to sell such Load Shares to the public against
orders therefor at the applicable public offering price, as defined in Section 4
hereof. Distributor shall also have the right to sell Load Shares to dealers
against orders therefor at the public offering price less a concession
determined by Distributor, which concession shall not exceed the amount of the
sales charge or underwriting
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discount, if any, referred to in Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load
Fund to, or on the order of, Distributor, Distributor shall pay or cause to be
paid to the Load Fund or to its order an amount in Boston or New York clearing
house funds equal to the applicable net asset value of such Shares. Distributor
may retain so much of any sales charge or underwriting discount as is not
allowed by Distributor as a concession to dealers.
4. Public Offering Price.
The public offering price of a Load Share shall be the net
asset value of such Load Share, plus any applicable sales charge, all as set
forth in the current prospectus of the Load Fund. The net asset value of Shares
shall be determined in accordance with the provisions of the Declaration or
Trust/Articles of Incorporation and Bylaws of the Trust and the then-current
prospectus of the Load Fund.
5. Issuance of Shares.
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The Trust reserves the right to issue, transfer or sell Load
Shares at net asset value (a) in connection with the merger or consolidation of
the Trust or the Load Fund(s) with any other investment company or the
acquisition by the Trust or the Load Fund(s) of all or substantially all of the
assets or of the outstanding Shares of any other investment company; (b) in
connection with a pro rata distribution directly to the holders of Shares in the
nature of a stock dividend or split; (c) upon the exercise of subscription
rights granted to the holders of Shares on a pro rata basis; (d) in connection
with the issuance of Load Shares pursuant to any exchange and reinvestment
privileges described in any then-current prospectus of the Load Fund; and (e)
otherwise in accordance with any then-current prospectus of the Load Fund.
6. Term, Duration and Termination.
This Agreement shall become effective as of the date first
written above and, unless sooner terminated as provided herein, shall continue
until May 21, 2002. Thereafter, if not terminated, this Agreement shall continue
with respect to a particular Fund automatically for successive one-year terms,
provided that such continuance is specifically approved at least annually by (a)
by the vote of a majority of those members of the Trust's Directors who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting for the purpose of voting on such approval and (b) by the
vote of the Trust's Directors or the vote of a majority of the outstanding
voting securities of such Fund. This Agreement is terminable without penalty, on
not less than sixty days' prior written notice, by the Trust's Directors, by
vote of a majority of the outstanding voting securities of the Trust or by the
Distributor. This Agreement will also terminate automatically in the event of
its assignment. (As used in this Agreement, the terms "majority of the
outstanding voting securities," "interested persons" and "assignment" shall have
the same meanings as ascribed to such terms in the 1940 Act.)
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
written above.
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WHATIFI FUNDS
By:________________________________
Title:_______________________________
Date:_______________________________
BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By:________________________________
Title:_______________________________
Date:_______________________________
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CUSTODIAN AGREEMENT
AGREEMENT made as of this 28th day of April, 2000, between whatifi
Funds, a business trust organized under the laws of the state of Delaware (the
"Fund"), Whatifi Asset Management, Inc., a Delaware corporation (the "Adviser"),
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. The Adviser, pursuant to its agreement with the Fund, has agreed to
pay any fees due to the Bank for the services rendered hereunder.
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 Adviser, on behalf of 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,
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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, 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
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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 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
<PAGE>
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
(if such fees are not paid by the Adviser) 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 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
<PAGE>
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.
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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
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
<PAGE>
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.
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
<PAGE>
(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 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;
<PAGE>
(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 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
<PAGE>
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, 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.
<PAGE>
(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 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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
(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 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
<PAGE>
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.
<PAGE>
12. Fund Evaluation and Yield Calculation
12.1 Fund Evaluation. The Bank shall compute and, unless
otherwise directed by the 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
<PAGE>
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 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
<PAGE>
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.
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
<PAGE>
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 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.
<PAGE>
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 (or the Adviser
on behalf of the Fund in the case of fees to be paid hereunder) 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 Adviser on behalf of 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. It is agreed that if the Adviser fails to pay the fees due
hereunder within thirty days of receipt of an invoice for such fees, the Fund
will remain directly responsible for the payment of such fees. The Bank will
also be entitled to reimbursement by the Fund for all reasonable expenses
incurred in conjunction with termination of 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;
<PAGE>
(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;
(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.
In addition, either party hereto may terminate this Agreement prior to the
<PAGE>
expiration of any Renewal Term upon 120 days' prior written notice of such
termination.
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 prior to the effectiveness 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 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
<PAGE>
below, namely:
(a) In the case of notices sent to the Fund to:
whatifi Funds
c/o whatifi Financial, Inc.
790 Eddy Street
San Francisco, CA 94109
Attn: Harris Fricker
(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: Steven
Gallant, 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 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
<PAGE>
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:
Whatifi Asset Management, Inc.
By:
Name:
Title:
INVESTORS BANK & TRUST COMPANY
By:
Name:
Title:
<PAGE>
Appendices
Appendix A....................................................Portfolios
Appendix B..................................................Fee Schedule
Appendix C...........................................Additional Services
<PAGE>
whatifi Asset Management, Inc.
For Five BGI Feeder Funds
(Whatifi Funds)
CUSTODY and FUND ACCOUTING
Custody, Fund Accounting and Calculation of N.A.V.
The following annual fee will apply:
Annual Fee
Private Label Feeder $20,000
Per Class Fee (Beyond one) $7,500
There will also be a .5 basis point charge on all assets.
MISCELLANEOUS
A. Out-of-Pocket
The charges next to each section are for proforma purposes only. Actual charges
may vary.
These charges consist of:
- -Third Party Review ($250/fd/yr)
- - Legal Expenses
- -Printing, Delivery, Postage, Fax - Performance Measurement - Forms and Supplies
- - Data Transmissions - Extraordinary Travel Expenses - Customized Statements -
Microfiche - Ad Hoc Reporting - Customized Reporting, Transmissions or Extracts
- - Telecommunications (Per month/fund dom $61.25, intl $77.06) - Micro/Support
Equipment
Systems
The details of any systems work will be determined after a thorough
business analysis. Any systems work will be billed on a time and material basis.
Investors Bank provides a total allowance of 10 system hours of data extract and
reporting extract set-up. This would include any interfaces with Bisys.
Payment
The above fees will be charged against the advisory fees to be paid from
the custodian account on the last business day of the month. All fees will be
billed monthly.
This fee schedule assumes the execution of our standard contractual agreements
for a minimum of three years.
<PAGE>
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 22nd day of May, 2000, by and among
WHATIFI FUNDS, a Delaware business trust (the "Trust") having its principal
place of business at 790 Eddy Street, Suite B, San Francisco, California 94109,
WHATIFI ASSET MANAGEMENT, INC. (the "Adviser"), a Delaware corporation having
its principal place of business at 790 Eddy Street, Suite B, San Francisco,
California 94109, and BISYS FUND SERVICES OHIO, INC. (the "Administrator"), an
Ohio corporation organized under the laws of the State of Ohio and having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares of beneficial interest or common
stock ("Shares");
WHEREAS, the Adviser is a registered investment adviser that has been
retained by the Trust, pursuant to an Investment Advisory Agreement, dated May
22, 2000, to provide various investment advisory services to the Trust; and
WHEREAS, the Trust and the Adviser desire the Administrator to provide,
and the Administrator is willing to provide, management and administrative
services to each series of the Trust, all as now or hereafter may be established
from time to time ("Portfolios"), on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator. The Trust and the Adviser
hereby retain the Administrator to act as the administrator of the Portfolios
and to furnish the Portfolios with the management and administrative services as
set forth in Article 2 below. The Administrator hereby accepts such engagement
to perform the duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Trust in any way and shall
not be deemed an agent of the Trust.
