U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. ___________
Post-Effective Amendment No. __________
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. _______________
(Check appropriate box or boxes)
BONFIGLIO & REEED INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
1661 East Camelback, Suite 280
Phoenix, Arizona, 85016
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (714) 641-3579
Chad E. Bonfiglio
Bonfiglio & Reeed LLC
1661 East Camelback, Suite 280
Phoenix, Arizona 85016
(Name and Address of Agent for Service)
Copies to:
Wade R. Bridge, Esq.
_______ Fund Solutions, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
<PAGE>
BONFIGLIO & REED INVESTMENT TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
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PART A
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ITEM NO. REGISTRATION STATEMENT CAPTION CAPTION IN PROSPECTUS
- -------- ------------------------------ ---------------------
1. Front and Back Cover Pages Front and Back Cover Pages
2. Risk/Return Summary: Risk/Return Summary
Investments, Risks, and Performance
3. Risk/Return Summary: Fee Table Expense Information
4. Investment Objectives, Principal Risk/Return Summary
Investment Strategies, and Related
Risk Considerations
5. Management's Discussion of Fund Inapplicable
Performance
6. Management, Organization, and Fund Management
Capital Structure
7. Shareholder Information How to Purchase and Redeem
Shares; Shareholder
Information and Services
8. Distribution Arrangements Dividends and
Distributions; Taxes
9. Financial Highlights Information Inapplicable
PART B
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CAPTION IN STATEMENT
OF ADDITIONAL
ITEM NO. REGISTRATION STATEMENT CAPTION INFORMATION
- -------- ------------------------------ --------------------
10. Cover Page and Table of Contents Cover Page and Table of
Contents
11. Fund History Description of the Trust
12. Description of the Fund and Its Description of the Trust;
Investments and Risks Definitions, Policies and
Risk Considerations;
Investment Limitations;
(i)
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13. Management of the Fund Trustees and Officers
14. Control Persons and Principal Inapplicable
Holders of Securities
15. Investment Advisory and Other Services Investment Adviser
16. Brokerage Allocation and Other Portfolio Transactions
Practices and Brokerage
17. Capital Stock and Other Securities Description of the Trust
18. Purchase, Redemption and Pricing of Shares of the Fund;
Shares Determination of Share
Price
19. Taxation of the Fund Additional Tax Information
20. Underwriters Other Services
21. Calculation of Performance Data Performance Information
22. Financial Statements Financial Statements
PART C
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The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
(ii)
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_______, 2000
BONFIGLIO & REED OPTIONS FUND
-----------------------------
Advised by
Bonfiglio & Reed, LLC
The Securities and Exchange Commission has not approved or disapproved these
Fund shares or determined whether this prospectus is truthful or complete.
Anyone who tells you otherwise is committing a crime.
<PAGE>
TABLE OF CONTENTS
Risk/Return Summary
Expense Information
Fund Management
How to Purchase and Redeem shares
Shareholder Information and Services
Dividends and Distributions
Taxes
Calculation of Share Price
Risk/Return Summary
INVESTMENT OBJECTIVE
The Fund seeks to provide investors with long term capital appreciation.
The Fund's Trustees may change this objective without a shareholder vote and the
Fund will notify you of any changes that are material. If there is a material
change in the Fund's objective or policies, you should consider whether the Fund
remains an appropriate investment for you. There is no guarantee that the Fund
will meet its objective.
PRINCIPAL INVESTMENT STRATEGIES
The Fund primarily invests in equity options of large capitalization ("large
cap") companies (capitalization of 5 billion and up) that the investment adviser
believes will appreciate in value. The adviser selects securities offered by or
based on companies based in the United States or, to a limited extent, in
foreign countries. Typically these companies include those that demonstrate an
acceleration of earnings and/or profits, positive changes in management
personnel or structure, new product developments and positive changes in the
company's industry. Although, the Fund intends to focus on large cap companies
it may at any time invest in small and mid capitalization ("small cap, mid cap")
companies. The adviser does not focus on any industry sector.
As noted above, the Fund generally does not invest in traditional securities,
such as common stock of companies. Rather, the Fund principally invests in
derivatives, such as options on securities and securities indices. Options, in
the adviser's opinion, may provide a cheaper, quicker or more specifically
focused way for the Fund to invest than traditional common stock would.
Generally, options provide the buyer the right to buy (a call option) or sell (
a put option) a certain quantity of a security or instrument at a fixed sum
during a specified period or on a specified day. The Fund may also use options
for hedging purposes to offset changes in the value of securities held or
expected to be acquired. Successful use of options is subject to the adviser's
ability to predict correctly movements in the direction of the market.
The Fund may sell short securities of companies that the adviser believes will
underperform in the current market environment. When the Fund sells short, it is
borrowing a security and then selling it. If the price of a stock sold short
decreases before the Fund closes its position, the Fund makes money. However, if
the value of the stock increases, the Fund will lose money. In determining which
stocks to sell short, the adviser will seek out companies that are experiencing
negative changes. These changes may include: deceleration of earnings, profits
or acceleration of loses; negative changes in management personnel or structure;
new product developments by a company's competitors; and negative changes in the
companies industry. In addition, the Fund may engage in short-selling to manage
or hedge the Fund's exposure to perceived market risk in the common stocks held
by the Fund.
When selling securities short, the Fund will be required to maintain a
segregated account with its custodian of cash or high-grade liquid assets equal
to the market value of the securities sold, less any collateral deposited with
its broker. In order to meet its collateral needs, the Fund will maintain high
levels of cash or liquid assets (e.g., U.S.
<PAGE>
Treasury bills, money market funds, repurchase agreements, certificates of
deposit, high quality commercial paper and long equity positions).
The Fund may borrow money from banks, brokers or dealers for investment
purposes. This technique is known as "leverage." Leverage provides a means of
magnifying small market movements, up or down, into large changes in an
investment's value. To the extent the Fund uses leverage, it will limit it to
25% of the Fund's total assets.
Although the Fund will invest principally in securities of U.S. issuers, it may
invest up to 20% of its total assets in the equity securities of foreign
issuers, including common stocks, depositary receipts (ADR) and options on
depository receipts.
When the adviser believes that market, economic or other conditions warrant a
Fund may assume a temporary defensive position. During these periods, the Fund
may invest without limit in cash or cash equivalents, short-term commercial
paper, U.S. government securities, high quality debt securities, including
obligations of banks. When and to the extent the Fund assumes a temporary
defensive position, it may not pursue or achieve its investment objective.
PRINCIPAL INVESTMENT RISKS
Market Risk. Stocks, and the options based on them, fluctuate in price, often
based on factors unrelated to the issuers' value. The value of your investment
in the Fund will fluctuate in response to movements in the stock market and the
activities of individual portfolio companies. As a result, you could lose money
by investing in the Fund, particularly if there is a sudden decline in the value
of the Fund's holdings or an overall decline in the stock market.
Small and Mid Capitalization Risks. Stocks of small and mid cap companies may
have more risks than those of larger companies. In general, they have less
experienced management teams, serve smaller markets, and find it more difficult
to obtain financing for growth or potential development than do larger
companies. Due to these and other factors, small and mid cap companies may have
volatile stock prices that are more susceptible to market downturns.
Interest Rate Risk. Increases in interest rates may lower the present value of a
company's future earnings stream. Since the market price of a stock changes
continuously based upon investors' collective perceptions of a variety of
factors, including future earnings, stock prices may decline when investors
anticipate or experience rising interest rates.
Initial Public Offering Risks. The Fund may purchase securities of companies in
initial public offerings or shortly thereafter. The prices of these companies'
securities may be very volatile. The Fund may purchase securities of companies,
which have no earnings or have experienced losses. The adviser generally will
make these investments based on a belief that actual or anticipated products or
services will produce future earnings. If the anticipated event is delayed or
does not occur, or if investor perceptions about the company change, the
company's stock price may decline sharply and its securities may become less
liquid.
Foreign Security Risks. The Fund may also invest in securities of foreign
issuers (including ADRs). These securities fluctuate in price, often based on
factors unrelated to the issuers' value, and such fluctuations can be
pronounced. Foreign securities tend to be more volatile than U.S. securities
because they include special risks, such as exposure to currency fluctuations, a
lack of comprehensive company information, political instability, and differing
auditing and legal standards.
Management risks. The Fund is actively managed and, thus, is subject to the risk
that its portfolio management practices might not achieve its goals. This risk
is present to a greater degree due to the minimal operating history of the
investment adviser. In addition, the adviser employs investment techniques that
may be considered aggressive, in particular short selling stocks, investing in
options and using leverage. Below is a description of some of the risks involved
in employing these techniques:
SHORT SALES: With respect to short sales, the price at the time the Fund
replaces the security borrowed may be more (and the Fund would lose money)
or less (and the Fund would make money) than the price at
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which the security was sold by the Fund. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any
premium or amounts in lieu of interest the Fund may be required to pay in
connection with a short sale. The risk of price increases is the principal
risk of engaging in short sales. In addition, the Fund may not always be
able to close out an established short position at any particular time or
at an acceptable price. Also, if the Fund's margin account falls below the
required levels of asset coverage or if the broker from whom the stock was
borrowed for a position requires that stock to be repaid, then the Fund
could be forced to cover short positions earlier than the Fund otherwise
would.
OPTIONS: The risks related to the use of options contracts include: (i)
the correlation between movements in the market price of the Fund's
investments (held or intended for purchase) being hedged and in the price
of the option may be imperfect; (ii) possible lack of a liquid secondary
market for closing out options positions; and (iii) losses due to
unanticipated market movements. Options typically have larger spreads, the
difference between the bid and ask price, than common stocks in general.
Other risks associated with investing in options involve "trading halts."
The major exchanges on which option contracts are traded have established
limits on how much an option contract may decline over various time
periods during the day. If an option contract price declines more than the
established limits, trading on the exchange is halted on that instrument.
If a trading halt occurs at the close of a trading day, the Fund may not
be able to purchase or sell options contracts. In such an event, the Fund
also may be required to use a "fair value" method to price its outstanding
shares; and
LEVERAGE: Leveraging is a sophisticated investment technique in which the
Fund purchases securities with borrowed money which amplifies the effect
on net asset value of any increase or decrease in the market value of the
Fund's portfolio. When the Fund uses leverage it is subject to the
interest costs associated with the borrowings. The interest costs may or
may not be recovered by appreciation of the securities purchased; in
certain cases, interest costs may exceed the return received on the
securities purchased.
Non-Diversification Risk. The Fund is classified as "non-diversified" under the
federal securities laws. The adviser may concentrate a relatively high
percentage of the Fund's investments in the securities of a small number of
companies. This would make the performance of the Fund more susceptible to a
single economic, political or regulatory event than a more diversified mutual
fund might be. Although the Fund is "non-diversified," the adviser intends to
invest on a diversified basis.
Portfolio Turnover. The Fund's investment strategy may involve frequent trading
which leads to increased transaction costs and brokerage commission, both of
which may lower the actual return on your investment. Active trading may also
increase short-term capital gains and loses, which affect the taxes you have to
pay.
An investment in the Fund is not a bank deposit and is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any other government agency.
EXPENSE INFORMATION
BAR CHART AND TABLE
Because the Fund is new, it has no performance as of the date of this
prospectus.
FEES AND EXPENSE INFORMATION
This table describes the fees and expenses that you may pay if you buy, hold or
sell shares of the Fund. Because the Fund is new, we estimated the Fund's
expenses. Actual expenses may be different from those shown.
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SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
None
ANNUAL FUND OPERATING EXPENSES (FEES PAID FROM FUND ASSETS)
Management fee 2.95%
Distribution (12b-1) fee 0%
Other expenses(estimated expenses) (1) 0.04%
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TOTAL ANNUAL FUND OPERATING EXPENSES 2.99%
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Note 1: Expenses are based on estimated amounts.
EXPENSE EXAMPLE
Use the example below to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. It illustrates the amount of fees
and expenses you would pay, assuming the following:
* $10,000 investment
* 5% annual return
* No changes in the Fund's operating expenses
* Reinvestment of all dividends and distributions
* Redemption at the end of each period shown
Your actual costs may be higher or lower.
1 YEAR $302
3 YEARS $924
FUND MANAGEMENT
Investment Adviser. Bonfiglio & Reed, LLC (the "adviser"), located at 1661 E.
Camelback Road, Suite # 280, Phoenix, Arizona, 85016, serves as the Fund's
investment adviser. The adviser is a newly formed entity (October 1999) and has
limited operating history upon which investors can evaluate its performance.
Pursuant to an Investment Advisory Agreement with the Trust, the adviser is
responsible for making investment decisions for the Fund, placing purchase and
sale orders and providing research, statistical analysis and continuous
supervision of the Fund's investment portfolio. Investment decisions for the
Fund are made by Reese Whitman Reed. Mr. Reed has not managed a mutual fund in
the past. Mr. Reed's lack of mutual fund management experience may negatively
affect the fund's results. For its services, the adviser receives a fee, payable
monthly, at an annual rate of 2.95% of the Fund's average daily net assets.
Unlike most mutual funds, the advisory fees paid by the Fund to the adviser
include transfer agency, pricing, custodial, auditing and legal services, and
general administrative and other operating expenses of the Fund except brokerage
commissions, taxes, interest, fees and expenses of non-interested Trustees and
extraordinary expenses.
HOW TO PURCHASE AND REDEEM SHARES
ACCOUNT TYPE MINIMUM INVESTMENT
Initial Subsequent
Regular (non-retirement) $1,000 $100
Retirement (IRA - Roth, Education;
Keogh; Pension and Profit Sharing Plans, $250 $50
plans containing 401(k) provisions; and
403(b) accounts)
Automatic Investment Plan $250 $50
<PAGE>
You may purchase shares directly through the Fund's Transfer Agent or through a
brokerage firm or financial institution that has agreed to sell the Fund's
shares. Your initial investment in the Fund ordinarily must be at least $1,000
(or $250 for IRAs). The Fund reserves the right to waive the minimum initial
investment requirements. Different minimums may apply to investors purchasing
shares of the Fund through certain brokerage firms. Contact your brokerage firm
for additional information. Shares of the Fund are sold on a continuous basis at
the net asset value next determined after receipt of a purchase order by the
Trust or an agent of the Trust. If an order to purchase shares is cancelled
because your check does not clear, you will be responsible for any resulting
losses or fees incurred by the Trust or the Transfer Agent in the transaction.
The Transfer Agent (or your broker) mails you confirmations of all purchases or
redemptions of Fund shares. Certificates representing shares are not issued. The
Trust reserves the right to limit the amount of investments and to refuse to
sell to any person. An account application is included with this Prospectus.
Brokerage Accounts. Any purchase order placed with a brokerage firm is treated
as if it were placed directly with the Trust. Your shares will be held in a
pooled account in the broker's name, and the broker will maintain your
individual ownership information. In addition, your brokerage firm may charge
you a fee for handling your order. Your brokerage firm is responsible for
processing your order correctly and promptly, keeping you advised of the status
of your individual account, confirming your transactions and ensuring that you
receive copies of the Trust's Prospectus, Semiannual and Annual Reports.
Purchase orders received by such agents prior to 4:00 p.m., eastern time, on any
business day are confirmed at the net asset value determined as of the close of
the regular session of trading on the New York Stock Exchange on that day if the
agent transmits properly completed orders to the Fund's Transfer Agent.
Opening Accounts by Mail or Wire. You may purchase and add shares to your
account by mail or by bank wire. Checks should be sent to Bonfiglio & Reed
Options Fund, P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made
payable to "Bonfiglio & Reed Options Fund." Third party checks will not be
accepted. Bank wires should be sent as outlined below. Each additional purchase
request must contain the account name and number to permit proper crediting.
Upon the Trust receiving a completed and signed account application form, you
may purchase shares of the Fund by bank wire. Please telephone the Transfer
Agent (Nationwide call toll-free 1.888.____.____) for detailed instructions;
however, before you call you should be prepared to give the name in which the
account is to be established, the address, telephone number and taxpayer
identification number for the account, and the name of the bank which will wire
the money. Your investment will be made at the next determined net asset value
after your wire is received together with the account information indicated
above. If the Transfer Agent does not receive timely and complete account
information, there may be a delay in the investment of your money and any
accrual of dividends. To make your initial wire purchase, you must mail a
completed account application to the Transfer Agent. Your bank may impose a
charge for sending your wire. There is presently no fee for receipt of wired
funds, but the Transfer Agent reserves the right to charge shareholders for this
service upon 30 days' prior notice to shareholders.
<PAGE>
HOW TO REDEEM SHARES
You may redeem shares of the Fund on each day that the Trust is open for
business. You will receive the net asset value per share next determined after
receipt by the Transfer Agent of your redemption request in the form described
below. Payment is normally made within 3 business days after tender in such
form, provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to 15 days
from the purchase date. To eliminate this delay, you may purchase shares of the
Fund by certified check or wire.
You may change the bank or brokerage account which you have designated at any
time by writing to the Transfer Agent with your signature guaranteed by any
eligible guarantor institution (including banks, brokers and dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations). Further documentation will be
required to change the designated account if shares are held by a corporation,
fiduciary or other organization.
By Telephone. You may sell or redeem shares having a value of less than $25,000
by telephone. The proceeds will be sent by mail to the address designated on
your account or wired directly to your existing account in any commercial bank
or brokerage firm in the United States as designated on your application. To
redeem by telephone, call the Transfer Agent (Nationwide call toll-free
1-888-___-____). IRA accounts are not redeemable by telephone.
The telephone redemption privilege is automatically available to all new
accounts. If you do not want the telephone redemption privilege, you must
indicate this in the appropriate area on your account application or you must
write to the Transfer Agent and instruct them to remove this privilege from your
account.
The Transfer Agent reserves the right to suspend the telephone redemption
privilege with respect to any account if the name(s) or the address on the
account has been changed within the previous 30 days.
Neither the Trust, the Transfer Agent, nor their respective affiliates will be
liable for complying with telephone instructions they reasonably believe to be
genuine or for any loss, damage, cost or expenses in acting on such telephone
instructions. The affected shareholders will bear the risk of any such loss. The
Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
By Mail. You may redeem any number of shares from your account by sending a
written request to the Transfer Agent. The request must state the number of
shares or the dollar amount to be redeemed and your account number. The request
must be signed exactly as your name appears on the Trust's account records. If
the shares to be redeemed have a value of $25,000 or more, your signature must
be guaranteed by any of the eligible guarantor institutions outlined above. If
the name(s) or the address on your account has been changed within 30 days of
your redemption request, you will be required to request the redemption in
writing with your signature guaranteed, regardless of the value of the shares
being redeemed. Written redemption requests may also direct that the proceeds be
deposited directly in a domestic bank or brokerage account designated on your
account application for telephone redemptions.
Through Broker-Dealers. You may also redeem shares of the Fund by placing a wire
redemption request through a securities broker or dealer. Unaffiliated
broker-dealers may charge you a fee for this service. You will receive the net
asset value per share next determined after receipt by the Trust or its agent of
your wire redemption request. If the amount being redeemed is greater than
$25,000, a signature guarantee is required (see above). It is the responsibility
of broker-dealers to promptly transmit wire redemption orders and follow all
relevant instructions.
Additional Redemption Information. If your instructions request a redemption by
wire, the proceeds will be wired directly to your existing account in any
commercial bank or brokerage firm in the United States as designated on your
application and you will be charged an $__ processing fee by the Fund's
Custodian. The Trust reserves the
<PAGE>
right, upon 30 days' written notice, to change the processing fee. All charges
will be deducted from your account by redemption of shares in your account. Your
bank or brokerage firm may also impose a charge for processing the wire. In the
event that wire transfer of funds is impossible or impractical, the redemption
proceeds will be sent by mail to the designated account.
Redemption requests may direct that the proceeds be deposited directly in your
account with a commercial bank or other depository institution by way of an
Automated Clearing House (ACH) transaction. There is currently no charge for ACH
transactions. Contact the Transfer Agent for more information about ACH
transactions.
At the discretion of the Trust or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account, other than an IRA account, if at any
time the value of your shares is less than $1,000 (based on actual amounts
invested, unaffected by market fluctuations), or such other minimum amount as
the Trust may determine from time to time. After notification to you of the
Trust's intention to close your account, you will be given 60 days to increase
the value of your account to the minimum amount.
The Trust reserves the right to suspend the right of redemption or to postpone
the date of payment for more than 3 business days under unusual circumstances as
determined by the Securities and Exchange Commission. Under unusual
circumstances, when the Board of Trustees deems it appropriate, the Funds may
make payment for shares redeemed in portfolio securities of the Funds taken at
current value.
SHAREHOLDER INFORMATION AND SERVICES
On-line Services. The Fund may provide services and information to investors
on-line. An interruption in any portion of the technology infrastructure
associated with the BonfiglioReed.com website may impair an investor's ability
to access the BonfiglioReed.com website or otherwise use the BonfiglioReed.com
website.
Since the adviser may make available the Fund's holdings and completed trading
activity, at the discretion of the adviser, there is a risk that investors may
use such information to the detriment of the Fund. The Fund's Board may
discontinue this practice if it is found to be detrimental to the Fund and its
shareholders.
Delivery of Prospectus and Shareholder Reports. The Fund produces financial
reports, which include a list of the Fund's portfolio holdings, semiannually and
updates its prospectus annually. To reduce expenses, the Fund may choose to mail
only one report or prospectus to your household, even if more than one person in
the household has Fund account. Please call 1-800-___-_____ if you would like to
receive additional reports or prospectuses.
Contact the Transfer Agent (nationwide call toll-free 1.888.___._____) for
additional information about the shareholder services described below.
Tax-Deferred Retirement Plans
Shares of the Fund are available for purchase in connection with the following
tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals
-- Individual retirement account (IRA) plans for individuals and their
non-employed spouses, including Roth IRAs and Education IRAs
-- Qualified pension and profit-sharing plans for employees, including
those profit-sharing plans with a 401(k) provision
-- 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting
certain requirements of the Internal Revenue Code (the "Code")
<PAGE>
Direct Deposit Plans
Shares of the Fund may be purchased through direct deposit plans offered by
certain employers and government agencies. These plans enable a shareholder to
have all or a portion of his or her payroll or Social Security checks
transferred automatically to purchase shares of the Fund.
Automatic Investment Plan
By completing the Automatic Investment Plan section of the account application,
you may make automatic monthly investments in the Fund from your bank, savings
and loan or other depository institution account. The minimum initial investment
is $250 and subsequent investments must be $50 under the plan. The Transfer
Agent pays the costs associated with these transfers, but reserves the right,
upon 30 days' written notice, to make reasonable charges for this service. Your
depository institution may impose its own charge for debiting your account which
would reduce your return from an investment in the Fund. You may change the
amount of the investment or discontinue the plan at any time by writing to the
Transfer Agent.
DIVIDENDS AND DISTRIBUTIONS
The Fund expects to distribute substantially all of its net investment income,
if any, on an annual basis. The Fund expects to distribute any net realized
long-term capital gains at least once each year. Management will determine the
timing and frequency of the distributions of any net realized short-term capital
gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains distributions
reinvested in additional shares.
Income Option - income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
Cash Option - income distributions and capital gains distributions paid
in cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for 6 months, your
dividends may be reinvested in your account at the then current NAV and your
account will be converted to the Share Option. No interest will accrue on
amounts represented by uncashed dividend checks.
If you have received in cash any dividend or capital gains distribution from the
Fund you may return the distribution within 30 days of the distribution date to
the Transfer Agent for reinvestment at the NAV next determined after its return.