ARTICLE 2. Administrative Services. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Trust,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Board of Trustees/ Directors of the Trust
(hereafter referred to as the "Directors") with such reports regarding
investment performance as they may reasonably request but shall have no
responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
<PAGE>
The Administrator shall provide the Trust with regulatory reporting,
all necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Directors' meetings) for handling
the affairs of the Portfolios and such other services as the Administrator
shall, from time to time, determine to be necessary to perform its obligations
under this Agreement. In addition, at the request of the Directors, the
Administrator shall make reports to the Trust's Directors concerning the
performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual Trust expenses and control all
disbursements for the Trust, and as appropriate, compute the
Trust's yields, total return, expense ratios, portfolio
turnover rate and, if required, portfolio average
dollar-weighted maturity;
(b) assist Trust counsel with the preparation of
prospectuses, statements of additional information, registration
statements and proxy materials;
(c) prepare such reports, applications and documents
(including reports regarding the sale and redemption of Shares
as may be required in order to comply with Federal and state
securities law) as may be necessary or desirable to register
the Trust's Shares with state securities authorities, monitor
the sale of Trust Shares for compliance with state securities
laws, and file with the appropriate state securities
authorities the registration statements and reports for the
Trust and the Trust's Shares and all amendments thereto, as
may be necessary or convenient to register and keep effective
the Trust and the Trust's Shares with state securities
authorities to enable the Trust to make a continuous offering
of its Shares;
(d) develop and prepare, with the assistance of the Trust's
investment adviser, communications to Shareholders, including
the annual report to Shareholders, coordinate the mailing of
prospectuses, notices, proxy statements, proxies and other
reports to Trust Shareholders, and supervise and facilitate
the proxy solicitation process for all shareholder meetings,
including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Trust with, among
others, the Trust's investment adviser, distributor, custodian,
transfer agent and fund accountant;
(f) supervise the Trust's transfer agent with respect to the
payment of dividends and other distributions to Shareholders;
(g) calculate performance data of the Portfolios for dissemination to
information services covering the investment company industry;
<PAGE>
(h) coordinate and supervise the preparation and filing of the Trust's
tax returns;
(i) examine and review the operations and performance of the
various organizations providing services to the Trust or any
Portfolio of the Trust, including, without limitation, the
Trust's investment adviser, distributor, custodian, fund
accountant, transfer agent, outside legal counsel and
independent public accountants, and at the request of the
Directors, report to the Board on the performance of
organizations;
(j) assist with the layout and printing of publicly
disseminated prospectuses and assist with and coordinate
layout and printing of the Trust's semi-annual and annual
reports to Shareholders;
(k) assist with the design, development, and operation of
the Portfolios, including new classes, investment objectives,
policies and structure;
(l) provide individuals reasonably acceptable to the Trust's
Directors to serve as officers of the Trust, who will be
responsible for the management of certain of the Trust's
affairs as determined by the Trust's Directors;
(m) advise the Trust and its Directors on matters concerning the
Trust and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Trust
in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Trust's Directors;
(o) monitor and advise the Trust and its Portfolios on
their registered investment company status under the
Internal Revenue Code of 1986, as amended;
(p) perform all administrative services and functions of the
Trust and each Portfolio to the extent administrative services
and functions are not provided to the Trust or such Portfolio
pursuant to the Trust's or such Portfolio's investment
advisory agreement, distribution agreement, custodian
agreement, transfer agent agreement and fund accounting
agreement;
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as the Trust and
the Administrator shall determine desirable; and
(r) prepare and file with the SEC the semi-annual report for the
Trust on Form
<PAGE>
N-SAR and all required notices pursuant to Rule 24f-2.
The Administrator shall perform such other services for the Trust that
are mutually agreed upon by the parties from time to time. Such services may
include performing internal audit examinations; mailing the annual reports of
the Portfolios; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the Trust
will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. Allocation of Charges and Expenses.
----------------------------------
(A) The Administrator. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Trust as well as all Directors of the
Trust who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Trust retained by the Directors of the Trust
to perform services on behalf of the Trust.
(B) The Trust and the Adviser. The Trust and the Adviser assume and
shall pay or cause to be paid all other expenses of the Trust not otherwise
allocated herein, including, without limitation, organization costs, taxes,
expenses for legal and auditing services, the expenses of preparing (including
typesetting), printing and mailing reports, prospectuses, statements of
additional information, proxy solicitation material and notices to existing
Shareholders, all expenses incurred in connection with issuing and redeeming
Shares, the costs of custodial services, the cost of initial and ongoing
registration of the Shares under Federal and state securities laws, fees and
out-of-pocket expenses of Directors who are not affiliated persons of the
Administrator or the Adviser or any affiliated corporation of the Administrator
or the Adviser, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Trust.
ARTICLE 4. Compensation of the Administrator.
---------------------------------
Administration Fee. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Adviser shall pay to the Administrator compensation at an annual
rate specified in the Omnibus Fee Agreement by and among the Trust, the Adviser
and the Administrator dated as of May 22, 2000 (the "Fee Agreement").
The Adviser shall also reimburse the Administrator for its reasonable
out-of-pocket expenses, including the travel and lodging expenses incurred by
officers and employees of the Administrator in connection with attendance at
Board meetings.
<PAGE>
Notwithstanding the foregoing, the Trust hereby agrees that, in the
event the Adviser shall fail at any time to (i) make timely payment of fees that
are due and payable under the Fee Agreement, (ii) reimburse the Administrator
for expenses incurred in accordance with this Article 4 within a reasonable time
following the receipt of an invoice for such expenses, or (iii) make any other
payment in a timely manner that shall become due and payable to the
Administrator hereunder, then the Trust shall immediately make or cause to be
made a payment of such fees and/or reimbursable expenses.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Survival of Compensation Rights. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby. (As used in this Article 5, the term "Administrator" shall include
directors, officers, employees and other agents of the Administrator as well as
the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Trust assumes full responsibility and shall
indemnify the Administrator and hold it harmless from and against any and all
actions, suits and claims, whether groundless or otherwise, and from and against
any and all losses, damages, costs, charges, reasonable counsel fees and
disbursements, payments, expenses and liabilities (including reasonable
investigation expenses) arising directly or indirectly out of the
Administrator's actions taken or nonactions with respect to the performance of
services hereunder. The indemnity and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Trust may be asked to indemnify or hold the
Administrator harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all
<PAGE>
reasonable care to identify and notify the Trust promptly concerning any
situation which presents or appears likely to present the probability of such a
claim for indemnification against the Trust, but failure to do so in good faith
shall not affect the rights hereunder.
The Trust shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Trust elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the Trust
and satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Trust elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Trust does not elect to assume the
defense of a suit, it will reimburse the Administrator for the reasonable fees
and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Trust at any time for instructions
and may consult counsel for the Trust or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator 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.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Trust until receipt of written notice thereof from the Trust.
ARTICLE 6. Activities of the Administrator. The services of the
Administrator rendered to the Trust are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and Shareholders of the Trust are or may be or become interested in the
Administrator, as officers, employees or otherwise and that partners, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the Trust, and that the Administrator may be or become
interested in the Trust as a Shareholder or otherwise.
ARTICLE 7. Duration of this Agreement. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. Assignment. This Agreement shall not be assignable by any
party without the written consent of the other parties; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 5
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of,
<PAGE>
the parties hereto and their respective successors and permitted assigns.
ARTICLE 9. Amendments. This Agreement, or any term thereof, may be modified only
by a written amendment, signed by the party against whom enforcement of
such modification is sought.
ARTICLE 10. Certain Records. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Trust shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Trust and will be made available
to or surrendered promptly to the Trust on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Trust and follow the Trust's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Trust has
agreed to indemnify the Administrator against such liability.
ARTICLE 11. Definitions of Certain Terms. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. Notice. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the following address: if to the Trust or the Adviser, at 790
Eddy Street, Suite B, San Francisco, California 94109, Attention: President: and
if to BISYS, at 3435 Stelzer Road, Columbus, Ohio 43219, Attention: President,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
ARTICLE 13. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 14. Multiple Originals. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
WHATIFI FUNDS
By: ______________________________
Title:______________________________
WHATIFI ASSET MANAGEMENT, INC.
By: _______________________________
Title: ______________________________
BISYS FUND SERVICES OHIO, INC.
By: _______________________________
Title: ______________________________
<PAGE>
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
BY AND AMONG
WHATIFI FUNDS,
WHATIFI ASSET MANAGEMENT, INC.
AND
BISYS FUND SERVICES OHIO, INC.
Portfolios: This Agreement shall apply to all Portfolios of WhatifI Funds,
either now or hereafter created (individually, the "Portfolio", and
collectively, the "Portfolios"). The current Portfolios of the Trust are
set forth below:
Term: Pursuant to Article 7, the term of this Agreement shall
commence on the date first written above and shall remain in
effect for a three (3) year period ("Initial Term").
Notwithstanding the foregoing, this Agreement may be
terminated without penalty at any time (i) by either party
upon the provision of at least ninety (90) days advance
written notice of termination to the other party or (ii) by
mutual agreement of the parties.
After such termination, for so long as the Administrator, with
the written consent of the Trust, in fact continues to perform
any one or more of the services contemplated by this Agreement
or any schedule or exhibit hereto, the provisions of this
Agreement, including without limitation the provisions dealing
with indemnification, shall continue in full force and effect.
Compensation due the Administrator and unpaid by the Trust
upon such termination shall be immediately due and payable
upon and notwithstanding such termination. The Administrator
shall be entitled to collect from the Trust, in addition to
the compensation described in this Schedule A, the amount of
all of the Administrator's cash disbursements for services in
connection with the Administrator's activities in effecting
such termination, including without limitation, the delivery
to the Trust and/or its designees of the Trust's property,
records, instruments and documents.
<PAGE>
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 22nd day of May, 2000, by and among WHATIFI FUNDS
(the "Trust"), a Delaware business trust, having its principal place of business
at 790 Eddy Street, Suite B, San Francisco, California 94109, WHATIFI ASSET
MANAGEMENT, INC. (the"Adviser"), a Delaware corporation having its principal
place of business at 790 Eddy Street, Suite B, San Francisco, California 94109,
and BISYS FUND SERVICES OHIO, INC. ("BISYS"), an Ohio corporation having its
principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Trust is an open-end management investment company,
registered with the Securities and Exchange Commission (the "Commission") under
the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Adviser is a registered investment adviser that has been
retained by the Trust, pursuant to an Investment Advisory Agreement, dated May
22, 2000, to provide various investment advisory services to the Trust; and
WHEREAS, the Trust and the Adviser desire that BISYS perform certain
services for each series of the Trust (individually referred to herein as a
"Fund" and collectively as the "Funds").
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services.
--------
BISYS shall perform the transfer agent services set forth in
Schedule A hereto. BISYS also agrees to perform such special services incidental
to the performance of the services enumerated herein as agreed to by the parties
from time to time. BISYS shall perform such additional services as are provided
on an amendment to Schedule A hereof, in consideration of such fees as the
parties hereto may agree.