You or your dealer must notify the Transfer Agent that a distribution is being
reinvested pursuant to this provision.
TAXES
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Code by annually distributing substantially all of its net investment
company taxable income, net tax-exempt income and net capital gains in dividends
to its shareholders and by satisfying certain other requirements related to the
sources of its income and the diversification of its assets. By so qualifying,
the Fund will not be subject to federal income tax or excise tax on that part of
its investment company taxable income and net realized short-term and long-term
capital gains which it distributes to its shareholders in accordance with the
Code's timing requirements.
<PAGE>
Dividends and distributions paid to shareholders (whether received in cash or
reinvested in additional shares) are generally subject to federal income tax and
may be subject to state and local income tax. Dividends from net investment
income and distributions from any excess of net realized short-term capital
gains over net realized capital losses are taxable to shareholders (other than
tax-exempt entities that have not borrowed to purchase or carry their shares of
the Funds) as ordinary income. Distributions are expected to primarily be in the
form of capital gains.
Distributions of net capital gains (the excess of net long-term capital gains
over net short-term capital losses) by the Fund to its shareholders are taxable
to you as capital gains, without regard to the length of time you have held your
Fund shares. Capital gains distributions may be taxable at different rates
depending on the length of time a Fund holds its assets. Redemptions of shares
of the Fund are taxable events on which you may realize a gain or loss.
The Trust will mail a statement to you annually indicating the amount and the
federal income tax status of all distributions made during the year. The Fund's
distributions may be subject to federal income tax whether received in cash or
reinvested in additional shares. In addition to federal taxes, you may be
subject to state and local taxes on distributions. Please contact your tax
consultant for more information.
CALCULATION OF SHARE PRICE
On each day that the Trust is open for business, the share price (net asset
value) of the shares of the Fund is determined as of the close of the regular
session of trading on the New York Stock Exchange (generally 4:00 p.m., eastern
time). The Trust is open for business on each day the New York Stock Exchange is
open for business. The net asset value per share of the Fund is calculated by
dividing the sum of the value of the securities held by the Fund plus cash or
other assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent. The
price at which a purchase or redemption of Fund shares is effected is based on
the next calculation of net asset value after the order is placed.
Securities held by the Fund may be primarily listed on foreign exchanges or
traded in foreign markets which are open on days (such as Saturdays and U.S.
holidays) when the New York Stock Exchange is not open for business. As a
result, the net asset value per share of the Fund may be significantly affected
by trading on days when the Trust is not open for business. Securities mainly
traded on a non-U.S. exchange are generally valued according to the preceding
closing values on that exchange. However, if an event that may change the value
of a security held in the Fund's portfolio occurs after the time when the
closing value on the non-U.S. exchange was determined, the Board of Trustees
might decide to value the security based on fair value. This may cause the value
of the security on the books of the Fund to be significantly different from the
closing value on the non-U.S. exchange and may affect the calculation of the
Fund's net asset value.
Portfolio securities are valued as follows:
(1) securities which are traded on stock exchanges or are quoted by NASDAQ are
valued at the last reported sale price as of the close of the regular
session of trading on the New York Stock Exchange on the day the securities
are being valued, or, if not traded on a particular day, at the most recent
bid price,
(2) securities traded in the over-the-counter market, and which are not quoted
by NASDAQ, are valued at the last sale price (or, if the last sale price is
not readily available, at the most recent bid price as quoted by brokers
that make markets in the securities) as of the close of the regular session
of trading on the New York Stock Exchange on the day the securities are
being valued,
(3) securities which are traded both in the over-the-counter market and on a
stock exchange are valued according to the broadest and most representative
market, and
(4) securities (and other assets) for which market quotations are not readily
available are valued at their fair value as determined in good faith in
accordance with consistently applied procedures established by and under
the general supervision of the Board of Trustees. The net asset value per
share of the Fund will fluctuate with the value of the securities it holds.
<PAGE>
Additional information about the Fund is included in the Statement of Additional
Information ("SAI"), which is hereby incorporated by reference in its entirety.
Additional information about the Fund's investments will be included in the
Fund's annual and semiannual reports to shareholders. The Fund's annual report
will include a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during the last fiscal year.
You can get free copies of the SAI or request other information and discuss your
questions about the Fund on the Fund's Internet site, by e-mail:
[email protected] or by phone at 1-___-___-_____
Internet: http://www.bonfiglioreed.com
Shareholders that provide the Fund with an e-mail address will be alerted by
e-mail when a prospectus amendment, annual or semi-annual report, or proxy
materials are available. It is the shareholder's obligation to provide the Fund
with any changes made to an e-mail address.
You can review information about the Fund, including the Fund's SAI, at the
Public Reference Room of the Securities and Exchange Commission. You can get
text-only copies:
For a fee, copies of information on the Commission's Internet site may 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 Commission, Washington, D.C. 20549- 0102.
Information on the operation of the public reference room may be obtained by
calling 1-202-942-8090. Reports and other information about the Fund is
available on the Commission's Internet site at http://www.sec.gov. * Free from
the Commission's Web site at http:www.sec.gov.
Investment Company Act file no. _________.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
BONFIGLIO & REED OPTIONS FUND
___________, 2000
Series of
The Bonfiglio & Reed Investment Trust
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
1-800-___-_____
TABLE OF CONTENTS
DESCRIPTION OF THE TRUST................................................
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS..........................
INVESTMENT LIMITATIONS..................................................
TRUSTEES AND OFFICERS...................................................
INVESTMENT ADVISER......................................................
TRANSFER AGENT AND DISTRIBUTOR..........................................
OTHER SERVICES..........................................................
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................
SHARES OF THE FUND......................................................
DETERMINATION OF SHARE PRICE............................................
ADDITIONAL TAX INFORMATION..............................................
DISTRIBUTION PLANS......................................................
PERFORMANCE INFORMATION.................................................
FINANCIAL STATEMENTS....................................................
This Statement of Additional Information is not a prospectus and should
only be read in conjunction with the Prospectus of the Bonfiglio & Reed Options
Fund dated __________, 2000. A Prospectus can be obtained by writing the
Transfer Agent at 312 Walnut Street, Cincinnati, Ohio 45202, by calling
___-____-______, or by email at [email protected]
<PAGE>
DESCRIPTION OF THE TRUST
The Bonfiglio & Reed Options Fund ( the "Fund") was organized as a series
of The Bonfiglio & Reed Investment Trust (the "Trust"). The Trust is an
open-end, management investment company established under the laws of Ohio by an
Agreement and Declaration of Trust dated April 14, 2000 (the "Trust Agreement").
The Trust Agreement permits the Trustees to issue an unlimited number of shares
of beneficial interest of separate series without par value.
Each share of a series represents an equal proportionate interest in the
assets and liabilities belonging to that series with each other share of that
series and is entitled to such dividends and distributions out of income
belonging to the series as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
any series into a greater or lesser number of shares of that series so long as
the proportionate beneficial interest in the assets belonging to that series and
the rights of shares of any other series are in no way affected. In case of any
liquidation of a series, the holders of shares of the series being liquidated
will be entitled to receive as a class a distribution out of the assets, net of
the liabilities, belonging to that series. Expenses attributable to any series
are borne by that series. Any general expenses of the Trust not readily
identifiable as belonging to a particular series are allocated by or under the
direction of the Trustees in such manner as the Trustees determine to be fair
and equitable. No shareholder is liable to further calls or to assessment by the
Trust without his or her express consent.
Any Trustee of the Trust may be removed by vote of the shareholders holding
not less than two-thirds of the outstanding shares of the Trust. The Trust does
not hold an annual meeting of shareholders. When matters are submitted to
shareholders for a vote, each shareholder is entitled to one vote for each whole
share he owns and fractional votes for fractional shares he owns. All shares of
the Fund have equal voting rights and liquidation rights. The Declaration of
Trust can be amended by the Trustees, except that any amendment that adversely
affects the rights of shareholders must be approved by the shareholders
effected.
For other information concerning the purchase and redemption of shares of
the Fund, see "How to Purchase and Redeem Shares" in the Fund's Prospectus. For
a description of the methods used to determine the share price and value of the
Fund's assets, see "Calculation of Share Price" in the Fund's Prospectus.
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DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the investments
the Fund may make and some of the techniques it may use, as described in the
Prospectus.
A. Equity Securities.
The Fund may invest in common stock, in addition to which, the Fund may
invest in preferred stock and common stock equivalents (such as convertible
preferred stock and convertible debentures). Convertible preferred stock is
preferred stock that can be converted into common stock pursuant to its terms.
Convertible debentures are debt instruments that can be converted into common
stock pursuant to their terms. The adviser intends to invest only in preferred
stock rated A or higher by Standard & Poor's Ratings Group ("S&P") or by Moody's
Investors Service, Inc. ("Moody's").
B. U.S. Government Obligations.
The Fund may invest in U.S. Government obligations. These securities may be
backed by the credit of the government as a whole or only by the issuing agency.
U.S. Treasury bonds, notes, and bills and some agency securities, such as those
issued by the Federal Housing Administration and the Government National
Mortgage Association (GNMA), are backed by the full faith and credit of the U.S.
Government as to payment of principal and interest and are the highest quality
government securities. Other securities issued by U.S. Government agencies or
instrumentalities, such as securities issued by the Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are supported only by the credit of
the agency that issued them, and not by the U.S. Government. Securities issued
by the Federal Farm Credit System, the Federal Land Banks, and the Federal
National Mortgage Association (FNMA) are supported by the agency's right to
borrow money from the U.S. Treasury under certain circumstances, but are not
backed by the full faith and credit of the U.S. Government.
C. Repurchase Agreements.
The Fund may invest in repurchase agreements fully collateralized by U.S.
Government obligations. A repurchase agreement is a short-term investment in
which the purchaser (i.e., the Fund) acquires ownership of a U.S. Government
obligation (which may be of any maturity) and the seller agrees to repurchase
the obligation at a future time at a set price, thereby determining the yield
during the purchaser's holding period (usually not more than seven days from the
date of purchase). Any repurchase transaction in which the Fund engages will
require full collateralization of the seller's obligation during the entire term
of the repurchase agreement. In
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the event of a bankruptcy or other default of the seller, the Fund could
experience both delays in liquidating the underlying security and losses in
value. However, the Fund intends to enter into repurchase agreements only with
banks with assets of $1 billion or more and registered securities dealers
determined by the adviser (subject to review by the Board of Trustees) to be
creditworthy. The adviser monitors the creditworthiness of the banks and
securities dealers with which the Fund engages in repurchase transactions.
D. Illiquid Securities.
The Fund may invest up to 15% of its assets (valued at the purchase date)
in illiquid securities. Illiquid securities generally include securities that
cannot be disposed of promptly and in the ordinary course of business without
taking a reduced price. Securities may be illiquid due to contractual or legal
restrictions on resale or lack of a ready market. The following securities are
considered to be illiquid: repurchase agreements maturing in more than seven
days, nonpublicly offered securities and restricted securities. Restricted
securities are securities the resale of which is subject to legal or contractual
restrictions. Restricted securities may be sold only in privately negotiated
transactions, in a public offering with respect to which a registration
statement is in effect under the Securities Act of 1933 or pursuant to Rule 144
or Rule 144A promulgated under the Act. Where registration is required, the Fund
may be obligated to pay all or part of the registration expense, and a
considerable period may elapse between the time of the decision to sell and the
time such security may be sold under an effective registration statement. If
during such a period adverse market conditions were to develop, the Fund might
obtain a less favorable price than the price it could have obtained when it
decided to sell.
E. Loans of Securities.
The Fund may make short and long term loans of its portfolio securities in
order to realize additional income. Under the lending policy authorized by the
Board of Trustees and implemented by the adviser in responses to requests of
broker-dealers or institutional investors which the adviser deems qualified, the
borrower must agree to maintain collateral, in the form of cash or U.S.
Government obligations, with the Fund on a daily mark-to-market basis in an
amount at least equal to the value of the loaned securities. The Fund will
continue to receive dividends or interest on the loaned securities and may
terminate such loans at any time or reacquire such securities in time to vote on
any matter which the adviser determines to be important. With respect to loans
of securities, there is the risk that the borrower may fail to return the loaned
securities or that the borrower may not be able to provide additional
collateral.
F. Reverse Repurchase Agreements.
The Fund may use reverse repurchase agreements as part of the Fund's
investment strategy. Reverse repurchase agreements involve sales by the Fund of
portfolio assets concurrently with an agreement by the Fund to repurchase the
same assets at a later date at a fixed price. Generally, the effect of such a
transaction is that the Fund can recover all or most of the cash invested in the
portfolio securities involved during the term of the reverse repurchase
agreement, while the Fund will be able to keep the interest income associated
with those portfolio securities. Such transactions
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<PAGE>
are advantageous only if the interest cost to the Fund is less than the cost of
obtaining the cash otherwise. When participating in these transactions the Fund
will establish a segregated account with its custodian bank in which the Fund
will maintain cash or liquid instruments equal in value to the Fund's
obligations in respect of reverse repurchase agreements.
G. Borrowing
The Fund may borrow money for cash management purposes or investment
purposes. The Fund may also enter into reverse repurchase agreements, which may
be viewed as a form of borrowing, with financial institutions. However, to the
extent the Fund covers its repurchase obligations as described in the "Reverse
Repurchase Agreements," such agreement will not be considered to be a "senior
security" and, therefore, will not be subject to the 300% asset coverage
requirement otherwise applicable to borrowings by the Fund. Borrowing for
investment purposes is known as leveraging. Leveraging investments, by
purchasing securities with borrowed money, is a speculative technique which
increases investment risk, but may also increase investment opportunity. Since
substantially all of the Fund's assets will fluctuate in value, whereas the
interest obligations on borrowings may be fixed, the net asset value per share
of the Fund will increase more when the Fund's portfolio assets increase in
value and decrease more when the Fund's portfolio assets decrease in value than
would otherwise be the case. Moreover, interest costs on borrowings may
fluctuate with changing market rates of interest and may partially offset or
exceed the returns on the borrowed funds. Under adverse conditions, the Fund
might have to sell portfolio securities to meet interest or principal payments
at a time when investment considerations would not favor such sales.
As required by the 1940 Act, the Fund must maintain continuous asset
coverage (total assets, including assets acquired with borrowed funds, less
liabilities exclusive of borrowings) of 300% of all amounts borrowed. If at any
time the value of the Fund's assets should fail to meet this 300% coverage test,
the Fund, within 3 days (not including Sundays and holidays), will reduce the
amount of the Fund's borrowings to the extent necessary to meet this test.
Complying with this limitation may result in the sale of portfolio securities at
a time when investment considerations otherwise indicate that it would be
disadvantageous to do so. In addition to the foregoing, the Fund is authorized
to borrow money for extraordinary or emergency purposes in amounts not in excess
of 5% of the value of the Fund's total assets. This borrowing is not subject to
the foregoing 300% asset coverage requirement. The Fund is authorized to pledge
portfolio securities as the adviser deems appropriate in connection with any
borrowings.
H. Foreign Securities
The Fund may invest up to 20% of its total net assets in foreign
securities. Foreign fixed-income securities include corporate debt obligations
issued by foreign companies and debt obligations of foreign governments or
international organizations. This category may include floating rate
obligations, variable rate obligations, Yankee dollar obligations (U.S. dollar
denominated obligations issued by foreign companies and traded on U.S. markets)
and Eurodollar obligations (U.S. dollar denominated obligations issued by
foreign companies and American depository receipts ("ADRs"). ADRs are
certificates of ownership issued by a U.S.
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<PAGE>
bank as a convenience to investors in lieu of the underlying shares which its
holds in custody. The Fund may invest in options based on ADR's.
There may be less information publicly available about a foreign company
than about a U.S. company, and foreign companies are not generally subject to
accounting, auditing and financial reporting standards and practices comparable
to those in the U.S. Other risks associated with investments in foreign
securities include changes in the administrations or economic and monetary
policies of foreign governments, the imposition of exchange control regulations,
the possibility of expropriation decrees and other adverse foreign governmental
action, the imposition of foreign taxes, less liquid markets, less government
supervision of exchanges, brokers and issuers, difficulty in enforcing
contractual obligations, delays in settlement of securities transactions and
greater price volatility. In addition, investing in foreign securities will
generally result in higher commissions than investing in similar domestic
securities.
I. Portfolio Turnover
The Fund may sell any portfolio security (without regard to the length of
time it has been held) when the adviser believes that market conditions,
creditworthiness factors or general economic conditions warrant such action. The
portfolio turnover rate is not expected to exceed 300% for the Fund. The Fund's
high turnover rate will result in correspondingly greater brokerage commissions,
transaction costs and other expenses. In addition, high portfolio turnover rates
may result in the realization of additional capital gains for tax purposes.
The Securities and Exchange Commission defines "portfolio turnover rate" as
the value of securities purchased or securities sold, excluding all securities
whose maturities at time of acquisition were one year or less, divided by the
average monthly value of securities owned during the year. Pursuant to the above
definition, the Fund's portfolio turnover rate is calculated without regard to
instruments, including futures and options contracts, having a maturity of less
than one year.
J. Investments in other Investment Companies
The Fund may invest in the securities of other investment companies to the
extent that such an investment would be consistent with the requirements of the
1940 Act. If the Fund invests in, and, thus, is a shareholder of, another
investment company, the Fund's shareholders will indirectly bear the Fund's
proportionate share of the fees and expenses paid by such other investment
company, including advisory fees, in addition to both the management fees
payable directly by the Fund to the Fund's own investment adviser and the other
expenses that the Fund bears directly in connection with the Fund's own
operations.
K. Aggressive Investment Techniques
The Fund may utilize various other investment strategies as described
below. Such strategies are generally accepted by modern portfolio managers and
are regularly utilized by many
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mutual funds and other institutional investors. Techniques and instruments may
change over time as new instruments and strategies are developed or regulatory
changes occur.
In the course of pursuing these investment strategies, the Fund may
purchase and sell financial futures contracts and options thereon, and enter
into various interest rate transactions such as swaps, caps, floors or collars.
Any or all of these investment techniques may be used at any time and there is
no particular strategy that dictates the use of one technique rather than
another, as use of any techniques is a function of numerous variables including
market conditions. The ability of the Fund to utilize these techniques
successfully will depend on the adviser's ability to predict pertinent market
movements, which cannot be assured. The Fund will comply with applicable
regulatory requirements when implementing these strategies, techniques and
instruments.
These techniques have risks associated with them including possible default
by the other party to the transaction, illiquidity and, to the extent the
adviser's view as to certain market movements is incorrect, the risk that the
use of such techniques would result in losses greater than if they had not been
used. In addition, futures and options markets may not be liquid in all
circumstances and certain over-the-counter options may have no markets. As a
result, in certain markets, the Fund might not be able to close out a
transaction without incurring substantial losses, if at all. Finally, the daily
variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of such techniques would reduce net asset value, and possible income,
and such losses can be greater than if the techniques had not been utilized.
GENERAL CHARACTERISTICS OF OPTIONS
Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many hedging transactions involving options
require segregation of the Fund's assets in special accounts, as described below
under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
For example, the Fund's purchase of a put option on a security might be designed
to protect its holdings in the underlying instrument (or, in some cases, a
similar instrument) against a substantial decline in the market value by giving
the Fund the right to sell such instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying instrument at the
exercise price. The Fund's purchase of a call option on a security, financial
future, index, currency or other instrument might be intended to protect the
Fund against an increase in the price of the underlying instrument that it
intends to purchase in the future by fixing the price at which it may purchase
such instrument. The Fund is authorized to purchase and sell exchange-listed
options and over-the-counter options ("OTC options"). Exchange-listed options
are issued by
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a regulated intermediary such as the Options Clearing Corporation ("OCC"), which
guarantees the performance of the obligations of the parties to such options.
With certain exceptions, OCC-issued and exchange-listed options generally
settle by physical delivery of the underlying security or currency, although in
the future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
The Fund's ability to close out its position as a purchaser or seller of an
OCC or exchange-listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible reasons for the absence of a
liquid option market on an exchange are: (i) insufficient trading interest in
certain options; (ii) restrictions on transactions imposed by an exchange; (iii)
trading halts, suspensions or other restrictions imposed with respect to
particular classes or series of options or underlying securities including
reaching daily price limits; (iv) interruption of the normal operations of the
OCC or an exchange; (v) inadequacy of the facilities of an exchange or OCC to
handle current trading volume; or (vi) a decision by one or more exchanges to
discontinue the trading of options (or a particular class or series of options),
in which event the relevant market for that option on that exchange would cease
to exist, although outstanding options on that exchange would generally continue
to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange-listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days. The
Fund expects generally to enter into OTC options that have cash settlement
provisions, although they are not required to do so.
Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly,
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the adviser must assess the creditworthiness of each such Counterparty or any
guarantor or credit enhancement of the Counterparty's credit to determine the
likelihood that the terms of the OTC option will be satisfied. While this type
of arrangement allows the Fund greater flexibility to tailor an option to their
needs, OTC options generally involve greater credit risk than exchange-traded
options, which are guaranteed by the clearing organization of the exchanges
where they are traded. The risk of illiquidity also is greater with OTC options,
since these options generally can be closed out only by negotiation with the
other party to the option.
If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase the Fund's income. The sale of put options can also provide income.
The Fund may purchase and sell call options on securities, including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets and on securities indices, currencies and futures
contracts. All calls sold by the Fund must be "covered" (i.e., the Fund must own
the securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though the Fund will receive the option premium to help protect it against
loss, a call sold by the Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold.
The Fund may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, equity securities (including convertible securities) and Eurodollar
instruments (whether or not it holds the above securities in its portfolio) and
on securities indices, currencies and futures contracts other than futures on
individual corporate debt and individual equity securities. The Fund will not
sell put options if, as a result, more than 50% of the Fund's assets would be
required to be segregated to cover its potential obligations under such put
options other than those with respect to futures and options thereon. In selling
put options, there is a risk that the fund may be required to buy the underlying
security at a disadvantageous price above the market price.
GENERAL CHARACTERISTICS OF FUTURES
The Fund may enter into financial futures contracts, or purchase or sell
put and call options on such futures, as a hedge against anticipated interest
rate, currency or equity market changes, for duration management, and for risk
management purposes. Futures are generally bought and sold on the commodities
exchanges where they are listed with payment of initial and variation margin as
described below. The sale of a futures contract creates a firm obligation by the
Fund, as seller, to deliver to the buyer the specific type of financial
instrument called for in the contract at a specific
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future time for a specified price (or, with respect to index futures and
Eurodollar instruments, the net cash amount). Options on futures contracts are
similar to options on securities except that an option on a futures contract
gives the purchaser the right, in return for the premium paid, to assume a
position in a futures contract and obligates the seller to deliver such option.
The Fund's use of financial futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission and will be
entered into only for bona fide hedging, risk management (including duration
management) or other portfolio management purposes. Typically, maintaining a
futures contract or selling an option thereon requires the Fund to deposit with
a financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark-to-market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of a Fund. If
a Fund exercises an option on a futures contract, it will be obligated to post
initial margin (and potential subsequent variation margin) for the resulting
futures position just as it would for any position. Futures contracts and
options thereon are generally settled by entering into an offsetting
transaction, but there can be no assurance that the position can be offset prior
to settlement at an advantageous price nor that delivery will occur. The
segregation requirements with respect to futures contracts and options thereon
are described below.
OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES
The Fund also may purchase and sell call and put options on securities
indices and other financial indices and in so doing can achieve many of the same
objectives it would achieve through the sale or purchase of options on
individual securities or other instruments. Options on securities indices and
other financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, they settle by cash settlement, i.e., an option on an index gives
the holder the right to receive, upon exercise of the option, an amount of cash
if the closing level of the index upon which the option is based exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option (except if, in the case of an OTC option, physical delivery is
specified). This amount of cash is equal to the excess of the closing price of
the index over the exercise price of the option, which also may be multiplied by
a formula value. The seller of the option is obligated, in return for the
premium received, to make delivery of this amount. The gain or loss of an option
on an index depends on price movements in the instruments making up the market,
market segment, industry or other composite on which the underlying index is
based, rather than price movements in individual securities, as is the case with
respect to options on securities.
CURRENCY TRANSACTIONS
The Fund may engage in currency transactions with Counterparties in order
to hedge the value of portfolio holdings denominated in particular currencies
against fluctuations in relative value. Currency transactions include forward
currency contracts, exchange-listed currency futures,
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exchange-listed and OTC options on currencies, and currency swaps. A forward
currency contract involves a privately negotiated obligation to purchase or sell
(with delivery generally required) a specific currency at a future date, at a
price set at the time of the contract. A currency swap is an agreement to
exchange cash flows based on the notional difference among two or more
currencies and operates similarly to an interest rate swap, which is described
below. The Fund may enter into currency transactions with Counterparties which
have received (or the guarantors of the obligations of such Counterparties have
received) a credit rating of A-1 or P-1 by S&P or Moody's, respectively, or that
have an equivalent rating from an NRSRO or (except for OTC currency options) are
determined to be of equivalent credit quality by the adviser.
The Fund's dealings in forward currency contracts and other currency
transactions such as futures, options, options on futures and swaps will be
limited to hedging involving either specific transactions or portfolio
positions. Transaction hedging is entering into a currency transaction with
respect to specific assets or liabilities of the Fund, which will generally
arise in connection with the purchase or sale of its portfolio securities or the
receipt of income therefrom. Position hedging is entering into a currency
transaction with respect to portfolio security positions denominated or
generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to an
extent greater, after netting all transactions intended to wholly or partially
offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currency convertible into such currently
other than with respect to proxy hedging as described below.
The Fund may also cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which the Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering to a forward contract to sell a currency whose changes
in value are generally considered to be linked to a currency or currencies in
which some or all of the Fund's portfolio securities are or are expected to be
denominated, and to buy U.S. dollars. The amount of the contract would not
exceed the value of the Fund's securities denominated in linked currencies. For
example, if the adviser considers the Austrian schilling linked to the German
deutschemark (the "D-mark"), the Fund holds securities denominated in schillings
and the adviser believes that the value of schillings will decline against the
U.S. dollar, the adviser may enter into a contract to sell D-marks and buy
dollars. Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Further, there is the risk that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that the Fund is engaging in proxy hedging.
If the Fund enters into a currency hedging transaction, the Fund will comply
with the asset segregation requirements described below.
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RISKS OF CURRENCY TRANSACTIONS
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Buyers and sellers of currency futures are subject to the same risk that
apply to the use of futures generally. Further, settlement of a currency futures
contract for the purchase of most currencies must occur at a bank based in the
issuing nation. Trading options on currency futures is relatively new, and the
ability to establish and close out positions on such options is subject to the
maintenance of a liquid market that may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transactions
(including forward currency contracts) and any combination of futures, options
and currency transactions ("component" transactions), instead of a single
hedging transaction, as part of a single or combined strategy when, in the
opinion of the adviser, it is in the best interests of the Fund to do so. A
combined transaction will usually contain elements of risk that are present in
each of its competent transactions. Although combined transactions are normally
entered into based on the adviser's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase such
risks or hinder achievement of the portfolio management objective.
SWAPS, CAPS, FLOORS AND COLLARS
Among the hedging transactions into which the Fund may enter are interest
rate, currency and index swaps and the purchase or sale of related caps, floors
and collars. The Fund expects to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a duration management
technique or to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. The Fund intends to use these
transactions as hedges and not as speculative investments and will not sell
interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Fund may be obligated to pay.
Interest rate swaps involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, for example, an exchange of
floating rate payments for fixed rate payments with respect to a notional amount
of principal. A currency swap is an agreement to exchange cash flows on a
notional amount of two or more currencies based on the relative value
differential among them and an index swap is an agreement to swap cash flows on
a notional amount based on changes in the values of the reference indices. The
purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling such cap to the extent that a
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specified index exceeds a predetermined interest rate or amount. The purchase of
a floor entitles the purchaser to receive payments on a notional principal
amount from the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is a combination
of a cap and a floor that preserves a certain return within a predetermined
range of interest rates or values.
The Fund will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the adviser
and the Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. The Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any credit
enhancements, is rated at least "A" by S&P or Moody's or has an equivalent
rating from an NRSRO or is determined to be of equivalent credit quality by the
adviser. If there is a default by the Counterparty, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors, and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
EURODOLLAR INSTRUMENTS
The Fund may make investments in Eurodollar instruments. Eurodollar
instruments are U.S. dollar-denominated futures contracts or options thereon
which are linked to the London Interbank Offered Rate ("LIBOR"), although
foreign currency-denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a fixed rate for the
lending of funds and sellers to obtain a fixed rate for borrowings. The Fund
might use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed- income
instruments are linked.
RISKS OF HEDGING TRANSACTIONS OUTSIDE THE UNITED STATES
When conducted outside the United States, hedging transactions may not be
regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and are subject to the risk of governmental
actions affecting trading in, or the prices of, foreign securities, currencies
and other instruments. The value of such positions also could be adversely
affected by: (i) other complex foreign political, legal and economic factors,
(ii) lesser availability than in the United States of data on which to make
trading decisions, (iii) delays in the Fund's ability to act upon economic
events occurring in foreign markets during nonbusiness hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lower
trading volume and liquidity.
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USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Many hedging transactions, in addition to other requirements, require that
the Fund segregate liquid high-grade assets with its Custodian to the extent
Fund obligations are not otherwise "covered" through ownership of the underlying
security, financial instrument or currency. In general, either the full amount
of any obligation by the Fund to pay or deliver securities or assets must be
covered at all times by the securities, instruments or currency required to be
delivered, or, subject to any regulatory restriction, an amount of cash or
liquid high grade securities at least equal to the current amount of the
obligation must be segregated with the Custodian. The segregated assets cannot
be sold or transferred unless equivalent assets are substituted in their place
or it is no longer necessary to segregate them. For example, a call option
written by the Fund will require the Fund to hold the securities subject to the
call (or securities convertible into the needed securities without additional
consideration) or to segregate liquid high-grade securities sufficient to
purchase and deliver the securities if the call is exercised. A call option sold
by the Fund on an index will require the Fund to own portfolio securities which
correlate with the index or to segregate liquid high grade assets equal to the
excess of the index value over the exercise price on a current basis. A put
option written by the Fund requires the Fund to segregate liquid, high-grade
assets equal to the exercise price.
Except when the Fund enters into a forward contract for the purchase or
sale of a security denominated in a particular currency, which requires no
segregation, a currency contract that obligates the Fund to buy or sell currency
will generally require the Fund to hold an amount of that currency or liquid
securities denominated in that currency equal to the Fund's obligations or to
segregate liquid high-grade assets equal to the amount of the Fund's obligation.
OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices and OCC-issued and exchange-listed
index options will generally provide for cash settlement. As a result, when the
Fund sells these instruments it will only segregate an amount of assets equal to
its accrued net obligations, as there is no requirement for payment or delivery
of amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a noncash settled put, the same as an
OCC-guaranteed listed option sold by the Fund, or the in-the-money amount plus
any sell-back formula amount in the case of a cash-settled put or call. In
addition, when the Fund sells a call option on an index at a time when the
in-the-money amount exceeds the exercise price, the Fund will segregate, until
the option expires or is closed out, cash or cash equivalents equal in value to
such excess. OCC-issued and exchange-listed options sold by the Fund other than
those above generally settle with physical delivery, or with an election of
either physical delivery or cash settlement, and the Fund will segregate an
amount of assets equal to the full value of the option. OTC options settling
with physical delivery, or with an election of either physical delivery or cash
settlement, will be treated the same as other options settling with physical
delivery.
In the case of a futures contract or an option thereon, the Fund must
deposit initial margin and possible daily variation margin in addition to
segregating assets sufficient to meet its obligation to purchase or provide
securities or currencies, or to pay the amount owed at the expiration of an
index-based futures contract. Such assets may consist of cash, cash equivalents,
liquid debt or equity securities or other acceptable assets.
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With respect to swaps, the Fund will accrue the net amount of the excess,
if any, of its obligations over its entitlement with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high-grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.
Hedging transactions may be covered by other means when consistent with
applicable regulatory policies. The Fund may also enter into offsetting
transactions so that its position, coupled with any segregated assets, equals
its net outstanding obligation in related options and Hedging Transactions. For
example, the Fund could purchase a put option if the strike price of that option
is the same or higher than the strike price of a put option sold by the Fund.
Moreover, instead of segregating assets if the Fund held a futures or forward
contract, it could purchase a put option on the same futures or forward contract
with a strike price as high or higher than the price of the contract held. Other
hedging transactions may also be offset in combinations. If the offsetting
transaction terminates at the time of or after the primary transaction no
segregation is required, but if it terminates prior to such time, assets equal
to any remaining obligation would need to be segregated.
INVESTMENT LIMITATIONS
FUNDAMENTAL. The investment limitations described below have been adopted
by the Trust with respect to the Fund and are fundamental ("Fundamental"), that
is, they may not be changed without the affirmative vote of a majority of the
outstanding shares of the Fund. As used in the Prospectus and this Statement of
Additional Information, the term "majority" of the outstanding shares of the
Fund means the lesser of (1) 67% or more of the outstanding shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund are present or represented at such meeting; or (2) more than 50% of
the outstanding shares of the Fund. Other investment practices that may be
changed by the Board of Trustees without the approval of shareholders to the
extent permitted by applicable law, regulation or regulatory policy are
considered non-fundamental ("Non-Fundamental").
1. BORROWING MONEY. The Fund will not borrow money, except (a) from a banks
(as defined in the Investment Company Act of 1940), provided that immediately
after such borrowing there is an asset coverage of 300% for all borrowings of
the Fund, (b) from a bank or other persons for temporary purposes only, provided
that such temporary borrowings are in an amount not exceeding 5% of the Fund's
total assets at the time when the borrowing is made, (c) may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities, (d) may purchase securities on margin to the extent
permitted by applicable law. This limitation does not preclude the Fund from
entering into reverse repurchase transactions, provided that the Fund has an
asset coverage of 300% for all borrowings and repurchase commitments of the Fund
pursuant to reverse repurchase transactions. For purposes of this Investment
Restriction, the entry into options, shall not constitute borrowing.
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2. SENIOR SECURITIES. The Fund will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. UNDERWRITING. The Fund will not act as underwriter of securities issued
by other persons. This limitation is not applicable to the extent that, in
connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. REAL ESTATE. The Fund will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities that are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. COMMODITIES. The Fund will not purchase or sell commodities except as
described in the Prospectus and Statement of Additional Information. This
limitation does not preclude the Fund from acquiring commodities as a result of
ownership of securities or other investments; from entering into options,
futures, currency, swap, cap, floor, collar or similar transactions; from
investing in securities or other instruments backed by commodities; or from
investing in companies that are engaged in a commodities business or have a
significant portion of their assets in commodities.
6. LOANS. The Fund will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. CONCENTRATION. The Fund will not invest 25% or more of its total assets,
taken at market value at the time of each investment, in any particular
industry. This limitation is not applicable to investments in obligations issued
or guaranteed by the U.S. Government, its agencies and instrumentalities or
repurchase agreements with respect thereto.
With respect to the percentages adopted by the Trust as maximum limitations
on its investment policies and limitations, an excess above the fixed percentage
will not be a violation of the policy or limitation unless the excess results
immediately and directly from the acquisition of any security or the action
taken. This paragraph does not apply to the borrowing policy set forth in
paragraph 1 above.
The Fund's classification as a "non-diversified" investment company means
that the proportion of the Fund's assets that may be invested in the securities
of a single issuer is not limited by the 1940 Act. A "diversified" investment
company is required by the 1940 Act, generally, with respect to 75% of its total
assets, to invest not more than 5% of such assets in the securities of a
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single issuer. Since a relatively high percentage of the Fund's assets may be
invested in the securities of a limited number of issuers, some of which may be
in the same industry, the Fund's portfolio may be more sensitive to changes in
the market value of a single issuer or industry. However, to meet federal tax
requirements, at the close of each quarter the Fund may not have more than 25%
of its total assets invested in any one issuer and, with respect to 50% of its
total assets, not more than 5% of its total assets invested in any one issuer.
These limitations do not apply to U.S. Government securities.
NON-FUNDAMENTAL. The following limitations have been adopted by the Trust
with respect to the Fund and are Non-Fundamental (see "Investment Limitations"
above).
1. PLEDGING. The Fund will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. BORROWING. The Fund will not purchase any security while borrowings
(including reverse repurchase agreements) representing more than 5% its total
assets are outstanding.
3. ILLIQUID SECURITIES. The Fund will not invest more than 15% of its
assets in securities that are restricted as to resale or otherwise illiquid. For
this purpose, illiquid securities generally include securities that cannot be
disposed of within seven days in the ordinary course of business without taking
a reduced price.
TRUSTEES AND OFFICERS
The Trust's Board of Trustees is responsible for the management and supervision
of the Fund. The Board approves all significant agreements with those companies
that furnish services to the Fund. These companies are as follows:
Bonfiglio & Reed LLC. Investment Adviser
_______ Fund Solutions Administrator and Transfer Agent
IFS Fund Distributors, Inc. Distributor
__________________________ Custodian
Trustees and officers of the Trust, together with information as to their
principal business occupations during at least the last five years, are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the 1940 Act, is indicated by an asterisk.
POSITION(S)
NAME, ADDRESS HELD PRINCIPAL OCCUPATION(S)
AND AGE WITH COMPANY DURING PAST 5 YEARS
*Chad Eaton Bonfiglio Trustee, [will be inserted]
8911 E. Kalil President
Scottsdale, AZ
Age: 25
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*Reese Whitman Reed Trustee, Salaried Broker, Investment Adviser,
942 S. Ash Treasurer & Student.
Suite 110
Tempe, AZ 85281
Age: 22
Trustee
Age:
Trustee
Age:
Trustee
Age:
Secretary
Age:
The Trust has a standing nominating committee comprised of its Trustees who are
not "interested persons" of the Trust, as defined in the 1940 Act. The function
of the nominating committee is to select and nominate all candidates who are not
"interested persons" of the Trust for election to the Trust's Board. The Trust
has an audit committee comprised of its Trustees who are not "interested
persons" of the Trust, as defined in the 1940 Act. The primary functions of the
audit committee is to select the Trust's independent auditor and review the
audited financial statements for the Trust. The Trust does not pay any
remuneration to its officers and Trustees other than fees and expenses to those
Trustees who are not directors, officers or employees of the Adviser or the
Administrator or any of their affiliates. The aggregate amount of compensation
estimated to be paid to each such Trustee by the Trust for the fiscal year
ending ______, 2000 is as follows:
TOTAL COMPENSATION
AGGREGATE PENSION OR RETIREMENT FROM FUND AND
NAME OF BOARD COMPENSATION FROM BENEFITS ACCRUED AS FUND COMPLEX
MEMBER COMPANY PART OF FUND EXPENSES PAID TO BOARD MEMBERS
_____________ 1,000 -0- 1,000
_____________ 1,000 -0- 1,000
_____________ 1,000 -0- 1,000
THE INVESTMENT ADVISER
Bonfiglio & Reed LLC (the "adviser"), located at 1661 E. Camelback Road, Suite
280, Phoenix, Arizona 85016, serves as the Fund's investment adviser. The
adviser is an Arizona limited liability corporation formed under Arizona law in
October 1999. Reese Whitman Reed and Chad Eaton Bonfiglio each may be deemed a
"control person" of the adviser as such term is defined in the 1940 Act by
virtue of their ownership of interests in Bonfiglio & Reed LLC. The adviser
provides investment advisory services pursuant to the Investment Advisory
Agreement (the "Agreement") dated _____________ with the Trust. The Agreement is
subject to annual approval by (i) the Trust's Board or (ii) vote of a majority
(as defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance also is approved by a majority of
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust or the adviser, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement was approved by the Trust's
sole shareholder on
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_______________. The Agreement is terminable without penalty, on 60 days'
notice, by the Trustee's Board or by vote of the holders of a majority of the
Fund's shares, or, on not less than 90 days' notice, by the adviser. The
Agreement will terminate automatically, as to the Fund, in the event of its
assignment (as defined in the 1940 Act).
Under the terms of the Agreement, the Trust has agreed to pay the adviser a
monthly fee at the annual rate of 2.95% of the Fund's average daily net assets.
The adviser will pay all transfer agency, distribution related fees and any fees
associated with listing the Fund on a mutual fund sales platform, such as
Schwab's One Source listing.
From time to time, the adviser may waive receipt of its fees, which would have
the effect of lowering the overall expense ratio of the Fund and increasing
yield to its investors. The Fund will not pay the adviser at a later time for
any amounts it may waive, nor will the Fund reimburse the adviser for any
amounts it may assume.
TRANSFER AGENT AND DISTRIBUTOR
The Fund retains _______ Fund Solutions, Inc., 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Transfer Agent"), to serve as transfer agent,
dividend paying agent and shareholder service agent. The Fund also retains the
Transfer Agent to provide the Fund with administrative services, including
regulatory reporting and necessary office equipment, personnel and facilities.
For its services as administrator, the Transfer Agent receives a monthly fee at
an annual rate of 15% of the Fund's average daily net assets up to $25 million;
.125% of such assets from $25 million to $50 million; and .10% of such assets in
excess of $50 million, subject to a minimum monthly fee of $2,000.
The Fund retains IFS Fund Distributors, Inc.-, 312 Walnut Street,
Cincinnati, Ohio 45202 (the "Distributor"), to act as the exclusive agent for
distribution of the Fund's shares. The Distributor is obligated to sell shares
of the Fund on a best efforts basis only against purchase orders for the shares.
Shares of the Fund are offered to the public on a continuous basis. The Transfer
Agent and the Distributor are wholly-owned subsidiaries of Fort Washington
Investment Advisors, which is an indirect wholly-owned subsidiary of The Western
and Southern Life Insurance Company.
OTHER SERVICES
The firm of_________________________________________________________, has
been selected as independent auditors for the Trust for the fiscal year ending
______________. ___________________ performs an annual audit of the Fund's
financial statements and provides financial, tax and accounting consulting
services as requested.
________________________________________, is Custodian of the Fund's
investments. The Custodian holds all cash and securities of the Fund (either in
the Custodian's possession or in its favor through "book entry systems"
authorized by the Trustee in accordance with the Investment
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Company Act of 1940), collects all income and effects all securities
transactions on behalf of the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust, the
adviser is responsible for the Fund's portfolio decisions and the placing of the
Fund's portfolio transactions. In placing portfolio transactions, the adviser
seeks the best qualitative execution for the Fund, taking into account such
factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. The adviser generally seeks favorable prices and commission
rates that are reasonable in relation to the benefits received.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the adviser may give consideration to sales of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions.
The adviser is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Fund and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and economic
analyses, statistical services and information with respect to the availability
of securities or purchasers or sellers of securities and analyses of reports
concerning performance of accounts. The research services and other information
furnished by brokers through whom the Fund effects securities transactions may
also be used by the adviser in servicing all of its accounts. Similarly,
research and information provided by brokers or dealers serving other clients
may be useful to the adviser in connection with its services to the Fund.
Although research services and other information are useful to the Fund and the
adviser, it is not possible to place a dollar value on the research and other
information received. It is the opinion of the Board of Trustees and the adviser
that the review and study of the research and other information will not reduce
the overall cost to the adviser of performing its duties to the Fund under the
Agreement.
Over-the-counter transactions will be placed either directly with principal
market makers or with broker-dealers, if the same or a better price, including
commissions and executions, is available. Fixed income securities are normally
purchased directly from the issuer, an underwriter or a market maker. Purchases
include a concession paid by the issuer to the underwriter and the purchase
price paid to a market maker may include the spread between the bid and asked
prices.
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The adviser makes investment decisions for the Fund independently from
those of the other accounts the adviser manages; investments of the type the
Fund may make, however, may also be made by those other accounts. When the Fund
and one or more other accounts the adviser manages are prepared to invest in, or
desire to dispose of, the same security, the adviser will allocate available
investments or opportunities for sales in a manner the adviser believes to be
equitable to each. In some cases, this procedure may adversely affect the price
paid or received by the Fund or the size of the position obtained or disposed of
by the Fund. Orders placed for the Fund will not be combined ("blocked") with
other orders.
SHARES OF THE FUND
The Fund does not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Transfer Agent
for the account of the shareholder. The rights to limit the amount of purchases
and to refuse to sell to any person are reserved by the Fund. If your check or
wire does not clear, you will be responsible for any loss incurred by the Fund.
If you are already a shareholder, the Fund can redeem shares from any
identically registered account in the Fund as reimbursement for any loss
incurred. You may be prohibited or restricted from making future purchases in
the Fund.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of the Fund is determined as of
4:00 p.m., Eastern time on each day the Trust is open for business and on any
other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day,
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas. For a description of
the methods used to determine the net asset value (share price), see
"Calculation of Share Price" in the Prospectus.
For valuation purposes, quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents at the time of pricing. In
computing the net asset value of the Fund, the values of foreign portfolio
securities are generally based upon market quotations which, depending upon the
exchange or market, may be last sale price, last bid price, or the average of
the last bid and asked prices as of, in each case, the close of the appropriate
exchange or another designated time.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day on which the New York Stock Exchange is open. Trading of
these securities may not take place on every New York Stock Exchange business
day. In addition, trading may take place in various foreign markets on Saturdays
or on other days when the New York Stock Exchange is not open and on which the
Fund's share price is not calculated. Therefore, the value of the portfolio of
the
-21-
<PAGE>
fund holding foreign securities may be significantly affected on days when
shares of the Fund may not be purchased or redeemed.
The calculation of the share price of the Fund when it holds foreign
securities in its portfolio does not take place contemporaneously with the
determination of the values of many of the foreign portfolio securities used in
such calculation. Events affecting the values of foreign portfolio securities
that occur between the time their prices are determined and the calculation of
the Fund's share price will not be reflected in the calculation unless the
adviser determines, subject to review by the Board of Trustees, that the
particular event would materially affect net asset value, in which case an
adjustment will be made.
ADDITIONAL TAX INFORMATION
TAXATION OF THE FUND. The Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). Among its requirements to qualify under Subchapter M, the Fund
must distribute annually at least 90% of its net investment income. In addition
to this distribution requirement, the Fund must derive at least 90% of its gross
income each taxable year from dividends, interest, payments with respect to
securities' loans, gains from the disposition of stock or securities, and
certain other income.
While the above requirements are aimed at qualification of the Fund as a
regulated investment company under Subchapter M of the Code, the Fund also
intends to comply with certain requirements of the Code to avoid liability for
federal income and excise tax. If the Fund remains qualified under Subchapter M,
it will not be subject to federal income tax to the extent it distributes its
taxable net investment income and net realized capital gains. A nondeductible 4%
federal excise tax will be imposed on the Fund to the extent it does not
distribute at least 98% of its ordinary taxable income for a calendar year, plus
98% of its capital gain net taxable income for the one year period ending each
October 31, plus certain undistributed amounts from prior years. While the Fund
intends to distribute its taxable income and capital gains in a manner so as to
avoid imposition of the federal excise and income taxes, there can be no
assurance that the Fund indeed will make sufficient distributions to avoid
entirely imposition of federal excise or income taxes.