Subject to the prior written consent of the Trust and the
Adviser, which consent shall not be unreasonably withheld, BISYS may, in its
discretion, appoint in writing other parties qualified to perform transfer
agency services reasonably acceptable to the Trust and the Adviser
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement; provided, however, that the Sub-transfer
Agent shall be the agent of BISYS and not the agent of the Trust or the Adviser
, and that BISYS shall be fully responsible for the acts of such Sub-transfer
Agent and shall not be relieved of any of its responsibilities hereunder by the
appointment of such Sub-transfer Agent.
2. Fees.
-----
1
<PAGE>
The Adviser shall pay BISYS for the services to be provided by
BISYS under this Agreement in accordance with, and in the manner set forth in
the Omnibus Fee Agreement by and among between the Trust, the Adviser and BISYS
dated as of May 22, 2000 (the "Fee Agreement"). Notwithstanding the foregoing,
the Trust hereby agrees that, in the event the Adviser shall fail at any time to
(i) make timely payment of fees that are due and payable under the Fee
Agreement, (ii) reimburse BISYS for expenses incurred in accordance with Section
3 herein within a reasonable time following the receipt of an invoice for such
expenses, or (iii) make any other payment in a timely manner that shall become
due and payable to BISYS hereunder, then the Trust shall immediately make or
cause to be made a payment of such fees and/or reimbursable expenses.
3. Reimbursement of Expenses.
In addition to paying BISYS the fees referred to in Section 2
hereof, the Adviser agrees to reimburse BISYS for BISYS' out-of-pocket expenses
in providing services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges
incurred by BISYS in delivering materials to and from the
Trust and in delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy
or other electronic transmission expenses incurred by
BISYS in communication with the Trust, the Trust's
investment adviser or custodian, dealers, shareholders or
others as required for BISYS to perform the services to be
provided hereunder;
Costs of postage, couriers, stock computer paper,
statements, labels, envelopes, checks, reports, letters,
tax forms, proxies, notices or other forms of printed
material which shall be required by BISYS for the
performance of the services to be provided hereunder;
Sales taxes paid on behalf of the Trust;
Expenses associated with the tracking of "as-of" trades;
The cost of microfilm or microfiche of records or other
materials;
All systems-related expenses associated with the provision
of special reports and services pursuant to Schedule B
attached hereto; and
Any expenses BISYS shall incur at the written direction of
an officer of the Trust thereunto duly authorized.
2
<PAGE>
The parties acknowledge and agree that the fees set forth
below, which will be collected by BISYS from certain Trust
shareholders, shall be used by BISYS to offset the
out-of-pocket expenses referenced above for which BISYS is
entitled to reimbursement. Such fees shall include (i)
paper-based reporting fees, (ii) minimum balance fees,
(iii) wire fees and (iv) redemption fees.
4. Effective Date.
---------------
This Agreement shall become effective as of the date first written above
(the "Effective Date").
5. Term.
-----
This Agreement shall become effective as of the date written
above and shall continue in effect with respect to a Fund, unless earlier
terminated by any party hereto as provided hereunder, for a three (3) year
period (the "Initial Term"). Notwithstanding the foregoing, this Agreement may
be terminated without penalty at any time (i) by any party upon the provision of
at least ninety (90) days advance written notice of termination to the other
parties or (ii) by mutual agreement of the parties.
After such termination, for so long as BISYS, with the written
consent of the Adviser or the Trust, in fact continues to perform any one or
more of the services contemplated by this Agreement or any Schedule or exhibit
hereto, the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full force and
effect. Fees and out-of-pocket expenses incurred by BISYS but unpaid by the
Adviser upon such termination shall be immediately due and payable upon and
notwithstanding such termination. BISYS shall be entitled to collect from the
Adviser, in addition to the fees and disbursements provided by Sections 2 and 3
hereof, the amount of all of BISYS' cash disbursements in connection with BISYS'
activities in effecting such termination, including without limitation, the
delivery to the Trust and/or its distributor or investment adviser and/or other
parties, of the Trust's property, records, instruments and documents.
6. Uncontrollable Events.
BISYS assumes no responsibility hereunder, and shall not be
liable for any damage, loss of data, delay or any other loss whatsoever caused
by events beyond its reasonable control.
7. Legal Advice.
-------------
BISYS may apply to the Adviser or the Trust at any time for
instructions and may consult counsel for the Trust or its own counsel with
respect to any matter arising in connection with BISYS's duties, and BISYS shall
not be liable or accountable for any action taken or omitted by it
3
<PAGE>
in good faith in accordance with such instruction or with the opinion of such
counsel.
8. Instructions.
-------------
Whenever BISYS is requested or authorized to take action
hereunder pursuant to instructions from a shareholder, or a properly authorized
agent of a shareholder ("shareholder's agent"), concerning an account in a Fund,
BISYS shall be entitled to rely upon any certificate, letter or other instrument
or communication, believed by BISYS to be genuine and to have been properly
made, signed or authorized by an officer or other authorized agent of the Trust
or by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Trust or
any other person authorized by the Trust's Board of Trustees/Directors
(hereafter referred to as the "Directors") or by the shareholder or
shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely
conclusively upon the terms of the Prospectuses and Statement of Additional
Information of the Trust relating to the Funds to the extent that such services
are described therein unless BISYS receives written instructions to the contrary
in a timely manner from the Trust.
9. Standard of Care; Reliance on Records and Instructions; Indemnification.
------------------------------------------------------------------------
BISYS shall use its best efforts to ensure the accuracy of all
services performed under this Agreement, but shall not be liable to the Adviser
or the Trust for any action taken or omitted by BISYS in the absence of bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties. The Trust agrees to indemnify and hold harmless BISYS,
its employees, agents, directors, officers and nominees from and against any and
all claims, demands, actions and suits, whether groundless or otherwise, and
from and against any and all judgments, liabilities, losses, damages, costs,
charges, counsel fees and other expenses of every nature and character arising
out of or in any way relating to BISYS' actions taken or nonactions with respect
to the performance of services under this Agreement or based, if applicable,
upon reasonable reliance on information, records, instructions or requests given
or made to BISYS by the Trust, the investment adviser and on any records
provided by any fund accountant or custodian thereof; provided that this
indemnification shall not apply to actions or omissions of BISYS in cases of its
own bad faith, willful misfeasance, negligence or from reckless disregard by it
of its obligations and duties; and further provided that prior to confessing any
claim against it which may be the subject of this indemnification, BISYS shall
give the Trust written notice of and reasonable opportunity to defend against
said claim in its own name or in the name of BISYS.
10. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the Trust all books
and records which the Trust or BISYS is, or may be, required to keep and
maintain pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the 1940 Act,
4
<PAGE>
relating to the maintenance of books and records in connection with the services
to be provided hereunder. BISYS further agrees that all such books and records
shall be the property of the Trust and to make such books and records available
for inspection by the Trust or by the Securities and Exchange Commission (the
"Commission") at reasonable times and otherwise to keep confidential all books
and records and other information relative to the Trust and its shareholders,
except when requested to divulge such information by duly-constituted
authorities or court process, or requested by a shareholder or shareholder's
agent with respect to information concerning an account as to which such
shareholder has either a legal or beneficial interest or when requested by the
Trust, the shareholder, or shareholder's agent, or the dealer of record as to
such account.
11. Reports.
--------
BISYS will furnish to the Trust and to its properly-authorized
auditors, investment advisers, examiners, distributors, dealers, underwriters,
salesmen, insurance companies and others designated by the Trust in writing,
such reports at such times as are prescribed in Schedule B attached hereto, or
as subsequently agreed upon by the parties pursuant to an amendment to Schedule
B. The Trust agrees to examine each such report or copy promptly and will report
or cause to be reported any errors or discrepancies therein.
12. Rights of Ownership.
All computer programs and procedures developed by BISYS or
paid for by BISYS to perform services required to be provided by BISYS under
this Agreement are the property of BISYS. All records and other data except such
computer programs and procedures developed by or paid for BISYS are the
exclusive property of the Trust and all such other records and data will be
furnished to the Trust in appropriate form as soon as practicable after
termination of this Agreement for any reason.
13. Return of Records.
BISYS may at its option at any time, and shall promptly upon
the Trust's demand, turn over to the Trust and cease to retain BISYS' files,
records and documents created and maintained by BISYS pursuant to this Agreement
which are no longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Trust, such documents and
records will be retained by BISYS for six years from the year of creation. At
the end of such six-year period, such records and documents will be turned over
to the Trust unless the Trust authorizes in writing the destruction of such
records and documents.
14. Bank Accounts.
--------------
The Trust and the Funds shall establish and maintain such bank
accounts with such bank or banks as are selected by the Trust, as are necessary
in order that BISYS may perform the services required to be performed hereunder.
To the extent that the performance of such services
5
<PAGE>
shall require BISYS directly to disburse amounts for payment of dividends,
redemption proceeds or other purposes, the Trust and Funds shall provide such
bank or banks with all instructions and authorizations necessary for BISYS to
effect such disbursements.
15. Representations of the Trust.
The Trust certifies to BISYS that: (a) as of the close of
business on the Effective Date, each Fund which is in existence as of the
Effective Date has authorized unlimited shares, and (b) by virtue of its
Declaration of Trust or Articles of Incorporation, shares of each Fund which are
redeemed by the Trust may be sold by the Trust from its treasury, and (c) this
Agreement has been duly authorized by the Trust and, when executed and delivered
by the Trust, will constitute a legal, valid and binding obligation of the
Trust, enforceable against the Trust in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
16. Representations of BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and
shall continue to be in, substantial compliance with all provisions of law,
including Section 17A(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), required in connection with the performance of its duties under
this Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Trust and BISYS' records, data, equipment, facilities and other property used in
the performance of its obligations hereunder are adequate and that it will make
such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
17. Insurance.
----------
BISYS shall maintain a fidelity bond covering larceny and
embezzlement and an insurance policy with respect to directors and officers
errors and omissions coverage in amounts that are appropriate in light of its
duties and responsibilities hereunder. BISYS shall notify the Trust should its
insurance coverage with respect to professional liability or errors and
omissions coverage be canceled or reduced. Such notification shall include the
date of change and the reasons therefor. BISYS shall notify the Trust of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Trust from time to time as may be appropriate of the total outstanding claims
made by BISYS under its insurance coverage.
18. Information to be Furnished by the Trust and Funds.
---------------------------------------------------
The Trust has furnished to BISYS the following:
6
<PAGE>
(a) Copies of the Declaration of Trust or Articles of
Incorporation of the Trust and of any amendments
thereto, certified by the proper official of the state
in which such Declaration or Articles has been filed.
(b) Copies of the following documents:
1. The Trust's Bylaws and any amendments thereto;
Certified copies of resolutions of the Directors Board of
Directors covering the following matters:
A. Approval of this Agreement and authorization of a specified
officer of the Trust to execute and deliver this Agreement
and authorization for specified officers of the Trust to
instruct BISYS hereunder; and
B. Authorization of BISYS to act as Transfer Agent for the
Trust on behalf of the Funds.
(c) A list of all officers of the Trust, together with
specimen signatures of those officers, who are
authorized to instruct BISYS in all matters.
(d) Two copies of the following (if such documents are
employed by the Trust):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Trust or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest or
common stock of the Trust authorized, issued, and
outstanding as of the Effective Date of BISYS'
appointment as Transfer Agent (or as of the date on
which BISYS' services are commenced, whichever is the
later date) and as to receipt of full consideration by
the Trust for all shares outstanding, such statement to
be certified by the Treasurer of the Trust.
19. Information Furnished by BISYS.
BISYS has furnished to the Trust the following:
(a) BISYS' Articles of Incorporation.
7
<PAGE>
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the
following matters:
1. Approval of this Agreement, and authorization of a
specified officer of BISYS to execute and deliver this
Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Trust.
(d) A copy of the most recent report describing control
structure policies and procedures relating to
transfer agency operations pursuant to AICPA
Statement on Auditing Standards Number 70.
20. Amendments to Documents.
The Trust shall furnish BISYS written copies of any amendments
to, or changes in, any of the items referred to in Section 18 hereof forthwith
upon such amendments or changes becoming effective. In addition, the Trust
agrees that no amendments will be made to the Prospectuses or Statement of
Additional Information of the Trust which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Trust
first obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
BISYS may rely on any amendments to or changes in any of the
documents and other items to be provided by the Trust pursuant to Sections 18
and 20 of this Agreement and the Trust hereby indemnifies and holds harmless
BISYS from and against any and all claims, demands, actions, suits, judgments,
liabilities, losses, damages, costs, charges, counsel fees and other expenses of
every nature and character which may result from actions or omissions on the
part of BISYS in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned amendments to and
changes in the documents and other items to be provided pursuant to Sections 18
and 20 hereof, BISYS shall be under no duty to comply with or take any action as
a result of any of such amendments or changes unless the Trust first obtains
BISYS' written consent to and approval of such amendments or changes.
22. Compliance with Law.
Except for the obligations of BISYS set forth in Section 10
hereof, the Trust assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Trust as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of
8
<PAGE>
the Trust's shares. The Trust represents and warrants that no shares of the
Trust will be offered to the public until the Trust's registration statement
under the 1933 Act and the 1940 Act has been declared or becomes effective.
23. Notices.
--------
Any notice provided hereunder shall be sufficiently given when
sent by registered or certified mail, postage prepaid, addressed by the party
giving notice to the other party at the following address: if to the Adviser or
the Trust, at 790 Eddy Street, Suite B, San Francisco, California 94109,
Attention: President; and if to BISYS, at 3435 Stelzer Road, Columbus, Ohio
43219, Attention: President, or at such other address as such party may from
time to time specify in writing to the other party pursuant to this Section.
24. Headings.
---------
Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this Agreement.
25. Assignment.
----------
This Agreement and the rights and duties hereunder shall not
be assignable by any of the parties hereto except by the specific written
consent of the other parties. This Section 25 shall not limit or in any way
affect BISYS' right to appoint a Sub-transfer Agent pursuant to Section 1
hereof. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and permitted assigns.
26. Governing Law.
--------------
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
WHATIFI FUNDS
By:________________________________
Title: ______________________________
9
<PAGE>
WHATIFI ASSET MANAGEMENT, INC.
By: _______________________________
Title: ______________________________
BISYS FUND SERVICES OHIO, INC.
By:________________________________
Title:______________________________
B-
10
<PAGE>
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BY AND AMONG
WHATIFI FUNDS,
WHATIFI ASSET MANAGEMENT, INC.
AND
BISYS FUND SERVICES OHIO, INC.
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10b-10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. Shareholder Information Services
a. Make information available to shareholder servicing unit and
other remote access units regarding trade date, share price,
current holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy
statements or marketing material to current shareholders.
11
<PAGE>
3. Compliance Reporting
a. Provide reports to the Securities and Exchange Commission,
the National Association of Securities Dealers and the
States in which the Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for corresponding Fund and shareholder income and
capital gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Fund shares.
Calculate fees due under 12b-1 plans for distribution and marketing
expenses.
Track sales and commission statistics by dealer and provide for payment of
commissions on direct shareholder purchases in a load Fund.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the Trust.
b. Issue customer statements on scheduled cycle, providing duplicate
second and third party copies if required.
Record shareholder account information changes.
Maintain account documentation files for each shareholder.
<PAGE>
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BY AND AMONG
WHATIFI FUNDS,
WHATIFI ASSET MANAGEMENT, INC.
AND
BISYS FUND SERVICES OHIO, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. A copy of the most recent report describing control structure policies and
procedures relating to transfer agency operations pursuant to AICPA
Statement on Auditing Standards Number 70.
<PAGE>
8. Such special reports and additional information that the parties may agree
upon, from time to time.
<PAGE>
Internet Services Agreement
whatifi.com refers to Whatifi Financial Inc., its affiliates, subsidiaries,
authorized agents, custodian and other service providers. I hereby agree to
online account access and transaction capabilities for this account through the
whatifi.com Internet site at http://www.whatifi.com (the "Web site"). I
understand that this agreement will remain effective until it is revoked.
By opening an account I authorize Whatifi Funds to issue an account number and
associate this account with the Registered User Name and password that I have
already established for accessing the Web site. I furthermore authorize Whatifi
Funds and its affiliates, authorized agents, custodian and other service
providers (hereinafter collectively "whatifi.com") to permit access to my
account(s) and to act on my instructions received via computer to purchase,
redeem or exchange shares. whatifi.com will not be held liable for acting on
these instructions. I further agree that if I choose to use electronic funds
transfer to purchase funds or receive proceeds from withdrawals, I will provide
accurate instructions to whatifi.com for transferring funds.
ELECTRONIC DELIVERY
I consent to receive current versions of the Fund's Prospectus, annual and
semi-annual reports, proxy materials, confirmations and statements, and other
shareholder information electronically. I realize that current versions of these
documents will not be mailed to me by U.S. mail but instead will be made
available to me without charge (online subscription or access fees by Internet
service providers may apply) either via e-mail or on the Web site for viewing,
downloading and printing. I realize that I may request paper copies of the above
information or revoke my consent to receive such information electronically and
instead receive copies via US mail for a fee of $9.00 quarterly. I may make
these requests by calling an authorized Customer Service Representative at
1-877-whatifi (1-877-942-8434).
TELEPHONE EXCHANGE
I agree that whatifi.com will not be liable for any loss, injury, damage or
expense either direct or indirect as a result of acting upon any telephone
instructions. I agree to indemnify and hold whatifi.com harmless from any loss,
claims or liability arising from acting on my telephone instructions. I
understand that all telephone calls may be recorded.
RESPONSIBILITIES
I understand that I am solely responsible for transactions entered under my
Account and in particular, for the following:
1. For accurately entering all data to perform an account transaction.
2. For verifying my instructions on all pending transactions. I understand
that all transactions are recorded and maintained in "pending" status until
a confirmation number is generated.
<PAGE>
3. For contacting whatifi.com immediately at 1-877-whatifi (1-877-942-8434)
upon discovering any of the following:
a. A discrepancy between the order I placed, and the order confirmation.
b. The receipt of a confirmation for a transaction that I did not place.
c. Missing confirmations for any order that I placed.
4. For maintaining the confidentiality of my password. My password will not be
disclosed to any person other than persons with whom I intend to have full
access to my accounts. Any such person will have full authorization to
engage in any transactions in my accounts. Furthermore, I agree to
immediately notifying whatifi.com if my password is lost, stolen, misplaced
or has been obtained or utilized by an unauthorized person. I will notify
whatifi.com by contacting a customer service representative at
1-877-whatifi (1-877-942-8434).