Should additional series, or funds, be created by the Trustees, each fund
would be treated as a separate tax entity for federal income tax purposes.
PERFORMANCE INFORMATION
"Average annual total return," as defined by the Securities and Exchange
Commission, is computed by finding the average annual compounded rates of return
for the period indicated that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
n
P(1+T) =ERV
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<PAGE>
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable
period of the hypothetical $1,000 investment made at
the beginning of the applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
The Fund may also advertise performance information (a "non-standardized
quotation") which is calculated differently from "average annual total return."
A non-standardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. A non-standardized quotation may
also be an average annual compounded rate of return over a specified period,
which may be a period different from those specified for "average annual total
return." In addition, a non-standardized quotation may be an indication of the
value of a $10,000 investment (made on the date of the initial public offering
of the Fund's shares) as of the end of a specified period. A non-standardized
quotation will always be accompanied by the Fund's "average annual total return"
as described above.
The Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's respective portfolios and operating
expenses of the Fund. These factors and possible differences in the methods and
time periods used in calculating non-standardized investment performance should
be considered when comparing the Fund's performance to those of other investment
companies or investment vehicles. The risks associated with the Fund's
investment objective, policies and techniques should also be considered. At any
time in the future, investment performance may be higher or lower than past
performance, and there can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or to prospective shareholders, the performance of the Fund
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the Funds or
considered to be representative of the stock market in general. The Fund may use
the Standard & Poor's 500 Stock Index, the Nasdaq Composite Index, the Dow Jones
Industrial Average and the Value Line Stock Index.
In addition, the performance of the Fund may be compared to other groups of
mutual funds tracked by any widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and assets, such as
Lipper Analytical Services, Inc. or Morningstar, Inc. The objectives, policies,
limitations and expenses of other mutual funds in a group may not be the same as
those of the Fund. Performance rankings and ratings reported periodically in
national financial publications such as Barron's and Fortune also may be used.
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<PAGE>
The Fund may also include in advertisements data comparing performance with
other mutual funds as reported in non-related investment media, published
editorial comments and performance rankings compiled by independent
organizations and publications that monitor the performance of mutual funds
(such as Lipper Analytical Services, Inc., Morningstar, Inc., Fortune or
Barron's). Performance information may be quoted numerically or may be presented
in a table, graph or other illustration. In addition, Fund performance may be
compared to well-known indices of market performance including the Standard &
Poor's (S&P) 500 Index, the Dow Jones Industrial Average or the Russell 2000
Index.
The advertised performance data of the Fund is based on historical
performance and is not intended to indicate future performance. Rates of total
return quoted by the Fund may be higher or lower than past quotations, and there
can be no assurance that any rate of total return will be maintained. The
principal value of an investment in the Fund will fluctuate so that a
shareholder's shares, when redeemed, may be worth more or less than the
shareholder's original investment.
-24-
<PAGE>
FINANCIAL STATEMENTS
The financial statements and independent auditors report required to be
included herein are hereby incorporated by reference to the Annual Report of the
Bonfiglio & Reed Options Fund for the period ended _______, 2000.
-25-
<PAGE>
BONFIGLIO & REED INVESTMENT TRUST
---------------------------------
PART C: OTHER INFORMATION
- ------- -----------------
Item 23. Exhibits
- -------- --------
(a) Declaration of Trust
(b) Bylaws
(c) See Declaration of Trust and Bylaws
(d) Form of Advisory Agreement with Bonfiglio & Reed LLC.
(e) Form of Underwriting Agreement with IFS Fund Distributors,
Inc.
(f) Inapplicable
(g) Custody Agreement**
(h) Form of Administration, Accounting and Transfer, Dividend
Disbursing, Shareholder Service and Plan Agency Agreement
with _______ Fund Solutions, Inc.
(i) Opinion and Consent of Counsel**
(j) Independent Auditor's Consent**
(k) Inapplicable
(l) Form of Agreement Relating to Initial Capital
(m) Inapplicable
(n) Inapplicable
(o) Inapplicable
(p) Code of Ethics**
- --------------------------------------
* Incorporated by reference to the Trust's registration statement on Form N-1A.
** To be filed by Amendment
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the Fund.
- ------- -----------------------------------------------------------
After commencement of the public offering of the Registrant's shares,
the Registrant expects that no person will be directly or indirectly
controlled by or under common control with the Registrant.
-1-
<PAGE>
Item 25. Indemnification
- -------- ---------------
Article VII of the Registrant's Declaration of Trust, incorporated
herein by reference, provides for the indemnification of officers and
Trustees.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers, employees and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer, employee or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer, employee or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The Registrant, its Trustees and Officers, its investment adviser, and
persons affiliated with them will be insured under a policy of
insurance maintained by the Registrant and its investment adviser,
within the limits and subject to the limitations of the policy,
against certain expenses in connection with the defense of actions,
suits or proceedings, and certain liabilities that might be imposed as
result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such Trustees or officers.
The policy expressly excludes coverage for any Trustee or officer
whose personal dishonesty, fraudulent breach of trust, lack of good
faith, or intention to deceive or defraud has been adjudicated or may
be established or who willfully fails to act prudently.
The Advisory Agreement with the Adviser provides that the Adviser
shall not be liable for any action taken, omitted or suffered to be
taken by it in its reasonable judgment, in good faith and believed by
it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement, or in accordance
-2-
<PAGE>
with (or in the absence of) specific directions or instructions from
the Trust, provided, however, that such acts or omissions shall not
have resulted from the Adviser's willful misfeasance, bad faith or
gross negligence, a violation of the standard of care established by
and applicable to the Adviser in its actions under the Agreement or
breach of its duty or of its obligations thereunder.
The Underwriting Agreement provides that the Underwriter, its
directors, officers, employees, shareholders and control persons shall
not be liable for any error of judgment or mistake of law or for any
loss suffered by Registrant in connection with the matters to which
the Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of any of such
persons in the performance of Underwriter's duties or from the
reckless disregard by any of such persons of Underwriter's obligations
and duties under the Agreement. Registrant will advance attorneys'
fees or other expenses incurred by any such person in defending a
proceeding, upon the undertaking by or on behalf of such person to
repay the advance if it is ultimately determined that such person is
not entitled to indemnification.
Item 26. Business and Other Connections of the Investment
- ------- ------------------------------------------------
Adviser
-------
The Adviser is a registered investment adviser, providing investment
advisory services to the Registrant. The Adviser is an Arizona Limited
Liability Corporation. The Adviser has not previously provided
investment advisory services to a registered investment company.
The directors and officers of the Adviser and any other business,
profession, vocation or employment of a substantial nature engaged in
at any time during the past two years:
(i) Chad E. Bonfiglio - of the Adviser.
(ii) Reece W. Reed - of the Adviser.
-3-
<PAGE>
Item 27. Principal Underwriters
- -------- ----------------------
(a) IFS Fund Distributors, Inc. (the "Distributor") also acts as
principal underwriter for other open-end investment companies:
Brundage, Story and Rose Investment Trust, The Caldwell & Orkin
Funds, Inc., Profit Funds Investment Trust, the Lake Shore Family
of Funds, UC Investment Trust, The Winter Harbor Fund and The
James Advantage Funds.
(b) The following list sets forth the directors and executive
officers of the Distributor. Unless otherwise noted with an
asterisk(*), the address of the persons named below is 312 Walnut
Street, Cincinnati, Ohio 45202.
*The address is 420 East Fourth Street, Cincinnati, Ohio 45202.
Position Position
with with
Name Distributor Registrant
*William F. Ledwin Director None
*Jill T. McGruder Director None
Maryellen Peretzky Director None
Terrie A. Wiedenheft First Vice None
President,
Chief Financial
Officer and
Treasurer
Theresa M. Samocki Vice President None
Fund Accounting
Manager
Elizabeth A. Santen Assistant Vice None
President
Steven F. Nienhaus Assistant Vice None
President
Michele M. Hawkins Assistant Vice None
President
Brian J. Manley Assistant Vice None
President
(c) Inapplicable
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be
-4-
<PAGE>
maintained by Section 31(a) of the Investment Company Act of 1940 and
the Rules promulgated thereunder will be maintained by the Registrant
at its offices located at 1661 East Camelback, Suite 280, Phoenix,
Arizona 85016 as well as at the offices of the Registrant's
administrator and transfer agent located at 312 Walnut Street, 21st
Floor, Cincinnati, Ohio 45202.
Item 29. Management Services
- -------- -------------------
Not Applicable
Item 30. Undertakings
- -------- ------------
Not Applicable
-5-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed below on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, and State of Arizona, on the 14th day of
April, 2000.
BONFIGLIO & REED INVESTMENT TRUST
By: /s/ Chad E. Bonfiglio
-----------------------------
Chad E. Bonfiglio
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Chad E. Bonfiglio President and Trustee April 17, 2000
- -------------------------
Chad E. Bonfiglio
/s/ Reese Whitman Reed Treasurer and Trustee April 17, 2000
- -------------------------
Reese Whitman Reed
-6-
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Declaration of Trust
(b) Bylaws
(c) See Declaration of Trust and Bylaws
(d) Form of Advisory Agreement
(e) Form of Underwriting Agreement
(f) Inapplicable
(g) Custody Agreement**
(h) Form of Administration Agreement, Accounting Services Agreement and
Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement
(i) Opinion and Consent of Counsel**
(j) Independent Auditor's Consent**
(k) Inapplicable
(l) Form of Agreement Relating to Initial Capital
(m) Inapplicable
(n) Inapplicable
(o) Inapplicable
(p) Code of Ethics**
- ----------------------------
* Incorporated by reference to the Trust's registration statement on Form
N-1A.
** To be filed by Amendment.
BONFIGLIO & REED INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made this 14th day of April, 2000, by
the Trustees hereunder, and by the holders of Shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH:
WHEREAS, this Trust is being formed to carry on the business of an
investment company; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of an Ohio business trust in accordance with the provisions
hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the benefit of the holders from time to time
of shares of beneficial interest in this Trust as hereinafter set forth.
ARTICLE I
---------
NAME AND DEFINITIONS
--------------------
SECTION 1.1 NAME. This Trust shall be known as "Bonfiglio & Reed Investment
Trust" and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.
SECTION 1.2 DEFINITIONS. Whenever used herein, unless otherwise required by
the context or specifically provided:
(a) The "Trust" refers to the Ohio business trust established by this
Agreement and Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named herein or elected
in accordance with Article III;
(c) "Shares" refers to the transferable units of interest into which the
beneficial interest in the Trust or any Series of the Trust (as the
context may require) shall be divided from time to time;
-1-
<PAGE>
(d) "Series" refers to Series of Shares established and designated under
or in accordance with the provisions of Article IV;
(e) "Shareholder" means a record owner of Shares;
(f) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(g) "Commission" shall have the meaning given it in the 1940 Act;
(h) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust as amended or restated from time to time; and
(i) "Bylaws" shall mean the Bylaws of the Trust as amended from time to
time.
ARTICLE II
----------
PURPOSE OF TRUST
----------------
The purpose of the Trust is to operate as an investment company, to offer
Shareholders one or more investment programs primarily in securities and debt
instruments and to engage in any and all lawful acts or activities for which
business trusts may be formed under Chapter 1746.01 through 1746.99 of the Ohio
Revised Code. Until the Trustees determine otherwise, the principal office of
the Trust is to be located at 312 Walnut Street, 21st Floor, Cincinnati, Ohio
45202.
ARTICLE III
-----------
THE TRUSTEES
------------
SECTION 3.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
(a) INITIAL TRUSTEES. Upon execution of this Declaration of Trust or a
counterpart hereof or some other writing in which he accepts such
Trusteeship and agrees to the provisions hereof, Chad E. Bonfiglio
shall become Trustee hereof.
(b) NUMBER. The Trustees serving as such, whether named above or hereafter
becoming a Trustee, may increase or decrease the number of Trustees to
a number other than the number theretofore determined. No decrease in
the number of Trustees shall have the effect of removing any Trustee
from office prior to the expiration of his
-2-
<PAGE>
term, but the number of Trustees may be decreased in conjunction with
the removal of a Trustee pursuant to subsection (e) of this Section
3.1.
(c) TERM. Each Trustee shall serve as a Trustee during the lifetime of the
Trust and until its termination as hereinafter provided or until such
Trustee sooner dies, resigns, retires or is removed. The Trustees may
elect their own successors and may, pursuant to Section 3.1(f) hereof,
appoint Trustees to fill vacancies; provided that, immediately after
filling a vacancy, at least two-thirds of the Trustees then holding
office shall have been elected to such office by the Shareholders at
an annual or special meeting. If at any time less than a majority of
the Trustees then holding office were so elected, the Trustees shall
forthwith cause to be held as promptly as possible, and in any event
within 60 days, a meeting of Shareholders for the purpose of electing
Trustees to fill any existing vacancies.
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his trust or retire
as a Trustee, by written instrument signed by him and delivered to the
other Trustees or to any officer of the Trust, and such resignation or
retirement shall take effect upon such delivery or upon such later
date as is specified in such instrument.
(e) REMOVAL. Any Trustee may be removed with or without cause at any time:
(i) by written instrument, signed by at least a majority of the number
of Trustees prior to such removal, specifying the date upon which such
removal shall become effective, (ii) by vote of the Shareholders
holding not less than two-thirds of the Shares then outstanding, cast
in person or by proxy at any meeting called for the purpose, or (iii)
by a declaration in writing signed by Shareholders holding not less
than two-thirds of the Shares then outstanding and filed with the
Trust's Custodian.
(f) VACANCIES. Any vacancy or anticipated vacancy resulting from any
reason, including without limitation, the death, resignation,
retirement, removal or incapacity of any of the Trustees or resulting
from an increase in the number of Trustees by the Trustees, may (but
so long as there are at least three remaining Trustees, need not
unless required by the 1940 Act) be filled either by a majority of the
remaining Trustees through the appointment in writing of such other
person as such remaining Trustees in their discretion shall determine
(unless a shareholder election is required by
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<PAGE>
the 1940 Act) or by the election by the Shareholders, at a meeting
called for the purpose, of a person to fill such vacancy, and such
appointment or election shall be effective upon the written acceptance
of the person named therein to serve as a Trustee and agreement by
such person to be bound by the provisions of this Declaration of
Trust, except that any such appointment or election in anticipation of
a vacancy to occur by reason of retirement, resignation, or increase
in number of Trustees to be effective at a later date shall become
effective only at or after the effective date of said retirement,
resignation, or increase in number of Trustees. As soon as any Trustee
so appointed or elected shall have accepted such appointment or
election and shall have agreed in writing to be bound by this
Declaration of Trust and the appointment or election is effective, the
Trust estate shall vest in the new Trustee, together with the
continuing Trustees, without any further act or conveyance.
(g) EFFECT OF DEATH, RESIGNATION, ETC. The death, resignation, retirement,
removal, or incapacity of the Trustees, or any one of them, shall not
operate to annul or terminate the Trust or to revoke or terminate any
existing agency or contract created or entered into pursuant to the
terms of this Declaration of Trust.
(h) NO ACCOUNTING. Except to the extent required by the 1940 Act or under
circumstances which would justify his removal for cause, no person
ceasing to be a Trustee as a result of his death, resignation,
retirement, removal or incapacity (nor the estate of any such person)
shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
SECTION 3.2 POWERS OF THE TRUSTEES. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient to carry out
that responsibility and the purpose of the Trust. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with this Declaration
of Trust providing for the conduct of the business and affairs of the Trust and
may amend and repeal them to the extent that such Bylaws do not reserve that
right to the Shareholders; they may as they consider appropriate elect and
remove officers and appoint and terminate agents and consultants and hire and
terminate employees, any one or more of the foregoing of whom may be a Trustee,
and may provide for the compensation of all of the foregoing; they may appoint
from their own number, and terminate, any one or more committees consisting of
two or more Trustees,
-4-
<PAGE>
including without implied limitation an executive committee, which may, when the
Trustees are not in session and subject to the 1940 Act, exercise some or all of
the power and authority of the Trustees as the Trustees may determine; in
accordance with Section 3.3 they may employ one or more advisers,
administrators, depositories and custodians and may authorize any depository or
custodian to employ subcustodians or agents and to deposit all or any part of
such assets in a system or systems for the central handling of securities and
debt instruments, retain transfer, dividend, accounting or Shareholder servicing
agents or any of the foregoing, provide for the distribution of Shares by the
Trust through one or more distributors, principal underwriters or otherwise, set
record dates or times for the determination of Shareholders or various of them
with respect to various matters; they may compensate or provide for the
compensation of the Trustees, officers, advisers, administrators, custodians,
other agents, consultants and employees of the Trust or the Trustees on such
terms as they deem appropriate; and in general they may delegate to any officer
of the Trust, to any committee of the Trustees and to any employee, adviser,
administrator, distributor, principal underwriter, depository, custodian,
transfer and dividend disbursing agent, or any other agent or consultant of the
Trust such authority, powers, functions and duties as they consider desirable or
appropriate for the conduct of the business and affairs of the Trust, including
without implied limitation the power and authority to act in the name of the
Trust and of the Trustees, to sign documents and to act as attorney-in-fact for
the Trustees.
Without limiting the foregoing and to the extent not inconsistent with the
1940 Act or other applicable law, the Trustees shall have power and authority:
(a) INVESTMENTS. To invest and reinvest cash and other property, and to
hold cash or other property uninvested without in any event being
bound or limited by any present or future law or custom in regard to
investments by trustees;
(b) DISPOSITION OF ASSETS. To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all of the assets of
the Trust;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities, debt instruments
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, debt instruments or property as the Trustees shall deem
proper;
-5-
<PAGE>
(d) SUBSCRIPTION. To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of securities or
debt instruments;
(e) FORM OF HOLDING. To hold any security, debt instrument or property in
a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust
or in the name of a custodian, subcustodian or other depository or a
nominee or nominees or otherwise;
(f) REORGANIZATION, ETC. To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or issuer,
any security or debt instrument of which is or was 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 or debt instrument held in
the Trust;
(g) VOTING TRUSTS, ETC. To join with other holders of any securities or
debt instruments in acting through a committee, depository, voting
trustee or otherwise, and in that connection to deposit any security
or debt instrument with, or transfer any security or debt instrument
to, any such committee, depository or trustee, and to delegate to them
such power and authority with relation to any security or debt
instrument (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such committee, depository
or trustee as the Trustees shall deem proper;
(h) COMPROMISE. 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) PARTNERSHIPS, ETC. To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(j) BORROWING AND SECURITY. To borrow funds and to mortgage and pledge the
assets of the Trust or any part thereof to secure obligations arising
in connection with such borrowing;
-6-
<PAGE>
(k) GUARANTEES, ETC. 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 such obligations; and
(l) INSURANCE. To purchase and pay for entirely out of Trust property such
insurance as they may deem necessary or appropriate for the conduct of
the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
consultants, investment advisers, managers, administrators,
distributors, principal underwriters, or independent contractors, or
any thereof (or any person connected therewith), 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 in any such capacity, including any action
taken or omitted that may be determined to constitute negligence;
provided, however, that insurance which protects the Trustees and
officers against liabilities rising from action involving willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of their offices may not be purchased.
(m) PENSIONS, ETC. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift
and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the
Trust.
Except as otherwise provided by the 1940 Act or other applicable law, this
Declaration of Trust or the Bylaws, any action to be taken by the Trustees may
be taken by a majority of the Trustees present at a meeting of Trustees (a
quorum, consisting of at least a majority of the Trustees then in office, being
present), within or without Ohio, including any meeting held by means of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other at the same time and
participation by such means shall constitute presence in person at a meeting, or
by
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written consents of a majority of the Trustees then in office (or such larger or
different number as may be required by the 1940 Act or other applicable law).
SECTION 3.3 CERTAIN CONTRACTS. Subject to compliance with the provisions of
the 1940 Act, but notwithstanding any limitations of present and future law or
custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time and without limiting the generality of
their powers and authority otherwise set forth herein, enter into one or more
contracts with any one or more corporations, trusts, associations, partnerships,
limited partnerships, other type of organizations, or individuals ("Contracting
Party") to provide for the performance and assumption of some or all of the
following services, duties and responsibilities to, for or of the Trust and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties and responsibilities in addition to those set forth below as
the Trustees may determine appropriate:
(a) ADVISORY. Subject to the general supervision of the Trustees and in
conformity with the stated policy of the Trustees with respect to the
investments of the Trust or of the assets belonging to any Series of
Shares of the Trust (as that phrase is defined in subsection (a) of
Section 4.2), to manage such investments and assets, make investment
decisions with respect thereto, and to place purchase and sale orders
for portfolio transactions relating to such investments and assets;
(b) ADMINISTRATION. Subject to the general supervision of the Trustees and
in conformity with any policies of the Trustees with respect to the
operations of the Trust, to supervise all or any part of the
operations of the Trust, and to provide all or any part of the
administrative and clerical personnel, office space and office
equipment and services appropriate for the efficient administration
and operations of the Trust;
(c) DISTRIBUTION. To distribute the Shares of the Trust, to be principal
underwriter of such Shares, and/or to act as agent of the Trust in the
sale of Shares and the acceptance or rejection of orders for the
purchase of Shares;
(d) CUSTODIAN AND DEPOSITORY. To act as depository for and to maintain
custody of the property of the Trust and accounting records in
connection therewith;
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(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. To maintain records of the
ownership of outstanding Shares, the issuance and redemption and the
transfer thereof, and to disburse any dividends declared by the
Trustees and in accordance with the policies of the Trustees and/or
the instructions of any particular Shareholder to reinvest any such
dividends;
(f) SHAREHOLDER SERVICING. To provide service with respect to the
relationship of the Trust and its Shareholders, records with respect
to Shareholders and their Shares, and similar matters; and
(g) LEGAL, ACCOUNTING, TAXES AND OTHER. To handle all or any part of the
legal, accounting, tax or other responsibilities, whether with respect
to the Trust's properties, Shareholders or otherwise.
The same person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into subcontractual arrangements relative to any of the matters referred to in
Sections 3.3(a) through (g) hereof.
Subject to the provisions of the 1940 Act, the fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party, or of or for any parent or affiliate of any Contracting
Party or that the Contracting Party or any parent or affiliate thereof is a
Shareholder or has an interest in the Trust, or that
(ii) any Contracting Party may have a contract providing for the
rendering of any similar services to one or more other corporations,
trusts, associations, partnerships, limited partnerships or other
organizations, or has other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees 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
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Shareholders, provided that in the case of any relationship or interest referred
to in the preceding clause (i) on the part of any Trustee or officer of the
Trust either (1) the material facts as to such relationship or interest have
been disclosed to or are known by the Trustees not having any such relationship
or interest and the contract involved is approved in good faith reasonably
justified by such facts by a majority of such Trustees not having any such
relationship or interest (even though such unrelated or disinterested Trustees
are less than a quorum of all of the Trustees), or (2) the specific contract
involved is fair to the Trust as of the time it is authorized, approved or
ratified by the Trustees or by the Shareholders.
SECTION 3.4 PAYMENT OF TRUST EXPENSES AND COMPENSATION OF TRUSTEES. The
Trustees are authorized to pay or to cause to be paid out of the principal or
income of the Trust, or partly out of principal and partly out of income, and to
charge or allocate the same to, between or among such one or more of the Series
that may be established and designated pursuant to Article IV, as the Trustees
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,
investment adviser, administrator, distributor, principal underwriter, auditor,
counsel, depository, custodian, transfer agent, dividend disbursing agent,
accounting agent, shareholder servicing agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur. Without limiting the
generality of any other provision hereof, the Trustees shall be entitled to
reasonable compensation from the Trust for their services as Trustees and may
fix the amount of such compensation.
SECTION 3.5 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 Trustees.
ARTICLE IV
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SHARES
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SECTION 4.1 DESCRIPTION OF SHARES. The beneficial interest in the Trust
shall be divided into Shares, all without par value, but the Trustees shall have
the authority from time to time to divide the Shares into two or more Series of
Shares, as they deem necessary or desirable, to establish and designate such
Series, and to fix and determine the relative rights and preferences as between
the different Series of Shares as to right of redemption and the price, terms
and manner of redemption, special and relative rights as to dividends and other
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distributions and on liquidation, sinking or purchase fund provisions,
conversion rights, and conditions under which the several Series shall have
separate voting rights or no voting rights. Except as aforesaid all Shares of
the different Series shall be identical.
The Shares of each Series may be issued or reissued from time to time in
one or more classes ("Classes"), as determined by the Board of Trustees pursuant
to resolution. Each Class shall be appropriately designated, prior to the
issuance of any shares thereof, by some distinguishing letter, number or title.
All Shares within a Class shall be alike in every particular. All Shares of each
Series shall be of equal rank and have the same powers, preferences and rights,
and shall be subject to the same qualifications, limitations and restrictions
without distinction between the shares of different Classes thereof, except with
respect to such differences among such Classes, as the Board of Trustees shall
from time to time determine to be necessary or desirable, including differences
in the rate or rates of dividends or distributions. The Board of Trustees may
from time to time increase the number of Shares allocated to any Class already
created by providing that any unissued Shares of the applicable Series shall
constitute part of such Class, or may decrease the number of Shares allocated to
any Class already created by providing that any unissued Shares previously
assigned to such Class shall no longer constitute part thereof. The Board of
Trustees is hereby empowered to classify or reclassify from time to time any
unissued Shares of each Series by fixing or altering the terms thereof and by
assigning such unissued shares to an existing or newly created Class.
Notwithstanding anything to the contrary in this paragraph the Board of Trustees
is hereby empowered (i) to redesignate any issued Shares of any Series by
assigning a distinguishing letter, number or title to such shares and (ii) to
reclassify all or any part of the issued Shares of any Series to make them part
of an existing or newly created Class. The number of authorized Shares and the
number of Shares of each Series that may be issued is unlimited, and the
Trustees may issue Shares of any Series for such consideration and on such terms
as they may determine (or for no consideration if pursuant to a Share dividend
or split-up), all without action or approval of the Shareholders. All Shares
when so issued on the terms determined by the Trustees shall be fully paid and
non-assessable (but may be subject to mandatory contribution back to the Trust
as provided in subsection (g) of Section 4.2). The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any Series into one or more Series that may be established and designated from
time to time. The Trustees may hold as treasury Shares (of the same or some
other Series), reissue for such consideration and on such terms as
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they may determine, or cancel, at their discretion from time to time, any Shares
of any Series reacquired by the Trust.
The Trustees may from time to time close the transfer books or establish
record dates and times for the purposes of determining the holders of Shares
entitled to be treated as such, to the extent provided or referred to in Section
5.3.
The establishment and designation of any Series of Shares in addition to
that established and designated in Section 4.2, or of any Class of Shares, shall
be effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the relative
rights and preferences of such Series or Class or by an officer of the Trust
pursuant to the vote of a majority of such Trustees, or as otherwise provided in
such instrument. At any time that there are no Shares outstanding of any
particular Series or Class previously established and designated the Trustees
may by an instrument executed by a majority of their number abolish that Series
or Class and the establishment and designation thereof. Each instrument referred
to in this paragraph shall have the status of an amendment to this Declaration
of Trust.
Any Trustee, officer or other agent of the Trust, and any organization in
which any such person is interested may acquire, own, hold and dispose of Shares
of any Series of the Trust to the same extent as if such person were not a
Trustee, officer or other agent of the Trust; and the Trust may issue and sell
or cause to be issued and sold and may purchase Shares of any Series from any
such person or any such organization subject only to the general limitations,
restrictions or other provisions applicable to the sale or purchase of Shares of
such Series generally.
SECTION 4.2 ESTABLISHMENT AND DESIGNATION OF SERIES. Without limiting the
authority of the Trustees set forth in Section 4.1 to establish and designate
any further Series, the Trustees hereby establish and designate one Series of
Shares: "Bonfiglio & Reed Options Fund". The Shares of this Series and any
Shares of any further Series that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further Series or Class at the time of establishing and
designating the same) have the following relative rights and preferences:
(a) ASSETS BELONGING TO 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,
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including any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that Series for all purposes, subject only to
the rights of creditors, and shall be so recorded upon the books of
account of the Trust. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in whatever
form the same may be, together with any General Items allocated to
that Series as provided in the following sentence, are herein referred
to as "assets belonging to" that Series. In the event that there are
any assets, incomes, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any
particular Series (collectively "General Items"), the Trustees shall
allocate such General Items to and among any one or more of the Series
established and designated from time to time in such manner and on
such basis as they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to a particular Series shall belong
to that Series. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all
purposes.
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.
(b) LIABILITIES BELONGING TO SERIES. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust
in respect of that Series and all expenses, costs, charges and
reserves attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular Series shall be
allocated and charged by the Trustees to and among any one or more of
the Series established and designated from time to time in such manner
and on such basis as the Trustees in their sole discretion deem fair
and equitable. The liabilities, expenses, costs, charges and reserves
allocated and so charged to a Series are herein referred to as
"liabilities belonging to" that Series. Each allocation of
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liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all Series for all
purposes.
(c) DIVIDENDS. Dividends and distributions on Shares of a particular
Series may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees
may determine, to the holders of Shares of that Series, from such of
the estimated income and capital gains, accrued or realized, from the
assets belonging to that Series, as the Trustees may determine, after
providing for actual and accrued liabilities belonging to that Series.
All dividends and distributions on Shares of a particular Series shall
be distributed pro rata to the holders of that Series in proportion to
the number of Shares of that Series held by such holders at the date
and time of record established for the payment of such dividends or
distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no
dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by
the time or times established by the Trustees under such program or
procedure, and except that if Classes have been established for any
Series, the rate of dividends or distributions may vary among such
Classes pursuant to resolution, which may be a standing resolution, of
the Board of Trustees. Such dividends and distributions may be made in
cash or Shares or a combination thereof as determined by the Trustees
or pursuant to any program that the Trustees may have in effect at the
time for the election by each Shareholder of the mode of the making of
such dividend or distribution to that Shareholder. Any such dividend
or distribution paid in Shares will be paid at the net asset value
thereof as determined in accordance with subsection (h) of Section
4.2.
The Trust intends to qualify each Series as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended, or any
successor or comparable statute thereto, and regulations promulgated
thereunder. Inasmuch as the computation of net income and gains for
federal income tax purposes may vary from the computation thereof on
the books of the Trust, the Board of Trustees shall have the power, in
its sole
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discretion, to distribute in any fiscal year as dividends, including
dividends designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion of the Board of
Trustees, to enable each Series to qualify as a regulated investment
company and to avoid liability of the Series for federal income tax in
respect of that year. However, nothing in the foregoing shall limit
the authority of the Board of Trustees to make distributions greater
than or less than the amount necessary to qualify as a regulated
investment company and to avoid liability of each Series for such tax.
(d) LIQUIDATION. In event of the liquidation or dissolution of the Trust,
the Shareholders of each Series that has been established and
designated shall be entitled to receive, as a Series, when and as
declared by the Trustees, the excess of the assets belonging to that
Series over the liabilities belonging to that Series. The assets so
distributable to the Shareholders of any particular Series shall be
distributed among such Shareholders in proportion to the number of
Shares of that Series held by them and recorded on the books of the
Trust. The liquidation of any particular Series may be authorized by
vote of a majority of the Trustees then in office subject to the
approval of a majority of the outstanding voting Shares of that
Series, as defined in the 1940 Act.
(e) VOTING. All shares of all Series shall have "equal voting rights" as
such term is defined in the 1940 Act and except as otherwise provided
by that Act or rules, regulations or orders promulgated thereunder. On
each matter submitted to a vote of the Shareholders, all Shares of all
Series shall vote as a single class ("Single Class Voting"); provided,
however, that (a) as to any matter with respect to which a separate
vote of any Series is required by the 1940 Act or rules and
regulations promulgated thereunder, or would be required under the
Ohio General Corporation Law if the Trust were an Ohio corporation,
such requirements as to a separate vote by that Series shall apply in
lieu of Single Class Voting as described above; (b) in the event that
the separate vote requirements referred to in (a) above apply with
respect to one or more Series, then, subject to (c) below, the Shares
of all other Series shall vote as a single class; and (c) as to any
matter which does not affect the interest of a particular Series, only
the holders of Shares of the one or more affected Series shall be
entitled to vote.
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(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a particular
Series shall have the right at such times as may be permitted by the
Trust, but no less frequently than once each week, to require the
Trust to redeem all or any part of his Shares of that Series at a
redemption price equal to the net asset value per Share of that Series
next determined in accordance with subsection (h) of this Section 4.2
after the Shares are properly tendered for redemption. Payment of the
redemption price shall be in cash; provided, however, that if the
Trustees determine, which determination shall be conclusive, that
conditions exist which make payment wholly in cash unwise or
undesirable, the Trust may make payment wholly or partly in securities
or other assets belonging to the Series of which the Shares being
redeemed are part at the value of such securities or assets used in
such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of
any Series to require the Trust to redeem Shares of that Series during
any period or at any time when and to the extent permissible under the
1940 Act, and such redemption is conditioned upon the Trust having
funds or property legally available therefor.
(g) REDEMPTION BY TRUST. Each Share of each Series that has been
established and designated is subject to redemption by the Trust at
the redemption price which would be applicable if such Share was then
being redeemed by the Shareholder pursuant to subsection (f) of this
Section 4.2: (a) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse
consequences to all or any of the holders of the Shares, or any Series
thereof, of the Trust, or (b) upon such other conditions as may from
time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust with respect to maintenance of
Shareholder accounts of a minimum amount. Upon such redemption the
holders of the Shares so redeemed shall have no further right with
respect thereto other than to receive payment of such redemption
price.
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(h) NET ASSET VALUE. The net asset value per Share of any Series shall be
the quotient obtained by dividing the value of the net assets of that
Series (being the value of the assets belonging to that Series less
the liabilities belonging to that Series) by the total number of
Shares of that Series outstanding, all determined in accordance with
the methods and procedures, including without limitation those with
respect to rounding, established by the Trustees from time to time.
(i) TRANSFER. All Shares of each particular Series shall be transferable,
but transfers of Shares of a particular Series will be recorded on the
Share transfer records of the Trust applicable to that Series only at
such times as Shareholders shall have the right to require the Trust
to redeem Shares of that Series and at such other times as may be
permitted by the Trustees.
(j) EQUALITY. All Shares of each particular Series shall represent an
equal proportionate interest in the assets belonging to that Series
(subject to the liabilities belonging to that Series), and each Share
of any particular Series shall be equal to each other Share of that
Series; but the provisions of this sentence shall not restrict any
distinctions permissible under subsection (c) of this Section 4.2 that
may exist with respect to dividends and distributions on Shares of the
same Series. The Trustees may from time to time divide or combine the
Shares of any particular Series into a greater or lesser number of
Shares of that Series without thereby changing the proportionate
beneficial interest in the assets belonging to that Series or in any
way affecting the rights of Shares of any other Series.
(k) FRACTIONS. Any fractional Share of any Series or Class, if any such
fractional Share is outstanding, shall carry proportionately all the
rights and obligations of a whole Share of that Series or Class,
including with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust.
(l) CONVERSION RIGHTS. Subject to compliance with the requirements of the
1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Series shall have the right to convert said
Shares into
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Shares of one or more other Series of Shares in accordance with such
requirements and procedures as may be established by the Trustees.
SECTION 4.3 OWNERSHIP OF SHARES. The ownership of Shares shall be recorded
on the books of the Trust or of a transfer or similar agent for the Trust, which
books shall be maintained separately for the Shares of each Series that has been
established and designated. No certificates certifying the ownership of Shares
need 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 use of facsimile signatures, the transfer of Shares
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 who are
the Shareholders and as to the number of Shares of each Series and Class held
from time to time by each such Shareholder.
SECTION 4.4 INVESTMENTS IN THE TRUST. The Trustees may accept investments
in the Trust from such persons and on such terms and for such consideration, not
inconsistent with the provisions of the 1940 Act, as they from time to time
authorize. The Trustees may authorize any distributor, principal underwriter,
custodian, transfer agent or other person to accept orders for the purchase of
Shares that conform to such authorized terms and to reject any purchase orders
for Shares whether or not conforming to such authorized terms.
SECTION 4.5 NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other securities issued by
the Trust.
SECTION 4.6 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 and to have
become a party hereto. The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the Trust nor entitle the representative of
any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the rights of said
decedent 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 right to
call for a partition or division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders as partners. Neither the Trust
nor
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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.
ARTICLE V
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SHAREHOLDERS' VOTING POWERS AND MEETINGS
----------------------------------------
SECTION 5.1 VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Section 3.1, (ii)
with respect to any contract with a Contracting Party as provided in Section 3.3
as to which Shareholder approval is required by the 1940 Act, (iii) with respect
to any termination or reorganization of the Trust or any Series to the extent
and as provided in Sections 7.1 and 7.2, (iv) with respect to any amendment of
this Declaration of Trust to the extent and as provided in Section 7.3, (v) to
the same extent as the stockholders of an Ohio business corporation as to
whether or not a court action, proceeding or claim should or should not be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, and (vi) with respect to such additional matters relating
to the Trust as may be required by the 1940 Act, this Declaration of Trust, the
Bylaws or any registration of the Trust with the Commission (or any successor
agency) or any state, or as the Trustees may consider necessary or desirable.
There shall be no cumulative voting in the election of any Trustee or Trustees.
Shares may be voted in person or by proxy. A proxy with respect to Shares held
in the name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. 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 Bylaws to be taken by Shareholders.
SECTION 5.2 MEETINGS. Meetings (including meetings involving only the
holders of Shares of one or more but less than all Series) of Shareholders may
be called by the Trustees from time to time for the purpose of taking action
upon any matter requiring the vote or authority of the Shareholders as herein
provided or upon any other matter deemed by the Trustees to be necessary or
desirable. Written notice of any meeting of Shareholders shall be given or
caused to be given by the Trustees
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by mailing such notice at least seven days before such meeting, postage prepaid,
stating the time, place and purpose of the meeting, to each Shareholder at the
Shareholder's address as it appears on the records of the Trust. The Trustees
shall promptly call and give notice of a meeting of Shareholders for the purpose
of voting upon removal of any Trustee of the Trust when requested to do so in
writing by Shareholders holding not less than 10% of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders (including a meeting involving only the holders of Shares of one or
more but less than all Series) for a period of 30 days after written application
by Shareholders holding at least 25% of the Shares then outstanding requesting a
meeting be called for any other purpose requiring action by the Shareholders as
provided herein or in the Bylaws, then Shareholders holding at least 25% of the
Shares then outstanding may call and give notice of such meeting, and thereupon
the meeting shall be held in the manner provided for herein in case of call
thereof by the Trustees.
SECTION 5.3 RECORD DATES. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding 30 days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than 60 days prior to the date of any meeting of Shareholders or other action as
the date and time of record for the determination of Shareholders entitled to
vote at such meeting or any adjournment thereof or to be treated as Shareholders
of record for purposes of such other action, and any Shareholder who was a
Shareholder at the date and time so fixed shall be entitled to vote at such
meeting or any adjournment thereof or (subject to any provisions permissible
under subsection (c) of Section 4.2 with respect to dividends or distributions
on Shares that have not been ordered and/or paid for by the time or times
established by the Trustees under the applicable dividend or distribution
program or procedure then in effect) to be treated as a Shareholder of record
for purposes of such other action, even though he has since that date and time
disposed of his Shares, and no Shareholder becoming such after that date and
time shall be so entitled to vote at such meeting or any adjournment thereof or
to be treated as a Shareholder of record for purposes of such other action.
SECTION 5.4 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled to
vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the
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original meeting without the necessity of further notice. A majority of the
Shares voted, at a meeting of which a quorum is present, shall decide any
questions and a plurality shall elect a Trustee, except when a different vote is
required or permitted by any provision of the 1940 Act or other applicable law
or by this Declaration of Trust or the Bylaws.
SECTION 5.5 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such other proportion thereof as shall be required by the 1940 Act or by any
express provision of this Declaration of Trust or the Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
SECTION 5.6 INSPECTION OF RECORDS. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted stockholders of
an Ohio corporation under the Ohio General Corporation Law.
SECTION 5.7 ADDITIONAL PROVISIONS. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
----------
LIMITATION OF LIABILITY; INDEMNIFICATION
----------------------------------------
SECTION 6.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; Notice. All
persons extending credit to, contracting with or having any claim against the
Trust shall look only to the assets of the Trust for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future, shall be
personally liable therefor. Every note, bond, contract, instrument, certificate
or undertaking and every other act or thing whatsoever executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only by or for the
Trust or the Trustees and not personally. Nothing in this Declaration of Trust
shall protect any Trustee or officer against any liability to the Trust or the
Shareholders to which such Trustee or officer would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless
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<PAGE>
disregard of the duties involved in the conduct of the office of Trustee or of
such officer.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that this
Declaration of Trust is on file with the Secretary of the State of Ohio and
shall 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 such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, but the omission thereof shall not operate to
bind any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
SECTION 6.2 TRUSTEE'S 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. A Trustee shall be liable for his 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, (a) 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, dividend disbursing, Shareholder servicing or accounting agent of the
Trust, nor shall any Trustee be responsible for the act or omission of any other
Trustee; (b) 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 (c) 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
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 appointed by
the Trustees pursuant to Section 3.3. The Trustees as such shall not be required
to give any bond or surety or any other security for the performance of their
duties. Nothing stated herein is intended to detract from the protection
accorded to Trustees by Ohio Revised Code Sections 1746.08 and 1701.59, as
amended from time to time.
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<PAGE>
SECTION 6.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or
former Shareholder 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)
shall assume the defense against such charge and satisfy any judgment thereon,
and the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled out of
the assets of the Trust estate to be held harmless from and indemnified against
all loss and expense arising from such liability.
SECTION 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. Subject to and
except as otherwise provided in the Securities Act of 1933, as amended, and the
1940 Act, the Trust shall indemnify each of its Trustees and officers, 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 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 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, and except that no Covered
Person shall be indemnified against any liability to the Trust or its
Shareholders to which such Covered Person would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office.
SECTION 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys' fees
or other expenses incurred by a Covered Person in defending a proceeding to the
full extent permitted by the Securities Act of 1933, as amended, the 1940 Act,
and Ohio Revised Code Chapter 1707, as amended. In the event any of these laws
conflict with Ohio Revised Code Section 1701.13(E), as amended, these laws, and
not Ohio Revised Code Section 1701.13(E), shall govern.
SECTION 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of or affect
any other rights to which any such Covered
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<PAGE>
Person may be entitled. As used in this Article VI, "Covered Person" shall
include such person's heirs, executors and administrators. Nothing contained in
this article 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.
SECTION 6.7 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.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by a majority of the Trustees then in office
subject to a favorable vote of a majority of the outstanding voting Shares, as
defined in the 1940 Act, of each Series voting separately by Series.
Upon termination, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or anticipated as may be
determined by the Trustees, the Trust shall in accordance with such procedures
as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of subsection (d) of Section 4.2.
SECTION 7.2 REORGANIZATION. The Trustees may sell, convey and transfer the
assets of the Trust, or the assets belonging to any one or more Series, to
another trust, partnership, association or corporation organized under the laws
of any state of the United States, or to the Trust to be held as assets
belonging to another Series of the Trust, in exchange for cash, shares or other
securities (including, in the case of a transfer to another Series of the Trust,
Shares of such other Series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to each Series
the assets of which are so transferred; provided, however, that if shareholder
approval is required by the 1940 Act, no assets belonging to any particular
Series shall be so transferred
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<PAGE>
unless the terms of such transfer shall have first been approved at a meeting
called for the purpose by the affirmative vote of the holders of a majority of
the outstanding voting Shares, as defined in the 1940 Act, of that Series.
Following such transfer, the Trustees shall distribute such cash, shares or
other securities (giving due effect to the assets and liabilities belonging to
and any other differences among the various Series the assets belonging to which
have so been transferred) among the Shareholders of the Series the assets
belonging to which have been so transferred; and if all of the assets of the
Trust have been so transferred, the Trust shall be terminated.
SECTION 7.3 AMENDMENTS. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees), when authorized so to do
by the vote in accordance with subsection (e) of Section 4.2 of Shareholders
holding a majority of the Shares entitled to vote, except that amendments either
(a) establishing and designating any new Series of Shares not established and
designated in Section 4.2, or any Class or (b) having the purpose of changing
the name of the Trust or the name of any Shares theretofore established and
designated or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any provision hereof which is internally
inconsistent with any other provision hereof or which is defective or
inconsistent with the 1940 Act or with the requirements of the Internal Revenue
Code and applicable regulations for the Trust's obtaining the most favorable
treatment thereunder available to regulated investment companies, shall not
require authorization by Shareholder vote. Subject to the foregoing, any such
amendment shall be effective as provided in the instrument containing the terms
of such amendment or, if there is no provision therein with respect to
effectiveness, upon the execution of such instrument and of a certificate (which
may be a part of such instrument) executed by a Trustee or officer of the Trust
to the effect that such amendment has been duly adopted.
SECTION 7.4 FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy
of this instrument and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A copy of this
instrument and of each
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<PAGE>
amendment hereto shall be filed by the Trust with the Secretary of the State of
Ohio, as well as any other governmental office where such filing may from time
to time be required, but the failure to make any such filing shall not impair
the effectiveness of this instrument or any such amendment. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such amendments have been made, as to the identities of the Trustees and
officers, 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
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein," "hereof" and "hereunder" shall be
deemed to refer to this instrument as a whole as the same may be amended or
affected by any such amendments. The masculine gender shall include the feminine
and neuter genders. 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. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
SECTION 7.5 APPLICABLE LAW. This Declaration of Trust is created under and
is to be governed by and construed and administered according to the laws of the
State of Ohio, including the Ohio General Corporation Law as the same may be
amended from time to time, but the reference to said Corporation Law is not
intended to give the Trust, the Trustees, the Shareholders or any other person
any right, power, authority or responsibility available only to or in connection
with an entity organized in corporate form. The Trust shall be of the type
referred to in Section 1746.01 of the Ohio Revised Code, and without limiting
the provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set their hands for
themselves and their assigns, as of the day and year first above written.
/s/ Chad E. Bonfiglio
--------------------------------
Chad E. Bonfiglio
STATE OF ARIZONA )
) ss:
COUNTY OF Maricopa )
Before me, a Notary Public in and for said county and state, personally
appeared the above named Chad E. Bonfiglio, who acknowledged that he did sign
the foregoing instrument and that the same is his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal on this 13 day of April, 2000.