5. For any agreements that I have consented to by pointing and clicking on
such consent on the Web site.
6. For placing transaction orders solely through the Web site in the areas
designated for trading and not via e-mail. E-mail orders will not be
acknowledged or processed.
7. For maintaining a valid e-mail account. I understand that information
relevant to my account and any transactions I may have placed will be
communicated to me through this e-mail account.
ACKNOWLEDGEMENT OF SECURITY AND MAINTENANCE MEASURES IMPOSED BY WHATIFI.COM
whatifi.com employs reasonable procedures to confirm that your instructions
communicated on the Web site are genuine. Such procedures include, personal
identification each time you visit the Web site, providing e-mail transaction
confirmations to the e-mail address on record, and employing other precautions
reasonably designed to protect the integrity, confidentiality and security of
your shareholder and account information. whatifi.com will also monitor usage
and may deny access when an incorrect password is entered multiple times, when
the account is inactive for 180 days or more, or when unusual trading patterns
are detected. whatifi.com reserves the right to limit the dollar amount or
number of transactions that may be undertaken on the Web site.
ACKNOWLEDGEMENT OF LIMITATION OF LIABILITY OF WHATIFI.COM, ITS
AGENTS, AFFILIATES AND INDEPENDENT PROVIDERS
I agree that whatifi.com shall not be liable for any loss, liability, cost or
expense incurred either directly or indirectly by me, and I agree to indemnify
and hold harmless whatifi.com for:
<PAGE>
- Following instructions communicated via the Web site that
whatifi.com reasonably believes to be genuine.
- Following the above security and maintenance procedures.
- The impact of any viruses infecting my computer.
- Any malfunction or failure in the operation of the Web site.
- Delivery or acceptance of information or data communicated
through the Web site.
- Any malfunction associated with software programs or security
systems required for the proper use and operation of the Web
site, unless such malfunctions or failures are due to the
actions or inactions of whatifi.com. Provided, however, that
such action or inaction constitutes gross negligence, fraud or
malfeasance on the part of whatifi.com.
- Government restrictions, exchange or market rulings,
suspension of trading, war, acts of God and other conditions
beyond the reasonable control of whatifi.com.
I will indemnify and hold harmless whatifi.com for any violation of this
Internet Services Agreement, or violation of any law, rule or any third party
rights. I understand and agree that opening an account constitutes delivery of
this agreement, and that the use of the Web site constitutes my full and valid
agreement to its terms.
<PAGE>
THIRD PARTY FEEDER FUND AGREEMENT
AMONG
WHATIFI FUNDS
BISYS FUND SERVICES
BISYS FUND SERVICES, INC.
WHATIFI ASSET MANAGEMENT, INC.
INVESTORS BANK & TRUST COMPANY
AND
MASTER INVESTMENT PORTFOLIO
dated as of
May __, 2000
<PAGE>
THIRD PARTY FEEDER FUND AGREEMENT
THIS THIRD PARTY FEEDER FUND AGREEMENT (the "Agreement") is made and
entered into as of the __ day of May, 2000, by and among Whatifi Funds, a
Delaware business trust ("Trust"), for itself and on behalf of those series set
forth on Schedule A (the "Funds"), BISYS Fund Services ("BISYS"), an Ohio
limited partnership, BISYS Fund Services, Inc. ("Transfer Agent"), Whatifi Asset
Management, Inc. ("Advisor"), Investors Bank & Trust Company ("IBT"), and Master
Investment Portfolio ("MIP"), a Delaware business trust, for itself and on
behalf of those series set forth on Schedule B (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 of its
investable assets (the "Assets") in exchange for a beneficial interest the
corresponding Portfolio (the "Investments") 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 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 Funds and the conduct
of business contemplated 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 the Funds,
or the performance by the Funds of their obligations
hereunder. This
<PAGE>
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 Funds is necessary
to approve or implement the Investments.
(c) 1940 Act Registration. Trust is duly registered under
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 (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 shareholders and its registration as
an investment company. All SEC Filings relating to 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 substantially all of 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 each
Portfolio's registration statement on Form N-1A, 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.
1.2 MIP. MIP represents and warrants to Trust that:
----
(a) Organization. MIP is a trust, duly organized, validly existing
and in good
<PAGE>
standing under the laws of the State of Delaware and
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, interest holders of the Portfolios is
necessary to approve the issuance of Interests (as defined below)
to the Funds.
(c) Issuance of Beneficial Interest. The issuance by MIP
of beneficial 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
the 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 for sale or
qualified for sale or exempt from notice or qualification
requirements under applicable securities laws in those states or
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
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
<PAGE>
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 currently December 31st.
(h) Insurance. MIP has in force an errors and omissions
liability insurance policy insuring the Portfolios
against loss up to $5.0 million for negligence or
wrongful acts.
1.3 BISYS. BISYS represents and warrants to MIP that the execution, delivery and
performance of this Agreement by BISYS have been duly authorized by all
necessary action. This Agreement constitutes a legal, valid and binding
obligation of BISYS, enforceable against BISYS in accordance with its terms.
1.4 Advisor. Advisor represents and warrants to MIP that the execution, delivery
and performance of this Agreement by Advisor have been duly authorized by all
necessary action. This Agreement constitutes a legal, valid and binding
obligation of Advisor, enforceable against Advisor 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-1A and any
amendments thereto, and also will furnish 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 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 errors or omissions result from information
provided in MIP's 1940 Act registration statement or otherwise
provided by MIP for inclusion therein. In addition, neither
<PAGE>
Fund nor BISYS 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 shareholders, and
the registration of Funds as series of an investment company. Trust
will file such 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 comply
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 Fund 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 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 a
regulated investment company 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 December).
(f) Proxy Voting. If requested to vote on matters pertaining to
MIP or a Portfolio, each Fund will either seek instructions
from its shareholders with regard to the voting of all proxies
with respect to a Portfolio's securities and vote such proxies
only in accordance with such instructions, or vote the shares
held by it in the same proportion as the vote of all other
holders of the Portfolio's securities; provided that the Fund
will not be obligated to take such action if and to the extent
the Fund obtains an exemption from Section 12(d)(1)(E)
(iii)(aa) of the 1940 Act.
(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 a registered
investment company.
<PAGE>
(h) Insurance. Trust will maintain in full force and effect for so
long as this Agreement is in effect reasonable insurance
coverage against any and all liabilities that may arise as a
result of Trust's business as a registered investment company.
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 BISYS 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 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) Redemptions. Except as otherwise provided in this Section 2.2(b),
redemptions of interests owned by a Fund will be effected in cash pursuant
to Section 2.2(c). In the event a Fund desires to withdraw its entire
Investment from a corresponding Portfolio, either by submitting a
redemption request or by terminating this agreement in accordance with
Section 5.1 hereof, Portfolio, at its sole discretion, and in accordance
with the 1940 Act and the rules and regulations thereunder, may effect such
redemption "in kind" and in such manner that the securities delivered to
the Fund or its custodian approximate the Fund's proportionate share of
Portfolio's net assets immediately prior to such redemption. In addition,
in the event a Fund makes a redemption (or series of redemptions over any
three consecutive business days) of an amount that exceeds 10% of
Portfolio's net asset value, Portfolio, at its sole discretion, and in
accordance with the 1940 Act and the rules and regulations thereunder, may
effect such redemption "in kind" and in such manner that the securities
delivered to Fund or its custodian approximate the Fund's proportionate
share of Portfolio's net assets immediately prior to such redemption. Each
Portfolio will use its 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.
(c) Ordinary Course Redemptions. Each Portfolio will effect its redemptions in
accordance with the provisions of the 1940 Act and the rules and
regulations thereunder. Except as described in Section 2.2(b), all
redemptions will be
<PAGE>
effected in cash at the next determined net asset value after
the redemption request is received in proper form. Each
Portfolio will use its 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 a
Portfolio's 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.
(g) Securities Exemptions. Interests in each Portfolio 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.
(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 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 22c-1.
(i) Compliance with Laws. MIP shall comply, in all material respects, with all
<PAGE>
applicable laws, rules and regulations in connection with
conducting its operations as a registered investment company.
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.
2.4 Advisor. Advisor covenants that:
(a) To the extent that any service provider which has agreed to indemnify and
hold harmless MIP, each Portfolio, and MIP's trustees, officers and
employees, and each other person who controls MIP or a Portfolio within the
meaning of Section 15 of the 1933 Act (each a "Covered Person" and
collectively "Covered Persons") under Article III hereunder is replaced by
the Trust, the Advisor shall cause any successor service provider to give a
substantially similar indemnification or the Advisor shall undertake to
provide indemnification on behalf of such successor service provider.