/s/ Carl Des Vergnes
-------------------------------------
Notary Public
My Commission Expires: 9-6-01
-----------
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<PAGE>
BONFIGLIO & REED INVESTMENT TRUST
---------------------------------
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
PAGE
----
ARTICLE I. NAME AND DEFINITIONS.......................................1
- ---------- --------------------
Section 1.1 Name.......................................................1
Section 1.2 Definitions................................................1
(a) "Trust"..............................................1
(b) "Trustees"...........................................1
(c) "Shares".............................................1
(d) "Series".............................................1
(e) "Shareholder"........................................2
(f) "1940 Act"...........................................2
(g) "Commission".........................................2
(h) "Declaration of Trust"...............................2
(i) "Bylaws".............................................2
ARTICLE II. PURPOSE OF TRUST...........................................2
- ---------- ----------------
ARTICLE III. THE TRUSTEES...............................................2
- ------------ ------------
Section 3.1 Number, Designation, Election, Term, etc...................2
(a) Initial Trustees.....................................2
(b) Number...............................................2
(c) Term.................................................3
(d) Resignation and Retirement...........................3
(e) Removal..............................................3
(f) Vacancies............................................3
(g) Effect of Death, Resignation, etc....................4
(h) No Accounting........................................4
Section 3.2 Powers of the Trustees.....................................4
(a) Investments..........................................5
(b) Disposition of Assets................................5
(c) Ownership Powers.....................................5
(d) Subscription.........................................5
(e) Form of Holding......................................6
(f) Reorganization, etc..................................6
(g) Voting Trusts, etc...................................6
(h) Compromise...........................................6
(i) Partnerships, etc....................................6
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<PAGE>
(j) Borrowing and Security...............................6
(k) Guarantees, etc......................................6
(l) Insurance............................................7
(m) Pensions, etc........................................7
Section 3.3 Certain Contracts..........................................7
(a) Advisory.............................................8
(b) Administration.......................................8
(c) Distribution.........................................8
(d) Custodian and Depository.............................8
(e) Transfer and Dividend Disbursing Agency..............8
(f) Shareholder Servicing................................8
(g) Legal, Accounting, Taxes and Other...................9
Section 3.4 Payment of Trust Expenses and Compensation
of Trustees...............................................10
Section 3.5 Ownership of Assets of the Trust..........................10
ARTICLE IV. SHARES....................................................10
- ---------- ------
Section 4.1 Description of Shares.....................................10
Section 4.2 Establishment and Designation of Series...................12
(a) Assets Belonging to Series..........................12
(b) Liabilities Belonging to Series.....................13
(c) Dividends...........................................13
(d) Liquidation.........................................14
(e) Voting..............................................15
(f) Redemption by Shareholder...........................15
(g) Redemption by Trust.................................16
(h) Net Asset Value.....................................16
(i) Transfer............................................16
(j) Equality............................................16
(k) Fractions...........................................17
(l) Conversion Rights...................................17
Section 4.3 Ownership of Shares.......................................17
Section 4.4 Investments in the Trust..................................17
Section 4.5 No Preemptive Rights......................................17
Section 4.6 Status of Shares and Limitation of Personal
Liability.................................................18
- ii -
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<PAGE>
ARTICLE V. SHAREHOLDERS' VOTING POWERS AND MEETINGS..................18
- --------- ----------------------------------------
Section 5.1 Voting Powers.............................................18
Section 5.2 Meetings..................................................19
Section 5.3 Record Dates..............................................19
Section 5.4 Quorum and Required Vote..................................20
Section 5.5 Action by Written Consent.................................20
Section 5.6 Inspection of Records.....................................20
Section 5.7 Additional Provisions.....................................20
ARTICLE VI. LIMITATION OF LIABILITY; INDEMNIFICATION..................20
- ---------- ----------------------------------------
Section 6.1 Trustees, Shareholders, etc. Not Personally
Liable; Notice............................................20
Section 6.2 Trustee's Good Faith Action; Expert Advice;
No Bond or Surety.........................................21
Section 6.3 Indemnification of Shareholders...........................22
Section 6.4 Indemnification of Trustees, Officers, etc................22
Section 6.5 Advances of Expenses......................................22
Section 6.6 Indemnification Not Exclusive, etc........................23
Section 6.7 Liability of Third Persons Dealing with
Trustees..................................................23
ARTICLE VII. MISCELLANEOUS.............................................23
- ----------- -------------
Section 7.1 Duration and Termination of Trust.........................23
Section 7.2 Reorganization............................................23
Section 7.3 Amendments................................................24
Section 7.4 Filing of Copies; References; Headings....................25
Section 7.5 Applicable Law............................................25
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<PAGE>
BONFIGLIO & REED INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
APRIL 14, 2000
BYLAWS
------
OF
--
BONFIGLIO & REED INVESTMENT TRUST
---------------------------------
ARTICLE 1
---------
AGREEMENT AND DECLARATION OF TRUST AND OFFICES
----------------------------------------------
1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall be subject to
the Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Bonfiglio & Reed Investment Trust, the Ohio business
trust established by the Declaration of Trust (the "Trust").
1.2 OFFICES. The Trust may maintain one or more other offices, including
its principal office, in or outside of Ohio, in such cities as the Trustees may
determine from time to time. Unless the Trustees otherwise determine, the
principal office of the Trust shall be located in Cincinnati, Ohio.
ARTICLE 2
---------
MEETINGS OF TRUSTEES
--------------------
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the Trustees may from time to
time determine, provided that notice of the first regular meeting following any
such determination shall be given to absent Trustees. A regular meeting of the
Trustees may be held without call or notice immediately after and at the same
place as any meeting of the shareholders.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may be held at any
time and at any place designated in the call of the meeting when called by the
President or the Treasurer or by two or more Trustees, sufficient notice thereof
being given to each Trustee by the Secretary or an Assistant Secretary or by the
officer or the Trustees calling the meeting.
2.3 NOTICE. It shall be sufficient notice to a Trustee of a special meeting
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give notice to him or
her in person or by telephone at least twenty-four hours before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her
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<PAGE>
before or after the meeting, is filed with the records of the meeting, or to any
Trustee who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him or her. Neither notice of a meeting nor
a waiver of a notice need specify the purposes of the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of the Trustees then
in office shall constitute a quorum. Any meeting may be adjourned from time to
time by a majority of the votes cast upon the question, whether or not a quorum
is present, and the meeting may be held as adjourned without further notice.
2.5 PARTICIPATION BY TELEPHONE. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting except as
otherwise provided by the Investment Company Act of 1940, as amended.
2.6 ACTION BY CONSENT. Any action required or permitted to be taken at any
meeting of the Trustees or any committee thereof may be taken without a meeting,
if a written consent of such action is signed by a majority of the Trustees then
in office or a majority of the members of such committee, as the case may be,
and such written consent is filed with the minutes of the proceedings of the
Trustees or such committee.
ARTICLE 3
---------
OFFICERS
--------
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including Vice
Presidents, if any, as the Trustees from time to time may in their discretion
elect. The Trust may also have such agents as the Trustees from time to time may
in their discretion appoint. The President of the Trust shall be a Trustee and
may but need not be a shareholder; and any other officer may be but none need be
a Trustee or shareholder. Any two or more offices may be held by the same
person.
3.2 ELECTION. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees. Other officers, if any, may be elected or
appointed by the Trustees at any time. Vacancies in any office may be filled at
any time.
3.3 TENURE. The President, the Treasurer and the Secretary shall hold
office for one year and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed or
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<PAGE>
becomes disqualified. Each other officer shall hold office and each agent shall
retain authority at the pleasure of the Trustees.
3.4 POWERS. Subject to the other provisions of these Bylaws, each officer
shall have, in addition to the duties and powers herein and in the Declaration
of Trust set forth, such duties and powers as are commonly incident to the
office occupied by him or her as if the Trust were organized as an Ohio business
corporation and such other duties and powers as the Trustees may from time to
time designate.
3.5 PRESIDENT. Unless the Trustees otherwise provide, the President, or in
the absence of the President, any other Trustee chosen by the Trustees, shall
preside at all meetings of the shareholders and of the Trustees. The President
shall be the chief executive officer of the Trust.
3.6 TREASURER. The Treasurer shall be the chief financial and accounting
officer of the Trust, and shall, subject to the provisions of the Declaration of
Trust and to any arrangement made by the Trustees with a custodian, investment
adviser or manager, or transfer, shareholder servicing or similar agent, be in
charge of the valuable papers, books of account and accounting records of the
Trust, and shall have such other duties and powers as may be designated from
time to time by the Trustees or by the President.
3.7 SECRETARY. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an assistant
secretary, or if there be none or if he or she is absent, a temporary secretary
chosen at such meeting shall record the proceedings thereof in the aforesaid
books.
3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may resign at any
time by written instrument signed by him or her and delivered to the President
or the Secretary or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some other time. The
Trustees may remove any officer elected by them with or without cause. Except to
the extent expressly provided in a written agreement with the Trust, no Trustee
or officer resigning and no officer 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.
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<PAGE>
ARTICLE 4
---------
COMMITTEES
----------
4.1 GENERAL. The Trustees, by vote of a majority of the Trustees then in
office, may elect from their number an Executive Committee or other committees
and may delegate thereto some or all of their powers except those which by law,
by the Declaration of Trust, or by these Bylaws may not be delegated. Except as
the Trustees may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Trustees or in
such rules, its business shall be conducted so far as possible in the same
manner as is provided by these Bylaws for the Trustees themselves. All members
of such committees shall hold such offices at the pleasure of the Trustees. The
Trustees may abolish any such committee at any time. Any committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its action to the Trustees. The Trustees shall have
power to rescind any action of any committee, but no such rescission shall have
retroactive effect.
ARTICLE 5
---------
REPORTS
-------
5.1 GENERAL. The Trustees and officers shall render reports at the time and
in the manner required by the Declaration of Trust or any applicable law.
Officers and committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
---------
FISCAL YEAR
-----------
6.1 GENERAL. The fiscal year of the Trust shall be fixed, and shall be
subject to change by the Trustees.
ARTICLE 7
---------
SEAL
----
7.1 GENERAL. If required by applicable law, the seal of the Trust shall
consist of a flat-faced die with the word "Ohio", together with the name of the
Trust and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
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<PAGE>
ARTICLE 8
---------
EXECUTION OF PAPERS
-------------------
8.1 GENERAL. Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, the Secretary or the Treasurer and need not
bear the seal of the Trust, but shall state the substance of or make reference
to the provisions of Section 6.1 of the Declaration of Trust.
ARTICLE 9
---------
ISSUANCE OF SHARE CERTIFICATES
------------------------------
9.1 SHARE CERTIFICATES. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share certificates.
In that event, each shareholder shall be entitled to a certificate stating the
number of shares owned by him, in such form as shall be prescribed from time to
time by the Trustees. Such certificate shall be signed by the President and by
the Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he were such officer at the time of its issue.
9.2 LOSS OF CERTIFICATES. In case of the alleged loss or destruction or the
mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. In the event certificates have
been issued, a pledgee of shares transferred as collateral security shall be
entitled to a new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured thereby. Such new
certificate
-5-
<PAGE>
shall express on its face that it is held as collateral security, and the name
of the pledgor shall be stated thereon, who alone shall be liable as a
shareholder, and entitled to vote thereon.
9.4 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
ARTICLE 10
----------
CUSTODIAN
---------
10.1 GENERAL. The Trust shall at all times employ a bank or trust company
or such other institution as may meet the requirements of the Investment Company
Act of 1940, as amended, as Custodian of the capital assets of the Trust. The
Custodian shall be compensated for its services by the Trust and upon such basis
as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 11
----------
DEALINGS WITH TRUSTEES AND OFFICERS
-----------------------------------
11.1 GENERAL. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which he is interested.
ARTICLE 12
----------
SHAREHOLDERS
------------
12.1 MEETINGS. A meeting of the shareholders of the Trust shall be held
whenever called by the Trustees, whenever election of a Trustee or Trustees by
shareholders is required by the provisions of Section 16(a) of the Investment
Company Act of 1940, as amended, for that purpose or whenever otherwise required
pursuant to the Declaration of Trust. Any meeting shall be held on such day and
at such time as the President or the Trustees may fix in the notice of the
meeting.
12.2 RECORD DATES. For the purpose of determining the shareholders who are
entitled to vote or act at any meeting or any adjournment thereof, or who are
entitled to receive payment of any dividend or of any other distribution, the
Trustees may from time to time fix a time, which shall be not more than 60
-6-
<PAGE>
days before the date of any meeting of shareholders or the date for the payment
of any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case, only shareholders of record on such record date shall have
such right, notwithstanding any transfer of shares on the books of the Trust
after the record date; or without fixing such record date the Trustees may for
any such purposes close the register or transfer books for all or any part of
such period.
ARTICLE 13
----------
AMENDMENTS TO THE BYLAWS
------------------------
13.1 GENERAL. These Bylaws may be amended or repealed, in whole or in part,
by a majority of the Trustees then in office at any meeting of the Trustees, or
by one or more writings signed by such a majority.
-7-
ADVISORY AGREEMENT
------------------
AGREEMENT made this ____ day of ______, 2000, between Bonfiglio & Reed
Investment Trust (the "Trust"), a business trust organized under the laws of the
State of Ohio, and Bonfiglio & Reed, LLC. (the "Adviser"), a Limited Liability
Corporation organized under the laws of the State of Arizona.
WHEREAS, the Trust has been organized to operate as an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust's shares of beneficial interest are divided into
separate series or funds, each having separate investment objectives and
policies; and
WHEREAS, the Bonfiglio & Reed Options Fund (the "Fund") has been
established as a series of the Trust; and
WHEREAS, the Fund has been created for the purpose of investing and
reinvesting its assets in securities pursuant to its investment objective and
policies as set forth in the Trust's registration statements under the 1940 Act
and the Securities Act of 1933 ("Registration Statements"), as heretofore
amended and supplemented; and the Trust desires to avail itself of the services,
information, advice, assistance and facilities of a manager and to have a
manager provide or perform for it various management, statistical and other
services for the Fund;
NOW, THEREFORE, the Trust and the Adviser agree as follows:
1. EMPLOYMENT OF THE ADVISER. The Trust hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund in the manner
set forth in paragraph 2 of this Agreement, subject to the direction of the
Board of Trustees and the officers of the Trust, for the period, in the manner,
and on the terms hereinafter set forth. The Adviser hereby accepts such
employment and agrees during such period to render the services and to assume
the obligations herein set forth. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent of the Fund.
2. OBLIGATION OF AND SERVICES TO BE PROVIDED BY THE ADVISER. The Adviser
undertakes to provide the services hereinafter set forth and to assume the
following obligations:
<PAGE>
A. Investment Management Services.
(a) The Adviser shall have responsibility for the management and
investment of the assets and portfolio securities of the Fund
subject to and in accordance with the investment objective and
policies of the Fund, and any directions which the Trust's Board
of Trustees may issue to the Adviser from time to time.
(b) The Adviser shall provide overall investment programs and
strategies for the Fund, shall revise such programs as necessary
and shall monitor and report periodically to the Board of
Trustees concerning the implementation of the programs.
(c) The Adviser shall provide or arrange for and supervise the
provision by third parties to the Fund of custody, transfer
agency, administrative, accounting, legal, audit and similar
services.
(d) The Adviser shall render regular reports to the Trust, at regular
meetings of the Board of Trustees, of, among other things, the
portfolio investments of the Fund and measurement and analysis of
the results achieved by the Fund.
B. Provision of Information Necessary for Preparation of Securities
Registration Statements, Amendments and Other Materials.
The Adviser will make available and provide financial, accounting and
statistical information required by the Trust in the preparation of
registration statements, reports and other documents required by
federal and state securities laws, and such information as the Trust
may reasonably request for use in the preparation of registration
statements, reports and other documents required by federal and state
securities laws.
C. Other Obligations and Services.
The Adviser shall make available its officers and employees to the
Board of Trustees and officers of the Trust for consultation and
discussions regarding the administration and management of the Fund
and its investment activities.
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE COMMISSIONS. The
Adviser, subject to the limitations contained in this paragraph 3, shall place,
on behalf of the Fund, orders for the execution of portfolio transactions. The
Adviser is not authorized by the Fund to take any action, including the purchase
or sale of securities for the Fund's account, (a) in contravention of (i) any
investment restrictions set forth in the 1940 Act and the rules thereunder, (ii)
specific instructions
-2-
<PAGE>
adopted by the Board of Trustees and communicated to the Adviser, (iii) the
investment objective, policies and restrictions of the Fund as set forth in the
Trust's Registration Statement, or (iv) instructions from the Trust communicated
to the Adviser, or (b) which would have the effect of causing the Fund to fail
to qualify or to cease to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended, or any succeeding statute.
Subject to the foregoing, the Adviser shall determine the securities to be
purchased or sold by the Fund and will place orders pursuant to its
determination with or through such persons, brokers or dealers in conformity
with the policy with respect to brokerage as set forth in the Trust's
Registration Statement or as the Board of Trustees may direct from time to time.
It is recognized that, in providing the Fund with investment supervision of the
placing of orders for portfolio transactions, the Adviser will give primary
consideration to securing the best qualitative execution, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer.
Consistent with this policy, the Adviser may select brokers or dealers who
also provide brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to the other accounts over
which it exercises investment discretion. It is understood that neither the
Trust nor the Adviser have adopted a formula for allocation of the Fund's
investment transaction business. It is also understood that it is desirable for
the Fund that the Adviser have access to supplemental investment and market
research and security and economic analyses provided by certain brokers who may
execute brokerage transactions at a higher commission to the Fund than may
result when allocating brokerage to other brokers on the basis of seeking the
lowest commission. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities for the Fund with such certain brokers, subject
to review by the Trust's Board of Trustees from time to time with respect to the
extent and continuation of this practice, provided that the Adviser determines
in good faith that the amount of the commission is reasonable in relation to the
value of the brokerage and research services provided by the executing broker or
dealer. The determination may be viewed in terms of either a particular
transaction or the Adviser's overall responsibilities with respect to the Fund
and to other accounts over which it exercises investment discretion. It is
understood that although the information may be useful to the Fund and the
Adviser, it is not possible to place a dollar value on such information.
Consistent with the Rules of Conduct of the National Association of Securities
Dealers, Inc., and subject to seeking best qualitative execution, the Adviser
may give consideration to sales of shares of the Fund as a factor in the
selection of brokers and dealers to execute portfolio transactions of the Fund.
-3-
<PAGE>
On occasions when the Adviser deems the purchase or sale of a security to
be in the best interest of the Fund as well as other clients, the Adviser, to
the extent permitted by applicable laws and regulations, may, but shall be under
no obligation to, aggregate the securities to be sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as expenses incurred in the transaction, will be made by the Adviser in the
manner it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
Consistent with the policies described in this paragraph 3, the Adviser may
execute any portfolio transactions for the Fund's account with a broker or
dealer which is an "affiliated person" (as defined in the Act) of the Trust or
the Adviser, subject to review by the Trust's Board of Trustees from time to
time with respect to the extent and continuation of this practice.
For each fiscal quarter of the Fund, the Adviser shall render reports to
the Trust's Board of Trustees of the total brokerage business placed by the Fund
and the manner in which the allocation has been accomplished.
4. EXPENSES OF THE FUND. The Adviser will pay all of the expenses of the
Fund (including the fees and charges of third-party service providers engaged
pursuant to paragraph 2 above) except the following: interest; taxes; brokerage
commissions; extraordinary expenses; and the fees and expenses, including
ordinary counsel fees, of those Trustees who are not "interested persons" as
defined in the 1940 Act (hereinafter referred to as the "Independent Trustees").
The Adviser will provide the Trust with such facilities and personnel as may,
from time to time, be required to carry on the business of the Fund including
but not limited to office space, office furniture, fixtures and equipment,
office supplies, computer hardware and software and salaried and hourly paid
personnel. The Adviser may at its expense employ others to provide all or any
part of such facilities and personnel.
5. ACTIVITIES AND AFFILIATES OF THE ADVISER.
A. The services of the Adviser hereunder are not to be deemed exclusive,
and the Adviser and any of its affiliates shall be free to render
similar services to others. The Adviser shall use the same skill and
care in the management of the Fund's assets as it uses in the
administration of other accounts to which it provides asset
management, consulting and portfolio manager selection services, but
shall not be obligated to give the Fund more favorable or preferential
treatment vis-a-vis its other clients.
-4-
<PAGE>
B. Subject to and in accordance with the Agreement and Declaration of
Trust and Bylaws of the Trust and to Section 10(a) of the 1940 Act, it
is understood that Trustees, officers and agents of the Trust and
shareholders of the Fund are or may be interested in the Adviser or
its affiliates as directors, officers, agents, stockholders or
partners of the Adviser or its affiliates; that directors, officers,
agents, stockholders or partners of the Adviser or its affiliates are
or may be interested in the Trust as Trustees, officers, agents,
shareholders or otherwise; that the Adviser or its affiliates may be
interested in the Trust as shareholders or otherwise; and that the
effect of any such interests shall be governed by said Declaration of
Trust, Bylaws and the 1940 Act.
6. COMPENSATION OF ADVISER. (a) As full compensation for the services and
such facilities as may from time to time be furnished by the Adviser under this
Agreement, the Fund agrees to pay the Adviser a fee equal to the annual rate of
2.95% of the average value of its daily net assets, less the accrued fees and
expenses, including ordinary counsel fees, of the Independent Trustees of the
Trust. Such fees shall be accrued daily and payable monthly. For purposes of
calculating such fees, net asset value shall be determined by taking the average
of all determinations of net asset value made in the manner provided in the
Fund's current Prospectus and Statement of Additional Information.
(b) For any period less than a full month during which this Agreement is in
effect the compensation payable to the Adviser hereunder shall be prorated
according to the proportion which such period bears to a full month.
7. LIABILITIES OF THE ADVISER.
A. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of obligations or duties hereunder on the part of
the Adviser, the Adviser shall not be subject to liability to the Fund
or to any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any
security.
B. No provision of this Agreement shall be construed to protect any
Trustee, director, officer or agent of the Trust or the Adviser from
liability in violation of Sections 17(h) and (i) of the 1940 Act.
-5-
<PAGE>
8. RENEWAL AND TERMINATION.
A. This Agreement shall become effective on the date first written above
and shall remain in full force and effect for two (2) years from the
date hereof and from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the vote of
a majority of the Trustees who are not interested persons of the Trust
or the Adviser, cast in person at a meeting called for the purpose of
voting on such approval and by a vote of the Board of Trustees or of a
majority of the outstanding voting securities of each Fund. The
aforesaid provision that this Agreement may be continued "annually"
shall be construed in a manner consistent with the Act and the rules
and regulations thereunder.
B. This Agreement:
(a) may at any time be terminated, without the payment of any penalty,
either by vote of the Board of Trustees of the Trust or, with respect
to the Fund, by vote of a majority of the outstanding voting
securities of the Fund, on sixty (60) days' written notice to the
Adviser;
(b) shall immediately terminate in the event of its assignment; and
(c) may be terminated by the Adviser on sixty (60) days' written notice to
the Trust.
C. As used in this Section 8, the terms "assignment," "interested person"
and "vote of a majority of the outstanding voting securities" shall
have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
D. Any notice under this Agreement shall be given in writing addressed
and delivered or mailed postpaid, to the other party to this Agreement
at its principal place of business.
9. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
10. LIMITATION OF LIABILITY. It is expressly agreed that the obligations of
the Trust hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally, but bind only
the trust property of the Trust, as provided in the Declaration of Trust of
-6-
<PAGE>
the Trust. The execution and delivery of this Agreement have been authorized by
the Trustees and shareholders of the Trust and signed by the officers of the
Trust, acting as such, and neither such authorization by such Trustees and
shareholders nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust as provided
in its Declaration of Trust.
11. USE OF NAME. The Adviser may use the name "Bonfiglio & Reed" or any
derivation thereof in connection with another business enterprise, including any
registered investment company with which the Adviser is, or may become
associated, so long as such use is permitted under the Act and other applicable
law. The Trust will discontinue any use of the name "Bonfiglio & Reed" if the
Adviser ceases to be employed as the Trust's investment manager.
12. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged or terminated orally, and no amendment of this
Agreement shall be effective until approved by vote of the holders of a majority
of the outstanding voting securities of the Fund and by the Board of Trustees,
including a majority of the Independent Trustees, cast in person at a meeting
called for the purpose of voting on such approval.
13. GOVERNING LAW. To the extent that state law has not been preempted by
the provisions of any law of the United States heretofore or hereafter enacted,
as the same may be amended from time to time, this Agreement shall be
administered, construed and enforced according to the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, as of the day and year first written above.
BONFIGLIO & REED INVESTMENT TRUST
ATTEST: By:
------------------------------
/S/ Title: President
---------------------------
BONFIGLIO & REED, LLC
ATTEST: By:
------------------------------
/S/ Title: President
---------------------------
-7-
UNDERWRITING AGREEMENT
----------------------
This Agreement made as of ___________ , 2000 by and between Bonfiglio &
Reed Investment Trust (the "Company"), an Ohio business trust, Bonfiglio & Reed
LLC (the "Manager"), a Limited Liability Corporation organized under the laws of
the State of Arizona, and IFS Fund Distributors, Inc., a Delaware corporation
(the "Underwriter").
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is employed by the Company to
provide it with investment advisory and management services; and
WHEREAS, Underwriter is a broker-dealer registered with the Securities and
Exchange Commission and a member of the National Association of Securities
Dealers, Inc. (the "NASD") and is registered with the relevant securities
regulatory agencies in all fifty states, the District of Columbia and Puerto
Rico; and
WHEREAS, the Company and Underwriter are desirous of entering into an
agreement providing for the distribution by Underwriter of shares of beneficial
interest (the "Shares") of each series of shares of the Company (the "Series")
to the public in accordance with the applicable federal and state securities
laws;
NOW, THEREFORE, in consideration of the promises and agreements of the
parties contained herein, the parties agree as follows:
-1-
<PAGE>
1. APPOINTMENT.
------------
The Company hereby appoints, for the period of this Agreement,
Underwriter as its exclusive agent for the distribution of the Shares, and
Underwriter hereby accepts such appointment under the terms of this Agreement.
While this Agreement is in force, the Company shall not sell any Shares except
on the terms set forth in this Agreement. Notwithstanding any other provision
hereof, the Company may terminate, suspend or withdraw the offering of Shares
whenever, in its sole discretion, it deems such action to be desirable.
Underwriter will undertake and discharge its obligations hereunder as an
independent contractor and shall have no authority or power to obligate or bind
the Company by its actions, conduct or contracts except as described in this
Agreement.
2. SALE AND REPURCHASE OF SHARES.
------------------------------
(a) Underwriter will have the right, as agent for the Company, to
enter into dealer agreements with responsible investment dealers, and to sell
Shares to such investment dealers against orders therefor at the public offering
price (as defined in subparagraph 2(d) hereof) stated in the Company's effective
Registration Statement on Form N-1A under the Securities Act of 1933, as
amended, including the then current prospectus and statement of additional
information (the "Registration Statement"). Upon receipt of an order to purchase
Shares from a dealer with whom Underwriter has a dealer agreement, Underwriter
will promptly cause such order to be filled by the Company.
(b) Underwriter will also have the right, as agent for the Company, to
sell such Shares to the public against orders therefor at the public offering
price.
-2-
<PAGE>
(c) Underwriter will also have the right to take, as agent for the
Company, all actions which, in Underwriter's judgment, are necessary to carry
into effect the distribution of the Shares.
(d) The public offering price for the Shares of each Series shall be
the respective net asset value of the Shares of that Series then in effect, plus
any applicable sales charge determined in the manner set forth in the
Registration Statement or as permitted by the Act and the rules and regulations
of the Securities and Exchange Commission promulgated thereunder. In no event
shall any applicable sales charge exceed the maximum sales charge permitted by
the Rules of the NASD. Any payments to dealers shall be governed by a separate
agreement between Underwriter and such dealer and the Registration Statement.
(e) The net asset value of the Shares of each Series shall be
determined in the manner provided in the Registration Statement, and when
determined shall be applicable to transactions as provided for in the
Registration Statement. The net asset value of the Shares of each Series shall
be calculated by the Company or by another entity on behalf of the Company.
Underwriter shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
(f) On every sale, the Company shall receive the applicable net asset
value of the Shares promptly, but in no event later than the third business day
following the date on which Underwriter shall have received an order for the
purchase of the Shares.
(g) Upon receipt of purchase instructions, Underwriter will transmit
such instructions to the Company or its transfer agent for registration of the
Shares purchased.
(h) Exchanges of shares between Funds will be effected in the manner
and subject to the restrictions and charges described in the Registration
Statement. The handling of
-3-
<PAGE>
exchanges will be further subject to such other procedures as may be mutually
agreed upon from time to time.
(i) Nothing in this Agreement shall prevent Underwriter or any
affiliated person (as defined in the Act) of Underwriter from acting as
underwriter or distributor for any other person, firm or corporation (including
other investment companies) or in any way limit or restrict Underwriter or any
such affiliated person from buying, selling or trading any securities for its or
their own account or for the accounts of others for whom it or they may be
acting; provided, however, that Underwriter expressly represents that it will
undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Company under this Agreement.
(j) Underwriter, as agent of and for the account of the Company, may
repurchase the Shares at such prices and upon such terms and conditions as shall
be specified in the Registration Statement.
3. SALE OF SHARES BY THE COMPANY.
-----------------------------
The Company reserves the right to issue any Shares at any time
directly to the holders of Shares ("Shareholders"), to sell Shares to its
Shareholders or to other persons approved by Underwriter at not less than net
asset value and to issue Shares in exchange for substantially all the assets of
any corporation or trust or for the shares of any corporation or trust.
4. BASIS OF SALE OF SHARES.
-----------------------
Underwriter does not agree to sell any specific number of Shares.
Underwriter, as agent for the Company, undertakes to sell Shares on a best
efforts basis only against orders therefor.
-4-
<PAGE>
5. RULES OF NASD, ETC.
-------------------
(a) Underwriter will conform to the Rules of the NASD and the
securities laws of any jurisdiction in which it sells, directly or indirectly,
any Shares.
(b) Underwriter will require each dealer with whom Underwriter has a
dealer agreement to conform to the applicable provisions hereof and the
Registration Statement with respect to the public offering price of the Shares,
and neither Underwriter nor any such dealers shall withhold the placing of
purchase orders so as to make a profit thereby.
(c) Underwriter agrees to furnish to the Company sufficient copies of
any agreements, plans or other materials it intends to use in connection with
any sales of Shares in adequate time for the Company to file and clear them with
the proper authorities before they are put in use, and not to use them until so
filed and cleared.
(d) Underwriter, at its own expense, will qualify as dealer or broker,
or otherwise, under all applicable State or federal laws required in order that
Shares may be sold in such States as may be mutually agreed upon by the parties.
(e) Underwriter shall not make, or permit any representative, broker
or dealer to make, in connection with any sale or solicitation of a sale of the
Shares, any representations concerning the Shares except those contained in the
then current prospectus and statement of additional information covering the
Shares and in printed information approved by the Company as information
supplemental to such prospectus and statement of additional information. Copies
of the then effective prospectus and statement of additional information and any
such printed supplemental information will be supplied by the Company to
Underwriter in reasonable quantities upon request.
-5-
<PAGE>
(f) Underwriter shall file Company advertisements, sales literature
and other marketing and sales related materials with the appropriate regulatory
agencies and shall obtain such approvals for their use as may be required by the
Securities and Exchange Commission, the NASD and/or state securities
administrators. Underwriter shall not disseminate to the public any such
materials without prior approval by Company.
6. RECORDS TO BE SUPPLIED BY COMPANY.
---------------------------------
The Company shall furnish to Underwriter copies of all information,
financial statements and other papers which Underwriter may reasonably request
for use in connection with the distribution of the Shares, and this shall
include, but shall not be limited to, one certified copy, upon request by
Underwriter, of all financial statements prepared for the Company by independent
public accountants.
7. FEES AND EXPENSES.
-----------------
In performing its services under this Agreement, Underwriter will
receive from the Manager a fee of $500 per month. Fees shall be paid monthly in
arrears. The Manager shall promptly reimburse Underwriter for any expenses which
are to be paid by the Manager in accordance with the following paragraph.
In the performance of its obligations under this Agreement,
Underwriter will pay only the costs incurred in qualifying as a broker or dealer
under state and federal laws and in establishing and maintaining its
relationships with the dealers selling the Shares. All other costs in connection
with the offering of the Shares will be paid by the Manager in accordance with
agreements between them as permitted by applicable law, including the Act and
rules and regulations promulgated thereunder. These costs include, but are not
limited to, licensing fees, filing fees, travel and such other expenses as may
be incurred by Underwriter on behalf of the Company and the Manager.
-6-
<PAGE>
8. INDEMNIFICATION OF COMPANY AND MANAGER.
--------------------------------------
Underwriter agrees to indemnify and hold harmless the Company, the
Manager and each person who has been, is, or may hereafter be a director,
trustee, officer, employee, shareholder or control person of the Company or the
Manager, against any loss, damage or expense (including the reasonable costs of
investigation) reasonably incurred by any of them in connection with any claim
or in connection with any action, suit or proceeding to which any of them may be
a party, which arises out of or is alleged to arise out of or is based upon any
untrue statement or alleged untrue statement of a material fact, or the omission
or alleged omission to state a material fact necessary to make the statements
not misleading, on the part of Underwriter or any agent or employee of
Underwriter or any other person for whose acts Underwriter is responsible,
unless such statement or omission was made in reliance upon written information
furnished by the Company or the Manager. Underwriter likewise agrees to
indemnify and hold harmless the Company, the Manager and each such person in
connection with any claim or in connection with any action, suit or proceeding
which arises out of or is alleged to arise out of Underwriter's failure to
exercise reasonable care and diligence with respect to its services, if any,
rendered in connection with investment, reinvestment, automatic withdrawal and
other plans for Shares. The term "expenses" for purposes of this and the next
paragraph includes amounts paid in satisfaction of judgments or in settlements
which are made with Underwriter's consent. The Underwriter will advance
attorneys' fees or other expenses incurred by any such person in defending a
proceeding upon the undertaking by or on behalf of such person to repay the
advance if it is ultimately determined that such person is not entitled to
indemnification. The foregoing rights of indemnification shall be in addition to
any other rights to which the Company, the Manager or each such person may be
entitled as a matter of law.
-7-
<PAGE>
9. INDEMNIFICATION OF UNDERWRITER.
------------------------------
The Company agrees to indemnify and hold harmless Underwriter and each
person who has been, is, or may hereafter be a director, officer, employee,
shareholder or control person of Underwriter against any loss, damage or expense
(including the reasonable costs of investigation) reasonably incurred by any of
them in connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or negligence on the part of
any of such persons in the performance of Underwriter's duties or from the
reckless disregard by any of such persons of Underwriter's obligations and
duties under this Agreement. The Company will advance attorneys' fees or other
expenses incurred by any such person in defending a proceeding, upon the
undertaking by or on behalf of such person to repay the advance if it is
ultimately determined that such person is not entitled to indemnification. Any
person employed by Underwriter who may also be or become an officer or employee
of the Company shall be deemed, when acting within the scope of his employment
by the Company, to be acting in such employment solely for the Company and not
as an employee or agent of Underwriter.
10. TERMINATION AND AMENDMENT OF THIS AGREEMENT.
-------------------------------------------
This Agreement shall automatically terminate, without the payment of
any penalty, in the event of its assignment. This Agreement may be amended only
if such amendment is approved (i) by Underwriter, (ii) either by action of the
Board of Trustees of the Company or at a meeting of the Shareholders of the
Company by the affirmative vote of a majority of the outstanding Shares, and
(iii) by a majority of the Trustees of the Company who are not interested
persons of the Company or of Underwriter by vote cast in person at a meeting
called for the purpose of voting on such approval.
-8-
<PAGE>
Either the Company or Underwriter may at any time terminate this
Agreement on sixty (60) days' written notice delivered or mailed by registered
mail, postage prepaid, to the other party.
11. EFFECTIVE PERIOD OF THIS AGREEMENT.
----------------------------------
This Agreement shall take effect upon its execution and shall remain
in full force and effect for a period of two (2) years from the date of its
execution (unless terminated automatically as set forth in Section 10), and from
year to year thereafter, subject to annual approval (i) by Underwriter, (ii) by
the Board of Trustees of the Company or a vote of a majority of the outstanding
Shares, and (iii) by a majority of the Trustees of the Company who are not
interested persons of the Company or of Underwriter by vote cast in person at a
meeting called for the purpose of voting on such approval.
12. NEW SERIES.
----------
The terms and provisions of this Agreement shall become automatically
applicable to any additional series of the Company established during the
initial or renewal term of this Agreement.
13. SUCCESSOR INVESTMENT COMPANY.
----------------------------
Unless this Agreement has been terminated in accordance with Paragraph
10, the terms and provisions of this Agreement shall become automatically
applicable to any investment company which is a successor to the Company as a
result of reorganization, recapitalization or change of domicile.
14. SEVERABILITY.
------------
In the event any provision of this Agreement is determined to be void
or
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<PAGE>
unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
15. QUESTIONS OF INTERPRETATION.
---------------------------
(a) This Agreement shall be governed by the laws of the State of
Delaware.
(b) Any question of interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived from a term or provision
of the Act shall be resolved by reference to such term or provision of the Act
and to interpretation thereof, if any, by the United States courts or in the
absence of any controlling decision of any such court, by rules, regulations or
orders of the Securities and Exchange Commission issued pursuant to said Act. In
addition, where the effect of a requirement of the Act, reflected in any
provision of this Agreement is revised by rule, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
16. LIMITATION OF LIABILITY.
-----------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
17. MISCELLANEOUS.
-------------
(a) The parties to this Agreement acknowledge and understand that any
and all technical, trade secret, or business information, including, without
limitation, financial
-10-
<PAGE>
information, business or marketing strategies or plans, product development or
customer information, which is disclosed to the other or is otherwise obtained
by the other, its affiliates, agents or representatives during the term of this
Agreement (the "Proprietary Information") is confidential and proprietary,
constitutes trade secrets of the owner, and is of great value and importance to
the success of the owner's business. Each party agrees to use its best efforts
(the same being not less than that employed to protect its own proprietary
information) to safeguard the Proprietary Information and to prevent the
unauthorized, negligent or inadvertent use or disclosure thereof. Neither party
shall, without the prior written approval of an officer of the other, directly
or indirectly, disclose the Proprietary Information. Each party shall be liable
under this Agreement to the other for any use or disclosure in violation of this
Agreement by its employees, attorneys, accountants, or other advisors or agents.
This section shall continue in full force and effect notwithstanding the
termination of this Agreement.
18. NOTICES.
-------
Any notices under this Agreement shall be in writing, addressed and
delivered or mailed postage paid to the other party at such address as such
other party may designate for the receipt of such notice. Until further notice
to the other party, it is agreed that the address of the Company and the Manager
for this purpose shall be 1661 East Camelback, Suite 280, Phoenix, Arizona
85016, and that the address of Underwriter for this purpose shall be 312 Walnut
Street, Cincinnati, Ohio 45202.
-11-
<PAGE>
IN WITNESS WHEREOF, the Company, the Manager and Underwriter have each
caused this Agreement to be signed in duplicate on their behalf, all as of the
day and year first above written.
BONFIGLIO & REED INVESTMENT TRUST
By:_______________________________
Its: President
BONFIGLIO & REED LLC
By:_______________________________
Its: President
IFS FUND DISTRIBUTORS, INC.
By:_______________________________
Its: President
-12-
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
--------------------------------------------------------
AGREEMENT dated as of _____________, 2000 between Bonfiglio & Reed
Investment Trust (the "Trust"), an Ohio business trust, Bonfiglio & Reed, LLC
("B & R"), an Arizona limited liability corporation, and _______ Fund Solutions,
Inc. ("__________"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, B & R is registered as an investment adviser under the Investment
Advisers Act of 1940 and provides advisory services to the Trust pursuant to an
Advisory Agreement; and
WHEREAS, under the Advisory Agreement, B & R is responsible for retaining
and compensating agents to provide non-advisory services to the Trust; and
WHEREAS, B & R wishes to employ the services of _______ to serve as its
administrative agent, accounting and pricing agent and transfer and dividend
disbursing agent; and
WHEREAS, _______ wishes to provide such services under the conditions set
forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Trust and _______ agree as follows:
1. APPOINTMENT.
-----------
B & R, being hereby authorized, hereby employs _______ as agent to
perform those services described in this Agreement for the Trust. _______ shall
act under such appointment and perform the obligations thereof upon the terms
and conditions hereinafter set forth.
2. DOCUMENTATION.
-------------
The Trust will furnish from time to time the following documents:
A. Each resolution of the Board of Trustees of the Trust authorizing the
original issue of its shares;
B. Each Registration Statement filed with the Securities and Exchange
Commission (the "SEC") and amendments thereof;
C. A certified copy of each amendment to the Agreement and Declaration of
Trust and the Bylaws of the Trust;
<PAGE>
D. Certified copies of each resolution of the Board of Trustees
authorizing officers to give instructions to _______;
E. Specimens of all new forms of share certificates accompanied by Board
of Trustees' resolutions approving such forms;
F. Such other certificates, documents or opinions which _______ may, in
its discretion, deem necessary or appropriate in the proper
performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in effect;
H. Copies of all Advisory and Sub-Advisory Agreements in effect; and
I. Copies of all documents relating to special investment or withdrawal
plans which are offered or may be offered in the future by the Trust
and for which _______ is to act as plan agent.
3. TRUST ADMINISTRATION.
--------------------
Subject to the direction and control of B & R and the Trustees of the
Trust, _______ shall supervise the Trust's business affairs not otherwise
supervised by other agents of B & R or the Trust. To the extent not otherwise
the primary responsibility of, or provided by, other agents of the Trust,
_______ shall supply (i) office facilities, (ii) internal auditing and
regulatory services, and (iii) executive and administrative services. _______
shall coordinate the preparation of (i) reports to shareholders of the Trust,
(ii) reports to and filings with the SEC and state securities authorities
including preliminary and definitive proxy materials, post-effective amendments
to the Trust's registration statement, and the Trust's Form N-SAR, and (iii)
necessary materials for Board of Trustees' meetings, unless prepared by other
parties under agreement with B & R or the Trust. _______ shall also supervise
the preparation of all federal, state and local tax returns and reports of the
Trust required by applicable law. _______ shall provide personnel to serve as
officers of the Trust if so elected by the Board of Trustees; provided, however,
that B & R shall reimburse _______ for the reasonable out-of-pocket expenses
incurred by such personnel in attending Board of Trustees' meetings and
shareholders' meetings of the Trust.
4. CALCULATION OF NET ASSET VALUE.
------------------------------
_______ will maintain and keep current the general ledger for each
series of the Trust, recording all income and expenses, capital share activity
and security transactions of the Trust. _______ will calculate the net asset
value of each series of the Trust and the per share net asset value of each
series of the Trust, in accordance with the Trust's current prospectus and
-2-
<PAGE>
statement of additional information, once daily as of the time selected by the
Trust's Board of Trustees. _______ will prepare and maintain a daily valuation
of all securities and other assets of the Trust in accordance with instructions
from a designated officer of the Trust or B & R and in the manner set forth in
the Trust's current prospectus and statement of additional information. In
valuing securities of the Trust, _______ may contract with, and rely upon market
quotations provided by, outside services.
5. PAYMENT OF TRUST EXPENSES.
-------------------------
_______ shall process each request received from the Trust or its
authorized agents for payment of the Trust's expenses. Upon receipt of written
instructions signed by an officer or other authorized agent of the Trust,
_______ shall prepare checks in the appropriate amounts which shall be signed by
an authorized officer of _______ and mailed to the appropriate party.
6. _______ TO RECORD SHARES.
------------------------
_______ shall record the issuance of shares of the Trust and maintain
pursuant to applicable rules of the SEC a record of the total number of shares
of the Trust which are authorized, issued and outstanding, based upon data
provided to it by the Trust. _______ shall also provide the Trust on a regular
basis or upon reasonable request the total number of shares which are
authorized, issued and outstanding, but shall have no obligation when recording
the issuance of the Trust's shares, except as otherwise set forth herein, to
monitor the issuance of such shares or to take cognizance of any laws relating
to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
7. _______ TO VALIDATE TRANSFERS.
-----------------------------
Upon receipt of a proper request for transfer and upon surrender to
_______ of certificates, if any, in proper form for transfer, _______ shall
approve such transfer and shall take all necessary steps to effectuate the
transfer as indicated in the transfer request. Upon approval of the transfer,
_______ shall notify the Trust in writing of each such transaction and shall
make appropriate entries on the shareholder records maintained by _______.
-3-
<PAGE>
8. SHARE CERTIFICATES.
------------------
If the Trust authorizes the issuance of share certificates and an
investor requests a share certificate, _______ will countersign and mail, by
insured first class mail, a share certificate to the investor at his address as
set forth on the transfer books of the Trust, subject to any other instructions
for delivery of certificates representing newly purchased shares and subject to
the limitation that no certificates representing newly purchased shares shall be
mailed to the investor until the cash purchase price of such shares has been
collected and credited to the account of the Trust maintained by the Custodian.
The Trust shall supply _______ with a sufficient supply of blank share
certificates and from time to time shall renew such supply upon request of
_______. Such blank share certificates shall be properly signed, manually or, if
authorized by the Trust, by facsimile; and notwithstanding the death,
resignation or removal of any officers of the Trust authorized to sign share
certificates, _______ may continue to countersign certificates which bear the
manual or facsimile signature of such officer until otherwise directed by the
Trust. In case of the alleged loss or destruction of any share certificate, no
new certificates shall be issued in lieu thereof, unless there shall first be
furnished an appropriate bond satisfactory to _______ and the Trust, and issued
by a surety company satisfactory to _______ and the Trust.
9. RECEIPT OF FUNDS.
----------------
Upon receipt of any check or other instrument drawn or endorsed to it
as agent for, or identified as being for the account of, the Trust, _______
shall stamp the check or instrument with the date of receipt, determine the
amount thereof due the Trust and shall forthwith process the same for
collection. Upon receipt of notification of receipt of funds eligible for share
purchases in accordance with the Trust's then current prospectus and statement
of additional information, _______ shall notify the Trust, at the close of each
business day, in writing of the amount of said funds credited to the Trust and
deposited in its account with the Custodian.