ARTICLE III
INDEMNIFICATION
3.1 Trust.
-----
(a) Indemnification. Trust agrees to indemnify and hold harmless MIP, each
Portfolio and MIP's trustees, officers and employees, and each other person
who controls MIP or a Portfolio within the meaning of Section 15 of the
1933 Act (each a "Covered Person" and collectively "Covered Persons"),
against any and all losses, claims, demands, damages, liabilities and
expenses (each a "Liability" and collectively the "Liabilities")
(including, unless Trust elects to assume the defense pursuant to paragraph
(b), the reasonable cost of investigating and defending against any claims
therefor, including counsel fees incurred in connection therewith), which:
(1) arise out of or are based upon any
Securities Laws, any other statute 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
Liabilities arise out of or are based upon
the ground or alleged ground that any direct
or indirect omission or commission by Trust
(either during the course of its daily
activities or in connection with the
accuracy of its representations or its
warranties in this Agreement)
<PAGE>
caused or continues to cause a violation of
any federal or state securities laws or
regulations or any other applicable domestic
or foreign law or regulations or common law
duties or obligations, but only to the
extent that such Liabilities do not arise
out of and are not based upon an omission or
commission of a Portfolio or MIP;
(2) arise out of Trust having caused a Portfolio to be an
association taxable as a corporation rather than as a
partnership;
(3) arise out of any misstatement of a material
fact or an omission of a material fact in
Trust's registration statement (including
amendments and supplements thereto) or in
advertisements or sales literature prepared
by or on behalf of Trust, other than a
misstatement or omission arising from
information provided by a Portfolio or MIP;
(4) result from the failure of any
representation or warranty made by Trust to
be accurate when made or the failure of such
party to perform any covenant contained
herein or otherwise to comply with the terms
of this Agreement; or
(5) arise out of any unlawful or negligent act or omission
by Trust or any trustee, director, officer, employee or
agent of Trust;
provided, however, that in no case shall Trust be
liable with respect to any claim made against any
Covered Person unless the Covered Person shall have
notified Trust in writing of the nature of the claim
within a reasonable time after the summons, other
first legal process or formal or informal initiation
of a regulatory investigation or proceeding shall
have been served upon or provided to a Covered
Person, or any federal, state or local tax deficiency
has come to the attention of Trust, Portfolio or a
Covered Person. Failure to notify Trust of such claim
shall not relieve it from any liability that it may
have to any Covered Person otherwise than on account
of the indemnification contained in this Section.
(b) Assumption of Defense. Trust is 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 legal
counsel acceptable to the applicable Covered Persons,
which acceptance shall not be unreasonably withheld or
delayed. In the event Trust elects to assume the
defense of any such suit and retain such counsel, each
Covered Person and any other defendant or defendants
may retain additional counsel, but shall bear the fees
and expenses of such counsel unless (1) Trust shall
have specifically
<PAGE>
authorized the retaining of such counsel or (2) the
parties to such suit include any Covered Person and
Trust, and any such Covered Person has been advised
by counsel 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 such
counsel. Trust shall not be liable to indemnify any
Covered Person for any settlement of any claim
effected without Trust's 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 in
respect of a Fund might otherwise have to a Covered
Person.
3.2 Advisor.
-------
(a) Indemnification. Advisor will indemnify and hold
harmless MIP, each Portfolio, and MIP's trustees,
officers and employees, and each other person who
controls MIP or a Portfolio within the meaning of
Section 15 of the 1933 Act (each a "Covered Person" and
collectively "Covered Persons"), against any and all
losses, claims, demands, damages, liabilities and
expenses (each a "Liability" and collectively the
"Liabilities") (including, unless Advisor elects to
assume the defense pursuant to paragraph (b), the
reasonable cost of investigating and defending against
any claims therefor, including counsel fees incurred in
connection therewith), which:
(1) arise out of any misstatement of a material fact or
an omission of a material fact provided by Advisor in
Trust's registration statement (including amendments
and supplements thereto) or in advertisements or
sales literature prepared by Advisor on behalf of
Trust, other than a misstatement or omission arising
from information provided by MIP or a Portfolio;
(2) result from the failure of any representation or
warranty made by Advisor to be accurate when made or
the failure of such parties to perform any covenant
contained herein or otherwise to comply with the
terms of this Agreement; or
(3) arise out of any unlawful or negligent act or omission by
Advisor or any director, officer, employee or agent of
Advisor;
provided, however, that in no case shall Advisor be liable
with respect to any claim made against any Covered Person
unless the Covered Person shall have notified Advisor in
writing of the nature of the claim within a reasonable time
after the summons, other first legal process or formal or
informal initiation of a regulatory investigation or
proceeding shall have been served upon or provided to a
Covered Person, or any federal, state or local tax deficiency
has come to the
<PAGE>
attention of MIP, a Portfolio or a Covered Person. Failure to
notify Advisor of such claim shall not relieve it from any
liability that it may have to any Covered Person otherwise
than on account of the indemnification contained in this
Section.
(b) Assumption of Defense. Advisor is 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 Advisor elects to assume the defense, such
defense shall be conducted by legal counsel acceptable to
the applicable Covered Persons, which acceptance shall not
be unreasonably withheld or delayed. In the event Advisor
elects to assume the defense of any such suit and retain
such counsel, each Covered Person and any other defendant or
defendants may retain additional counsel, but shall bear the
fees and expenses of such counsel unless (1)Advisor shall
have specifically authorized the retaining of such counsel
or (2) the parties to such suit include any Covered Person
and Advisor, and any such Covered Person has been advised by
counsel that one or more legal defenses may be available to
it that may not be available to Advisor, in which case
Advisor shall not be entitled to assume the defense of such
suit notwithstanding its obligation to bear the fees and
expenses of such counsel. Advisor shall not be liable to
indemnify any Covered Person for any settlement of any claim
affected without Advisor's 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 in respect of a Fund might
otherwise have to a Covered Person.
3.3 BISYS.
-----
(a) Indemnification. BISYS will indemnify and hold harmless MIP, each
Portfolio, and MIP's trustees, officers and employees, and each other
person who controls MIP or a Portfolio within the meaning of Section 15 of
the 1933 Act (each a "Covered Person" and collectively "Covered Persons"),
against any and all losses, claims, demands, damages, liabilities and
expenses (each a "Liability" and collectively the "Liabilities")
(including, unless BISYS elects to assume the defense pursuant to paragraph
(b), the reasonable cost of investigating and defending against any claims
therefor, including counsel fees incurred in connection therewith), which:
(1) arise out of any misstatement of a material fact or
an omission of a material fact provided by BISYS in
Trust's registration statement (including amendments
and supplements thereto) or in advertisements or
sales literature prepared by BISYS on behalf of
Trust, other than a misstatement or omission arising
from information provided by MIP or a Portfolio;
(2) result from the failure of any representation or
warranty made by BISYS to be accurate when made or
the failure of such parties to perform any covenant
contained herein or otherwise to comply with the
terms of this
<PAGE>
Agreement; or
(3) arise out of any unlawful or negligent act or omission by BISYS or any
director, officer, employee or agent of BISYS;
provided, however, that in no case shall BISYS be liable with
respect to any claim made against any Covered Person unless
the Covered Person shall have notified BISYS in writing of the
nature of the claim within a reasonable time after the
summons, other first legal process or formal or informal
initiation of a regulatory investigation or proceeding shall
have been served upon or provided to a Covered Person, or any
federal, state or local tax deficiency has come to the
attention of MIP, a Portfolio or a Covered Person. Failure to
notify BISYS of such claim shall not relieve it from any
liability that it may have to any Covered Person otherwise
than on account of the indemnification contained in this
Section.
(b) Assumption of Defense. BISYS is 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 BISYS elects to assume the
defense, such defense shall be conducted by legal counsel acceptable to the
applicable Covered Persons, which acceptance shall not be unreasonably
withheld or delayed. In the event BISYS elects to assume the defense of any
such suit and retain such counsel, each Covered Person and any other
defendant or defendants may retain additional counsel, but shall bear the
fees and expenses of such counsel unless (1) BISYS shall have specifically
authorized the retaining of such counsel or (2) the parties to such suit
include any Covered Person and BISYS, and any such Covered Person has been
advised by counsel that one or more legal defenses may be available to it
that may not be available to BISYS, in which case BISYS shall not be
entitled to assume the defense of such suit notwithstanding its obligation
to bear the fees and expenses of such counsel. BISYS shall not be liable to
indemnify any Covered Person for any settlement of any claim affected
without BISYS's 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 in respect of a Fund might otherwise
have to a Covered Person.
3.4 Transfer Agent.
--------------
(a) Indemnification. Transfer Agent will indemnify and hold
harmless MIP, each Portfolio, and MIP's trustees, officers and
employees, and each other person who controls MIP or a
Portfolio within the meaning of Section 15 of the 1933 Act
(each a "Covered Person" and collectively "Covered Persons"),
against any and all losses, claims, demands, damages,
liabilities and expenses (each a "Liability" and collectively
the "Liabilities") (including, unless Transfer Agent elects to
assume the defense pursuant to paragraph (b), the reasonable
cost of investigating and defending against any claims
therefor, including counsel fees incurred in connection
therewith), which:
<PAGE>
(1) arise out of any misstatement of a material fact or
an omission of a material fact provided by Transfer
Agent in Trust's registration statement (including
amendments and supplements thereto) or in
advertisements or sales literature prepared by
Transfer Agent on behalf of Trust, other than a
misstatement or omission arising from information
provided by MIP or a Portfolio;
(2) result from the failure of any representation or
warranty made by Transfer Agent to be accurate when
made or the failure of such parties to perform any
covenant contained herein or otherwise to comply with
the terms of this Agreement; or
(3) arise out of any unlawful or negligent act or omission by Transfer
Agent or any director, officer, employee or agent of Transfer Agent;
provided, however, that in no case shall Transfer Agent be
liable with respect to any claim made against any Covered
Person unless the Covered Person shall have notified Transfer
Agent in writing of the nature of the claim within a
reasonable time after the summons, other first legal process
or formal or informal initiation of a regulatory investigation
or proceeding shall have been served upon or provided to a
Covered Person, or any federal, state or local tax deficiency
has come to the attention of MIP, a Portfolio or a Covered
Person. Failure to notify Transfer Agent of such claim shall
not relieve it from any liability that it may have to any
Covered Person otherwise than on account of the
indemnification contained in this Section.
(b) Assumption of Defense. Transfer Agent is 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
Transfer Agent elects to assume the defense, such defense shall be
conducted by legal counsel acceptable to the applicable Covered
Persons, which acceptance shall not be unreasonably withheld or
delayed. In the event Transfer Agent elects to assume the defense of
any such suit and retain such counsel, each Covered Person and any
other defendant or defendants may retain additional counsel, but shall
bear the fees and expenses of such counsel unless (1) Transfer Agent
shall have specifically authorized the retaining of such counsel or
(2) the parties to such suit include any Covered Person and Transfer
Agent, and any such Covered Person has been advised by counsel that
one or more legal defenses may be available to it that may not be
available to Transfer Agent, in which case Transfer Agent shall not be
entitled to assume the defense of such suit notwithstanding its
obligation to bear the fees and expenses of such counsel. Transfer
Agent shall not be liable to indemnify any Covered Person for any
settlement of any claim affected without Transfer Agent's 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 in respect of a Fund might otherwise have to a
Covered Person.
<PAGE>
3.5 IBT.
---
(a) Indemnification. IBT will indemnify and hold harmless MIP, each
Portfolio, and MIP's trustees, officers and employees, and each other
person who controls MIP or a Portfolio within the meaning of Section
15 of the 1933 Act (each a "Covered Person" and collectively "Covered
Persons"), against any and all losses, claims, demands, damages,
liabilities and expenses (each a "Liability" and collectively the
"Liabilities") (including, unless IBT elects to assume the defense
pursuant to paragraph (b), the reasonable cost of investigating and
defending against any claims therefor, including counsel fees incurred
in connection therewith), which arise out of the willful misfeasance,
bad faith or negligence of IBT in the performance of its duties under
the fund accounting agreement between IBT and Trust; provided,
however, that in no case shall IBT be liable with respect to any claim
made against any Covered Person unless the Covered Person shall have
notified IBT in writing of the nature of the claim within a reasonable
time after the summons, other first legal process or formal or
informal initiation of a regulatory investigation or proceeding shall
have been served upon or provided to a Covered Person, or any federal,
state or local tax deficiency has come to the attention of MIP, a
Portfolio or a Covered Person. Failure to notify IBT of such claim
shall not relieve it from any liability that it may have to any
Covered Person otherwise than on account of the indemnification
contained in this Section.
(b) Assumption of Defense. IBT is 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 IBT elects to assume the defense, such defense shall be
conducted by legal counsel acceptable to the applicable Covered
Persons, which acceptance shall not be unreasonably withheld or
delayed. In the event IBT elects to assume the defense of any such
suit and retain such counsel, each Covered Person and any other
defendant or defendants may retain additional counsel, but shall bear
the fees and expenses of such counsel unless (1)IBT shall have
specifically authorized the retaining of such counsel or (2) the
parties to such suit include any Covered Person and IBT, and any such
Covered Person has been advised by counsel that one or more legal
defenses may be available to it that may not be available to IBT, in
which case IBT shall not be entitled to assume the defense of such
suit notwithstanding its obligation to bear the fees and expenses of
such counsel. IBT shall not be liable to indemnify any Covered Person
for any settlement of any claim affected without IBT's 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 in respect of a Fund might otherwise have to a
Covered Person.
3.6 MIP.
---
(a) Indemnification. MIP will indemnify and hold harmless Trust, each
Fund,
<PAGE>
Advisor, BISYS, Transfer Agent, and IBT and their respective
trustees, directors, officers and employees, and each other
person who controls Trust, a Fund, Advisor, BISYS, Transfer
Agent or IBT as the case may be, within the meaning of Section
15 of the 1933 Act (each a "Covered Person" and collectively,
"Covered Persons"), against any and all losses, claims,
demands, damages, liabilities and expenses (each a "Liability"
and collectively the "Liabilities") (including, unless MIP
elects to assume the defense pursuant to paragraph (b), the
reasonable costs of investigating and defending against any
claims therefor, including counsel fees incurred in connection
therewith, whether incurred directly by MIP, a Fund, Advisor,
BISYS, Transfer Agent or IBT or indirectly by MIP, a Fund,
Advisor, BISYS, Transfer Agent, or IBT through Fund's
Investment in the Portfolio), which:
(1) arise out of or are based upon any Securities Laws,
any other statute 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 Liabilities
arise out of or are based upon the ground or alleged
ground that any direct or indirect omission or
commission by MIP (either during the course of its
daily activities or in connection with the accuracy
of its representations or its warranties in this
Agreement) caused or continues to cause a violation
of any federal or state securities laws or
regulations or any other applicable domestic or
foreign law or regulations or common law duties or
obligations, but only to the extent that such
Liabilities do not arise out of and are not based
upon an omission or commission of Trust, a Fund,
Advisor, BISYS, Transfer Agent or IBT;
(2) arise out of having caused a Fund to fail to qualify as a
regulated investment company under the Code;
(3) arise out of any misstatement of a material fact or
an omission of a material fact in MIP's registration
statement (including amendments and supplements
thereto) or included at the request of MIP in
advertising or sales literature used by the Fund,
other than a misstatement of a material fact or an
omission arising from information provided by Trust,
a Fund, Advisor, BISYS, Transfer Agent or IBT;
(4) result from the failure of any representation or
warranty made by MIP to be accurate when made or the
failure of such party to perform any covenant
contained herein or otherwise to comply with the
terms of this Agreement; or
(5) arise out of any unlawful or negligent act or omission
by MIP, or any trustee, officer, employee or agent of
MIP;
<PAGE>
provided, however, that in no case shall MIP be
liable with respect to any claim made against any
such Covered Person unless such Covered Person shall
have notified MIP in writing of the nature of the
claim within a reasonable time after the summons,
other first legal process or formal or informal
initiation of a regulatory investigation or
proceeding shall have been served upon or provided to
a Covered Person or any federal, state, or local tax
deficiency has come to the attention of Trust,
Advisor, BISYS, Transfer Agent, IBT or a Covered
Person. Failure to notify MIP of such claim shall not
relieve it from any liability that it may have to any
Covered Person otherwise than on account of the
indemnification contained in this Section.
(b) Assumption of Defense. MIP is 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 legal counsel acceptable to the
applicable Covered Persons, which acceptance shall not be unreasonably
withheld or delayed. In the event MIP elects to assume the defense of any
such suit and retain such counsel, each Covered Person and any other
defendant or defendants in the suit may retain additional counsel but shall
bear the fees and expenses of such counsel unless (1) MIP shall have
specifically authorized the retaining of such counsel or (2) the parties to
such suit include any Covered Person or Trust, Advisor BISYS, Transfer
Agent or IBT and any such Covered Person has been advised by counsel that
one or more legal defenses may be available to it that may not be available
to Trust, Advisor, BISYS, Transfer Agent or IBT, in which case MIP shall
not be entitled to assume the defense of such suit notwithstanding the
obligation to bear the fees and expenses of such counsel. MIP shall not be
liable to indemnify any Covered Person for any settlement of any such claim
effected without Trust's, BISYS's, Transfer Agent's, Advisor's or IBT's
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 a Covered Person.
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
<PAGE>
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 MIP's 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 N-1A as it relates to a Fund or
Portfolio, 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 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 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 officers, agents, employees,
trustees or interest holders 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, that nothing in this Agreement shall
limit Trust's right to redeem all or a portion of its units of
a Portfolio 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.
<PAGE>
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; 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 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:
c/o BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
Attention: _______
If to Advisor:
790 Eddy Street
San Francisco, California 94105
Attention: ________
<PAGE>
If to BISYS:
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
Attention: ________
If to Transfer Agent:
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
Attention: _________
If to IBT:
Investors Bank and Trust Company
200 Clarendon Street
PO Box 9130
Boston, MA 02117-9130
Attention __________
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 rules of interpretation
applicable to arms' length agreements.
6.10 Operation of Fund. Except as otherwise provided herein, this
Agreement shall not limit the authority of the Funds, Trust or
BISYS to take such action as it may deem appropriate or
advisable in connection with all matters relating to the
operation of the Funds and the sale of their shares.
6.11 Relationship of Parties; No Joint Venture, Etc. It is
understood and agreed that neither Trust, Advisor nor BISYS
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, Advisor or BISYS with the authority to bind such party.
<PAGE>
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, a Fund nor BISYS 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, a Fund or BISYS 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 or BISYS, 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 each Fund set Forth on Schedule A
By: /s/
---
Name:
Title:
BISYS Fund Services Limited Partnership
By: /s/
---
Name:
Title:
BISYS Fund Services, Inc. ("Transfer Agent"),
By: /s/
---
Name:
Title:
Whatifi Asset Management, Inc.
<PAGE>
By: /s/
---
Name:
Title:
Investors Bank & Trust Company ("IBT"),
By: /s/
---
Name:
Title:
MASTER INVESTMENT PORTFOLIO,
On behalf of itself and each Master Portfolio set forth on Schedule B
By: /s/ Richard H. Blank, Jr.