10. PURCHASE ORDERS.
---------------
Upon receipt of an order for the purchase of shares of the Trust,
accompanied by sufficient information to enable _______ to establish a
shareholder account, _______ shall, as of the next determination of net asset
value after receipt of such order in accordance with the Trust's then current
prospectus and statement of additional information, compute the number of shares
due to the shareholder, credit the share account of the shareholder, subject to
collection of the funds, with the number of shares so purchased, shall notify
the Trust in writing or by computer report at the close of each business day of
such transactions and shall mail to the shareholder and/or dealer of record a
notice of such credit when required by applicable securities laws or
regulations.
-4-
<PAGE>
11. RETURNED CHECKS.
---------------
In the event that _______ is notified by the Trust's Custodian that
any check or other order for the payment of money is returned unpaid for any
reason, _______ will:
A. Give prompt notification to the Trust of the non-payment of said
check;
B. In the absence of other instructions from the Trust, take such
steps as may be necessary to redeem any shares purchased on the basis of such
returned check and cause the proceeds of such redemption plus any dividends
declared with respect to such shares to be credited to the account of the Trust
and to request the Trust's Custodian to forward such returned check to the
person who originally submitted the check; and
C. Notify the Trust of such actions and correct the Trust's records
maintained by _______ pursuant to this Agreement.
12. DIVIDENDS AND DISTRIBUTIONS.
---------------------------
The Trust shall furnish _______ with appropriate evidence of Trustee
action authorizing the declaration of dividends and other distributions. _______
shall establish procedures in accordance with the Trust's then current
prospectus and statement of additional information and with other authorized
actions of the Trust's Board of Trustees under which it will have available from
the Custodian or the Trust any required information for each dividend and other
distribution. After deducting any amount required to be withheld by any
applicable laws, _______ shall, as agent for each shareholder who so requests,
invest the dividends and other distributions in full and fractional shares in
accordance with the Trust's then current prospectus and statement of additional
information. If a shareholder has elected to receive dividends or other
distributions in cash, then _______ shall disburse dividends to shareholders of
record in accordance with the Trust's then current prospectus and statement of
additional information. _______ shall, on or before the mailing date of such
checks, notify the Trust and the Custodian of the estimated amount of cash
required to pay such dividend or distribution, and the Trust shall instruct the
Custodian to make available sufficient funds therefor in the appropriate account
of the Trust. _______ shall mail to the shareholders periodic statements, as
requested by the Trust, showing the number of full and fractional shares and the
net asset value per share of shares so credited. When requested by the Trust,
_______ shall prepare and file with the Internal Revenue Service, and when
required, shall address and mail to shareholders, such returns and information
relating to dividends and distributions paid by the Trust as are required to be
so prepared, filed and mailed by applicable laws, rules and regulations.
-5-
<PAGE>
13. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
-----------------------------------------------------
_______ shall, at least annually, furnish in writing to the Trust the
names and addresses, as shown in the shareholder accounts maintained by _______,
of all shareholders for which there are, as of the end of the calendar year,
dividends, distributions or redemption proceeds for which checks or share
certificates mailed in payment of distributions have been returned. _______
shall use its best efforts to contact the shareholders affected and to follow
any other written instructions received from the Trust concerning the
disposition of any such unclaimed dividends, distributions or redemption
proceeds.
14. REDEMPTIONS AND EXCHANGES.
-------------------------
A. _______ shall process, in accordance with the Trust's then current
prospectus and statement of additional information, each order for the
redemption of shares accepted by _______. Upon its approval of such redemption
transactions, _______, if requested by the Trust, shall mail to the shareholder
and/or dealer of record a confirmation showing trade date, number of full and
fractional shares redeemed, the price per share and the total redemption
proceeds. For each such redemption, _______ shall either: (a) prepare checks in
the appropriate amounts for approval and verification by the Trust and signature
by an authorized officer of _______ and mail the checks to the appropriate
person, or (b) in the event redemption proceeds are to be wired through the
Federal Reserve Wire System or by bank wire, cause such proceeds to be wired in
federal funds to the bank account designated by the shareholder, or (c)
effectuate such other redemption procedures which are authorized by the Trust's
Board of Trustees or its then current prospectus and statement of additional
information. The requirements as to instruments of transfer and other
documentation, the applicable redemption price and the time of payment shall be
as provided in the then current prospectus and statement of additional
information, subject to such supplemental instructions as may be furnished by
the Trust and accepted by _______. If _______ or the Trust determines that a
request for redemption does not comply with the requirements for redemptions,
_______ shall promptly notify the shareholder indicating the reason therefor.
B. If shares of the Trust are eligible for exchange with shares of any
other investment company, _______, in accordance with the then current
prospectus and statement of additional information and exchange rules of the
Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
-6-
<PAGE>
C. _______ shall notify the Trust and the Custodian on each business
day of the amount of cash required to meet payments made pursuant to the
provisions of this Paragraph, and, on the basis of such notice, the Trust shall
instruct the Custodian to make available from time to time sufficient funds
therefor in the appropriate account of the Trust. Procedures for effecting
redemption orders accepted from shareholders or dealers of record by telephone
or other methods shall be established by mutual agreement between _______ and
the Trust consistent with the Trust's then current prospectus and statement of
additional information.
D. The authority of _______ to perform its responsibilities under
Paragraph 10, Paragraph 12, and this Paragraph 14 shall be suspended with
respect to any series of the Trust upon receipt of notification by it of the
suspension of the determination of such series' net asset value.
15. AUTOMATIC WITHDRAWAL PLANS.
--------------------------
_______ will process automatic withdrawal orders pursuant to the
provisions of the withdrawal plans duly executed by shareholders and the current
prospectus and statement of additional information of the Trust. Payments upon
such withdrawal order shall be made by _______ from the appropriate account
maintained by the Trust with the Custodian on approximately the last business
day of each month in which a payment has been requested, and _______ will
withdraw from a shareholder's account and present for repurchase or redemption
as many shares as shall be sufficient to make such withdrawal payment pursuant
to the provisions of the shareholder's withdrawal plan and the current
prospectus and statement of additional information of the Trust. From time to
time on new automatic withdrawal plans a check for payment date already past may
be issued upon request by the shareholder.
16. WIRE-ORDER PURCHASES.
---------------------
_______ will send written confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
_______. Upon receipt of any check drawn or endorsed to the Trust (or _______,
as agent) or otherwise identified as being payment of an outstanding wire-order,
_______ will stamp said check with the date of its receipt and deposit the
amount represented by such check to _______'s deposit accounts maintained with
the Custodian. _______ will cause the Custodian to transfer federal funds in an
amount equal to the net asset value of the shares so purchased to the Trust's
account with the Custodian, and will notify the Trust before noon of each
business day of the total amount deposited in the Trust's deposit accounts, and
in the
-7-
<PAGE>
event that payment for a purchase order is not received by _______ or the
Custodian on the tenth business day following receipt of the order, prepare an
NASD "notice of failure of dealer to make payment".
17. OTHER PLANS.
-----------
_______ will process such accumulation plans, automatic withdrawal
plans, group programs and other plans or programs for investing in shares of the
Trust as are now provided for in the Trust's current prospectus and statement of
additional information and will act as plan agent for shareholders pursuant to
the terms of such plans and programs duly executed by such shareholders.
18. RECORDKEEPING AND OTHER INFORMATION.
-----------------------------------
_______ shall create and maintain all records required by applicable
laws, rules and regulations, including but not limited to records required by
Section 31(a) of the 1940 Act and the rules thereunder, as the same may be
amended from time to time, pertaining to the various functions performed by it
and not otherwise created and maintained by another party pursuant to contract
with B & R or the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by _______ for the periods and in
the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of B & R. _______ shall make available during
regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust and
B & R or their agents, or any regulatory agency having authority over the Trust.
19. SHAREHOLDER RECORDS.
-------------------
_______ shall maintain records for each shareholder account showing
the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each shareholder,
including dividends and distributions in cash or invested in shares;
E. Information with respect to the source of all dividends and
distributions allocated among income, realized short-term gains and
realized long-term gains;
-8-
<PAGE>
F. Any instructions from a shareholder including all forms furnished by
the Trust and executed by a shareholder with respect to (i) dividend
or distribution elections and (ii) elections with respect to payment
options in connection with the redemption of shares;
G. Any correspondence relating to the current maintenance of a
shareholder's account;
H. Certificate numbers and denominations for any shareholder holding
certificates;
I. Any stop or restraining order placed against a shareholder's account;
J. Information with respect to withholding in the case of a foreign
account or any other account for which withholding is required by the
Internal Revenue Code of 1986, as amended; and
K. Any information required in order for _______ to perform the
calculations contemplated under this Agreement.
20. TAX RETURNS AND REPORTS.
-----------------------
_______ will prepare in the appropriate form, file with the Internal
Revenue Service and appropriate state agencies and, if required, mail to
shareholders of the Trust such returns for reporting dividends and distributions
paid by the Trust as are required to be so prepared, filed and mailed and shall
withhold such sums as are required to be withheld under applicable federal and
state income tax laws, rules and regulations.
21. FORM N-SAR.
----------
_______ shall maintain such records within its control and shall be
requested by the Trust to assist the Trust in fulfilling the requirements of
Form N-SAR.
22. OTHER INFORMATION TO THE TRUST.
------------------------------
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
_______ will also maintain such records as shall be necessary to furnish to the
Trust the following: annual shareholder meeting lists, proxy lists and mailing
materials, shareholder reports and confirmations and checks for disbursing
redemption proceeds, dividends and other distributions or expense disbursements.
-9-
<PAGE>
23. COOPERATION WITH ACCOUNTANTS.
----------------------------
_______ shall cooperate with the Trust's independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
24. SHAREHOLDER SERVICE AND CORRESPONDENCE.
--------------------------------------
_______ will provide and maintain adequate personnel, records and
equipment to receive and answer all shareholder and dealer inquiries relating to
account status, share purchases, redemptions and exchanges and other investment
plans available to Trust shareholders. _______ will answer written
correspondence from shareholders relating to their share accounts and such other
written or oral inquiries as may from time to time be mutually agreed upon, and
_______ will notify the Trust of any correspondence or inquiries which may
require an answer from the Trust.
25. FURTHER ACTIONS.
---------------
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
26. COMPENSATION.
------------
For performing its services under this Agreement, B & R shall pay
_______ a monthly fee with respect to each series of the Trust in accordance
with the scheduleS attached hereto as Schedule A, Schedule B and Schedule C.
27. EXPENSES.
--------
_______ shall furnish, at its expense and without cost to the Trust or
B & R (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by _______
under this Paragraph 28 shall be paid by B & R, including, but not limited to,
costs and expenses of officers and employees of _______ in attending meetings of
the Board of Trustees and shareholders of the Trust, as well as costs and
expenses for postage, envelopes, checks, drafts, continuous forms, reports,
communications, statements and other materials, telephone, telegraph and remote
transmission lines, use of outside pricing services, use of outside mailing
firms, necessary outside record storage, media for storage of records (e.g.,
microfilm, microfiche, computer tapes), printing, confirmations and any other
shareholder correspondence and any and all assessments, taxes or levies assessed
on _______ for services provided under this Agreement. Postage for mailings of
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<PAGE>
dividends, proxies, reports and other mailings to all shareholders shall be
advanced to _______ three business days prior to the mailing date of such
materials.
28. REFERENCES TO _______, B & R OR THE TRUST.
-----------------------------------------
A. Neither the Trust nor B & R shall circulate any printed matter
which contains any reference to _______ without the prior written approval of
_______, excepting solely such printed matter as merely identifies _______ as
Administrative Services Agent, Transfer, Shareholder Servicing and Dividend
Disbursing Agent and Accounting Services Agent. The Trust or B & R will submit
printed matter requiring approval to _______ in draft form, allowing sufficient
time for review by _______ and its counsel prior to any deadline for printing.
B. _______ shall not circulate any printed matter which contains any
reference to the Trust or B & R without the prior written approval of the Trust
or B & R, excepting solely such printed matter as merely identifies B & R and
the Trust as clients of _______. _______ will submit printed matter requiring
approval to B & R and/or the Trust in draft form, allowing sufficient time for
review by B & R and/or the Trust and its counsel prior to any deadline for
printing.
29. EQUIPMENT FAILURES.
------------------
In the event of equipment failures beyond _______'s control, _______
shall take all steps necessary to minimize service interruptions but shall have
no liability with respect thereto. _______ shall endeavor to enter into one or
more agreements making provision for emergency use of electronic data processing
equipment to the extent appropriate equipment is available.
30. INDEMNIFICATION OF _______.
--------------------------
A. _______ may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither _______ nor its shareholders, officers, directors,
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by B & R or
the Trust in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or gross
negligence on the part of any such persons in the performance of the duties of
_______ under this Agreement or by reason of reckless disregard by any of such
persons of the obligations and duties of _______ under this Agreement.
-11-
<PAGE>
B. Any person, even though also a director, officer, employee,
shareholder or agent of _______, or any of its affiliates, who may be or become
an officer, trustee, employee or agent of the Trust, shall be deemed, when
rendering services to the Trust or acting on any business of the Trust, to be
rendering such services to or acting solely as an officer, trustee, employee or
agent of the Trust and not as a director, officer, employee, shareholder or
agent of or one under the control or direction of _______ or any of its
affiliates, even though paid by one of these entities.
C. Notwithstanding any other provision of this Agreement, B & R and
the Trust shall each indemnify and hold harmless _______, its directors,
officers, employees, shareholders, agents, control persons and affiliates from
and against any and all claims, demands, expenses and liabilities (whether with
or without basis in fact or law) of any and every nature which _______ may
sustain or incur or which may be asserted against _______ by any person by
reason of, or as a result of: (i) any action taken or omitted to be taken by
_______ in good faith in reliance upon any certificate, instrument, order or
share certificate believed by it to be genuine and to be signed, countersigned
or executed by any duly authorized person, upon the oral instructions or written
instructions of an authorized person of the Trust or upon the opinion of legal
counsel for the Trust or its own counsel; or (ii) any action taken or omitted to
be taken by _______ in connection with its appointment in good faith in reliance
upon any law, act, regulation or interpretation of the same even though the same
may thereafter have been altered, changed, amended or repealed. However,
indemnification under this subparagraph shall not apply to actions or omissions
of _______ or its directors, officers, employees, shareholders or agents in
cases of its or their own gross negligence, willful misconduct, bad faith, or
reckless disregard of its or their own duties hereunder.
31. TERMINATION
-----------
A. The provisions of this Agreement shall be effective on the date
first above written, shall continue in effect for three years ("Initial Term")
from that date and shall continue in force from year to year thereafter
("Renewal Term"), but only so long as such continuance is approved (1) by
_______, (2) the B & R, (3) by a vote of a majority of the Trust's Trustees who
are not parties to this Agreement or interested persons (as defined in the 1940
Act) of any such party, and (4) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
B. Any party may terminate this Agreement at the end of the Initial
Term or at the end of any subsequent Renewal Term by giving the other parties at
least ninety (90) days' prior written notice of such termination specifying the
date fixed
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<PAGE>
therefor. Upon termination of this Agreement, the Adviser shall pay to _______
such compensation as may be due as of the date of such termination, and shall
likewise reimburse _______ for any out-of-pocket expenses and disbursements
reasonably incurred by _______ to such date.
C. If a party materially fails to perform its duties and obligations
hereunder (a "Defaulting Party") resulting in a material loss to another party
or parties, such other party or parties (the "Non-Defaulting Party") may give
written notice thereof to the Defaulting Party, which such notice shall set
forth with sufficient detail the nature of the breach. The Defaulting Party
shall have sixty (60) days from its receipt of notice to cure the breach. If
such material breach shall not have been remedied to commercially reasonable
operating standards, the Non-Defaulting Party may terminate this Agreement by
giving thirty (30) days written notice of such termination to the Defaulting
Party. If _______ is the Non-Defaulting Party, its termination of this Agreement
shall not constitute a waiver of any rights or remedies with respect to services
it performed prior to such termination, or the right of _______ to be reimbursed
for all reasonable out-of-pocket expenses. In all cases, termination by the
Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party
of any other rights it might have under this Agreement or otherwise against a
Defaulting Party.
D. In the event that in connection with the termination of this
Agreement a successor to any of _______'s duties or responsibilities under this
Agreement is designated by the Trust by written notice (certified mail, return
receipt requested) to _______, _______ shall, promptly upon such termination and
at the expense of the Trust, transfer all records maintained by _______ under
this Agreement and shall cooperate in the transfer of such duties and
responsibilities, including providing for assistance from _______'s cognizant
personnel in the establishment of books, records and other data by such
successor.
32. SERVICES FOR OTHERS.
-------------------
Nothing in this Agreement shall prevent _______ or any affiliated
person (as defined in the 1940 Act) of _______ from providing services for any
other person, firm or corporation (including other investment companies);
provided, however, that _______ expressly represents that it will undertake no
activities which, in its judgment, will adversely affect the performance of its
obligations to the Trust under this Agreement.
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<PAGE>
33. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
--------------------------------------------------
The parties hereto acknowledge and agree that nothing contained herein
shall be construed to require _______ to perform any services for B & R or the
Trust which services could cause _______ to be deemed an "investment adviser" of
the Trust within the meaning of Section 2(a)(20) of the 1940 Act or to supersede
or contravene the Trust's prospectus or statement of additional information or
any provisions of the 1940 Act and the rules thereunder. Except as otherwise
provided in this Agreement and except for the accuracy of information furnished
to it by _______, the Trust assumes full responsibility for complying with all
applicable requirements of the 1940 Act, the Securities Act of 1933, as amended,
and any other laws, rules and regulations of governmental authorities having
jurisdiction, it being acknowledged that the Trust is relying on the best
efforts of _______.
34. LIMITATION OF LIABILITY.
-----------------------
It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust, personally, but bind only the trust property
of the Trust. The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an officer of the Trust, acting as
such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but shall
bind only the trust property of the Trust.
35. SEVERABILITY.
------------
In the event any provision of this Agreement is determined to be void
or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
36. QUESTIONS OF INTERPRETATION.
---------------------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States Courts or in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC issued pursuant to said 1940 Act. In
addition, where the effect of a requirement of the 1940 Act, reflected in any
provision of this Agreement, is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
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<PAGE>
37. NOTICES.
-------
All notices, requests, consents and other communications required or
permitted under this Agreement shall be in writing (including telex and
telegraphic communication) and shall be (as elected by the person giving such
notice) hand delivered by messenger or courier service, telecommunicated, or
mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust Bonfiglio & Reed, LLC
or the Adviser: 1661 East Camelback Rd, Suite 280
Phoenix, Arizona 85106
Attention: Chad Bonfiglio
To _______: _______ Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: David E. Dennison
or to such other address as any party may designate by notice complying with the
terms of this Paragraph 38. Each such notice shall be deemed delivered (a) on
the date delivered if by personal delivery; (b) on the date telecommunicated if
by telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method or e-mail; and (d) on the date upon
which the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be, if
mailed.
38. AMENDMENT.
---------
This Agreement may not be amended or modified except by a written
agreement executed by all parties.
39. BINDING EFFECT.
--------------
Each of the undersigned expressly warrants and represents that he has
the full power and authority to sign this Agreement on behalf of the party
indicated, and that his signature will operate to bind the party indicated to
the foregoing terms.
40. COUNTERPARTS.
------------
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE>
41. FORCE MAJEURE.
-------------
If _______ shall be delayed in its performance of services or
prevented entirely or in part from performing services due to causes or events
beyond its control, including and without limitation, acts of God, interruption
of power or other utility, transportation or communication services, acts of
civil or military authority, sabotages, national emergencies, explosion, flood,
accident, earthquake or other catastrophe, fire, strike or other labor problems,
legal action, present or future law, governmental order, rule or regulation, or
shortages of suitable parts, materials, labor or transportation, such delay or
non-performance shall be excused and a reasonable time for performance in
connection with this Agreement shall be extended to include the period of such
delay or non-performance.
42. MISCELLANEOUS.
-------------
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
BONFIGLIO & REED INVESTMENT TRUST
By: _____________________________
Its: President
BONFIGLIO & REED, LLC
By:______________________________
Its: President
_______ FUND SOLUTIONS, INC.
By:______________________________
Its: Chief Operating Officer
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<PAGE>
Schedule A
COMPENSATION FOR ACCOUNTING SERVICES
------------------------------------
The Adviser will pay _______ a monthly fee, according to the average net
assets of each series during such month, as follows:
MONTHLY FEE AVERAGE NET ASSETS DURING MONTH
$2,500 $0 - $100,000,000
$3,500 $100,000,000 - $200,000,000
$4,500 $200,000,000 - $300,000,000
$5,500 + 001% Over - $300,000,000
The monthly fees are subject to an additional $500 per month fee if the
fund has more than one class. The monthly fees are subject to an additional
$1,000 per month fee for international funds. The monthly fees are subject to an
additional $1,000 per month fee for index funds.
The Funds will reimburse _______ for the cost of external pricing services
used by the Funds. The costs of pricing is approximately $.12 per security per
day for equity securities and $.45 per security per day for fixed-income
securities.
The .001% on assets over $300,000,000 represents the asset based fee
_______ is charged by SunGard.
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Schedule B
COMPENSATION FOR TRANSFER AGENCY
--------------------------------
AND SHAREHOLDER SERVICES
------------------------
SERVICES FEE
-------- ---
As Transfer Agent,
Dividend Disbursing Agent
and Shareholder Servicing Agent: (Per Account)
Bonfiglio & Reed Options Fund Payable monthly at rate of
$25.00/ account;
subject to a minimum
of $2,000 per month
_______ will charge each IRA shareholder account an annual fee of $10.00 per
account for the additional servicing work for IRA accounts.
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Schedule C
COMPENSATION FOR ADMINISTRATION SERVICES
----------------------------------------
For the performance of _______'s obligations under this Agreement, B & R
shall pay _______, on the first business day following the end of each month, a
monthly fee at the annual rate of .15% of the average daily net assets of each
series of the Trust up to $25 million; .125% of the from $25 to $50 million; and
.10% of such assets in excess of $50 million; provided, however, that the
minimum fee shall be $2,000 per month for each series.
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AGREEMENT RELATING TO INITIAL CAPITAL
, 2000
- -------------
Bonfiglio & Reed Investment Trust
1661 East Camelback Rd, Suite 280
Phoenix, Arizona 85106
Dear Sir/Madam:
In conjunction with the purchase by Bonfiglio & Reed, LLC (the
"Purchaser") of 10,000 shares of beneficial interest of the Bonfiglio & Reed
Options Fund, a series of the Bonfiglio & Reed Investment Trust (the "Shares"),
the Purchaser hereby represents that it is acquiring the Shares for investment
with no intention of reselling or otherwise distributing the Shares. The
Purchaser hereby further agrees that any transfer of any of the Shares or any
interest therein shall be subject to the following conditions:
1. The Purchaser shall furnish you and counsel satisfactory to you prior
to the time of transfer, a written description of the proposed
transfer specifying its nature and consequence and giving the name of
the proposed transferee.
2. You shall have obtained from your counsel a written opinion stating
whether in the opinion of such counsel the proposed transfer may be
effected without registration under the Securities Act of 1933. If
such opinion states that such transfer may be so effected, the
Purchaser shall then be entitled to transfer the Shares in accordance
with the terms specified in its description of the transaction to you.
If such opinion states that the proposed transfer may not be so
effected, the Purchaser will not be entitled to transfer the Shares
unless the Shares are registered.
<PAGE>
The Purchaser hereby authorizes you to take such action as you shall
reasonably deem appropriate to prevent any violation of the Securities Act of
1933 in connection with the transfer of the Shares, including the imposition of
a requirement that any transferee of the Shares sign a letter agreement similar
to this one.
Very truly yours,
By:____________________
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