--------------------------
Name: Richard H. Blank, Jr.
Title: Chief Operating Officer
<PAGE>
SCHEDULE A
WHATIFI FUNDS
Total Bond Index Fund
Extended Market Index Fund
International Fund
Money Market Fund
S&P 500 Index Fund
Approved: [________, 2000]
<PAGE>
SCHEDULE B
MASTER INVESTMENT PORTFOLIOS
Bond Index Master Portfolio
Extended Index Master Portfolio
International Master Portfolio
Money Market Master Portfolio
S&P 500 Index Master Portfolio
Approved: [________, 2000]
<PAGE>
Whatifi Funds
CONSENT TO USE OF NAME
WHEREAS, Whatifi Financial, Inc. ("WFI") has created a mutual fund known as
the 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 WFI to have the Trust and the Funds created
use the name "Whatifi";
NOW, THEREFORE, in consideration of the benefits to be derived by WFI and
the promises made herein, the parties hereby agree as follows:
1. WFI consents to the use by the Trust and its Funds of the
identifying name "Whatifi" which is a property right of WFI.
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. WFI or any corporate affiliate of WFI 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 WFI, 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 WFI, or any corporate affiliate of WFI, or by any person to whom
WFI or any affiliate of WFI 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 WFI or any affiliate of WFI and
the Trust and its Funds may enter, the Trust and its Funds shall, upon the
request of WFI, 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 WFI may request to effect the
foregoing and to reconvey to WFI or such corporate affiliate any and all rights
to such name.
5. A 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.
-1-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 24th day of May, 2000.
WHATIFI FINANCIAL, INC.
By: /s/ Harris A. Fricker
--------------------------------
Harris A. Fricker
WHATIFI FUNDS
By: /s/ Harris A. Fricker
--------------------------------
Harris A. Fricker
-2-
<PAGE>
CONSENT TO SERVICE AS A TRUSTEE
The undersigned person is named as Trustee of the Whatifi Funds in the
Prospectus and Statement of Additional Information included as a part of the
Registration Statement on Form N-1A filed by the 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 Prospectus and
Statement of Additional Information.
/s/Warner Henderson
- --------------------------
Warner Henderson
<PAGE>
CONSENT TO SERVICE AS A TRUSTEE
The undersigned person is named as Trustee of the Whatifi Funds in the
Prospectus and Statement of Additional Information included as a part of the
Registration Statement on Form N-1A filed by the 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 Prospectus and
Statement of Additional Information.
/s/Shon Goel
- --------------------------
Shon Goel
<PAGE>
CONSENT TO SERVICE AS A TRUSTEE
The undersigned person is named as Trustee of the Whatifi Funds in the
Prospectus and Statement of Additional Information included as a part of the
Registration Statement on Form N-1A filed by the 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 Prospectus and
Statement of Additional Information.
/s/Kenneth Crouse
- --------------------------
Kenneth Crouse
<PAGE>
CONSENT TO SERVICE AS A TRUSTEE
The undersigned person is named as Trustee of the Whatifi Funds in the
Prospectus and Statement of Additional Information included as a part of the
Registration Statement on Form N-1A filed by the 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 Prospectus and
Statement of Additional Information.
/s/Steven J. Dixon
- --------------------------
Steven J. Dixon
<PAGE>
CONSENT TO SERVICE AS A TRUSTEE
The undersigned person is named as Trustee of the Whatifi Funds in the
Prospectus and Statement of Additional Information included as a part of the
Registration Statement on Form N-1A filed by the 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 Prospectus and
Statement of Additional Information.
/s/Harris A. Fricker
- --------------------------
Harris A. Fricker
<PAGE>
The Whatifi Funds -1- May 23, 2000
SULLIVAN & WORCESTER LLP
1025 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
TELEPHONE: 202-775-8190
FACSIMILE: 202-293-2275
767 THIRD AVENUE ONE POST OFFICE SQUARE
NEW YORK, NEW YORK 10017 BOSTON, MASSACHUSETTS 02109
TELEPHONE: 212-486-8200 TELEPHONE: 617-338-2800
FACSIMILE: 212-758-2151 FACSIMILE: 617-338-2880
May 23, 2000
Whatifi Funds
790 Eddy Street
San Francisco, California 94105
The Whatifi Funds
Gentlemen:
We have acted as counsel for the Whatifi Funds (the "Trust") in
connection with the offer by the Trust of an unlimited number of shares of
beneficial interest of the Trust (the "Shares") which are currently classified
as five initial series portfolios (each a "Fund" and together, the "Funds"). We
have participated in the preparation of the Trust's Registration Statement (the
"Registration Statement") on Form N-1A relating to the Shares filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, on December 22, 1998 and Pre- Effective Amendment No. 1 to
the Registration Statement to be filed with the Commission on or about May 24,
2000. The Prospectus included in each Registration Statement as amended to date
is herein called the "Prospectus."
In so acting, we have participated in the preparation of the
Declaration of Trust of the Trust, dated December 15, 1999 (the "Declaration of
Trust"). We have also examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such records,
documents, certificates and other instruments, and have made such other
investigations, as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
We are admitted to the Bars of The Commonwealth of Massachusetts and
the District of Columbia and generally do not purport to be familiar with the
laws of the State of Delaware. To the extent that the conclusions based on the
laws of the State of Delaware are involved in the opinions set forth herein
below, we have relied, in rendering such opinions, upon our examination of
Chapter 38 of Title 12 of the Delaware Code Annotated, as amended, entitled
"Treatment of Delaware Business
<PAGE>
The Whatifi Funds -2- May 23, 2000
Trusts" (the "Delaware business trust law") and on our knowledge of
interpretation of analogous common law of The Commonwealth of Massachusetts.
This letter expresses our opinion as to the provisions of the Trust's
Agreement and Declaration of Trust, but does not extend to the Delaware Uniform
Securities Act, or to other federal or state securities laws or other federal
laws.
Based upon the foregoing and subject to the qualifications set forth
herein, we hereby advise you that, in our opinion:
1. The Trust is validly existing as a Trust with transferable shares under
the laws of the State of Delaware.
2. The Trust is authorized to issue an unlimited number of shares of
beneficial interest, the Shares have been duly and validly authorized by all
action of the Trustees of the Trust, and no action of the shareholders of the
Trust is required in such connection.
We understand that this opinion is to be used in connection with the
registration of the Shares for offering and sale pursuant to the Securities Act
of 1933, as amended. We consent to the filing of this opinion with and as a part
of the Registration Statement.
Very truly yours,
/s/ Sullivan & Worcester LLP
------------------------------------------
SULLIVAN & WORCESTER LLP
<PAGE>
SUBSCRIPTION AGREEMENT
May __, 2000
Whatifi Funds
790 Eddy Street
San Francisco, California 94105
Ladies and Gentlemen:
The 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 Total 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, we
hereby offer 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.
We 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.
We represent and warrant to the Trust that the Shares are being
acquired by us 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.
-1-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
with the Trust.
Very truly yours,
--------------------------------
By: Harris A. Fricker
Whatifi Financial, Inc.
Confirmed, as of the date first above written.
By: __________________________
Harris A. Fricker
Whatifi Funds
Chairman of the Board of
Trustees and President
-2-
<PAGE>
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the undersigned, Whatifi Funds, a
business trust organized under the laws of the State of Delaware (the "Trust"),
and certain Trustees and officers of the Trust, do hereby constitute and appoint
STEVEN J. DIXON, HARRIS A. FRICKER, DAVID M. LEAHY, GREGORY MADDOX, AND CURTIS
BARNES, and each of them individually, their true and lawful attorneys and
agents to take any and all action and execute any and all instruments which said
attorneys and agents may deem necessary or advisable:
(i) to enable the Trust to comply with the Securities
Act of 1933, as amended, and any rules, regulations, orders or
other requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under such
Securities Act of 1933 of shares of beneficial interest of the
Trust; and
(ii) in connection with the registration of the Trust under
the Investment Company Act of 1940, as amended,
including specifically, but without limitation of the foregoing, power of
authority to sign the name of the Trust in its behalf and to affix its seal, and
to sign the names of each of such Trustees and officers in his behalf as such
Trustee or officer as indicated below opposite his signature hereto, to any
amendment or supplement (including pre- and post-effective amendments) to the
registration statement or statements filed with the Securities and Exchange
Commission under such Securities Act of 1933 and such Investment Company Act of
1940, and to execute any instruments or documents filed or to be filed as a part
of or in connection with such registration statement or statements; and each of
the undersigned hereby ratifies and confirms all that said attorneys and agents
shall do or cause to be done by virtue hereof.
-1-
<PAGE>
IN WITNESS WHEREOF, the Trust has caused these presents to be signed by
the Chairman of the Trust thereunto duly authorized by its Trustee, and each of
the undersigned has set his hand hereto as of the day set opposite her name.
Whatifi Funds
By /s/Harris A. Fricker
--------------------
Harris A. Fricker
Chairman of the Board and President
Date: May __, 2000
By: /s/Harris A. Fricker Trustee
---------------------
Harris A. Fricker
By: /s/Steven J. Dixon Trustee
-------------------
Steven J. Dixon
By: /s/Kenneth Crouse Trustee
------------------
Kenneth Crouse
By: /s/ Shon Goel Trustee
--------------
Shon Goel
By: /s/ Warner Henderson Trustee
---------------------
Warner Henderson
-2-
<PAGE>
