SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
CALIFORNIA INVESTMENT TRUST
CALIFORNIA INVESTMENT TRUST II
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box:
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11-(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.: Schedule 14A
3) Filing Party: Registrant
4) Date Filed: [date]
<PAGE>
California Investment Trust Fund Group
44 Montgomery Street, Suite 2100
San Francisco, CA 94104
January 3, 2000
Dear Shareholder:
Enclosed are proxy materials related to your shares in a fund of the California
Investment Trust Fund Group (the "Group"). Please take a few minutes to read
the proxy statement and cast your vote. Your vote must be received by no later
than January 27, 2000, in order to be cast at the Special Shareholders Meeting
on January 28, 2000. The meeting will begin at 10:00 a.m., local time, at the
Group's offices at 44 Montgomery Street, Suite 2100 San Francisco, CA 94104.
The proxy statement attached requests your vote to elect five trustees for the
Group to serve for an indefinite term. Three of the Group's current trustees
were previously elected by the shareholders and you would be re-electing them.
Two current Trustees were appointed during the last year and a half to fill
vacancies and you would be electing those Trustees for the first time.
You are also being asked to approve new investment management agreements between
the Group and CCM Partners, the Group's investment adviser. The recent death of
Richard F. Shelton, the retired Chief Executive Officer of CCM Partners,
resulted in a change of control of CCM Partners. The laws regulating investment
companies require mutual fund shareholders to approve new investment management
agreements with the adviser whenever there is a change in control. These new
agreements, however, are substantially the same as those currently in effect.
The change of control in CCM Partners has not resulted in any change in the team
directly responsible for managing the Group's portfolio investments.
Please review the enclosed material and complete, sign, date and return the
enclosed Proxy Card(s). It is important that you submit your vote to ensure that
your shares are represented at the Special Meeting. If you have any questions
about the proxy, please call us at (800) 225-8778.
The Trustees have carefully reviewed the proposals and unanimously recommend
that you approve them. Your vote is important for the proper administration of
the Group. Thank you in advance for your participation and prompt response in
this matter.
Sincerely,
/s/ Stephen C. Rogers
Stephen C. Rogers
Chairman and President
Enclosures
<PAGE>
CALIFORNIA INVESTMENT TRUST FUND GROUP
44 Montgomery Street, Suite 2100
San Francisco, CA 94104
(800) 225-8778
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held January 28, 2000
<TABLE>
<S> <C> <C>
California Tax-Free Income Fund S&P 500 Index Fund U.S. Government Securities Fund
California Insured Intermediate Fund S&P MidCap Index Fund The United States Treasury Trust
California Tax-Free Money Market Fund S&P SmallCap Index Fund Equity Income Fund
</TABLE>
To the Shareholders:
A Special Meeting of Shareholders of each Fund listed above will be held
on January 28, 2000 at 10:00 a.m., local time, at 44 Montgomery Street, Suite
2100, San Francisco, California 94104 for the following purposes:
1. To elect five trustees to serve until their successors are elected
and qualified;
2. To approve new Investment Management Agreements between the Funds
and CCM Partners ("CCM") as a result of the change of control of CCM, with
no change in the advisory fee payable to CCM;
3. To transact such other business as may properly come before the
Meeting of Shareholders or any adjournments thereof.
Shareholders of record at the close of business on December 22, 1999 are
entitled to notice of, and to vote at, the Meeting. Your attention is called to
the accompanying Proxy Statement. Regardless of whether you plan to attend the
Meeting, please complete, sign and promptly return the enclosed proxy card so
that a quorum will be present and a maximum number of shares may be voted. If
you are present at the Meeting, you may change your vote, if desired, at that
time.
By Order of the Board of Trustees
/s/ Stephen C. Rogers
Stephen C. Rogers, Secretary
January 3, 2000
<PAGE>
CALIFORNIA INVESTMENT TRUST FUND GROUP
----------
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
To be held January 28, 2000
----------
<TABLE>
<S> <C> <C>
California Tax-Free Income Fund S&P 500 Index Fund U.S. Government Securities Fund
California Insured Intermediate Fund S&P MidCap Index Fund The United States Treasury Trust
California Tax-Free Money Market Fund S&P SmallCap Index Fund Equity Income Fund
</TABLE>
A Special Meeting (the "Meeting") of Shareholders of each Fund listed above
will be held on January 28, 2000 at 10:00 a.m., local time, at the offices of
the adviser, CCM Partners ("CCM"), 44 Montgomery Street, Suite 2100, San
Francisco, California 94104 for the following purposes:
1. To elect five trustees to serve until their successors are elected
and qualified;
2. To approve new Investment Management Agreements between the Funds
and CCM as a result of the change of control of CCM, with no change in the
advisory fee payable to CCM;
3. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
This proxy statement is expected to be first mailed to shareholders on or
about January 6, 2000.
This is a combined proxy statement for all of the Funds. Each Fund is a
series of California Investment Trust or of California Investment Trust II, each
of which is a registered investment company (each investment company is referred
to in this proxy as a "Trust" and, collectively, as the "Trusts"). The following
table identifies the Trusts to which this proxy relates and the Funds that are
series thereof:
<TABLE>
<S> <C>
California Investment Trust California Investment Trust II
California Tax-Free Income Fund S&P 500 Index Fund
California Insured Intermediate Fund S&P MidCap Index Fund
California Tax-Free Money Market Fund S&P SmallCap Index Fund
Equity Income Fund
U.S. Government Securities Fund
The United States Treasury Trust
</TABLE>
The Board of Trustees is soliciting votes from shareholders of a Fund only
with respect to the particular Proposals that affect that Fund. The following
table identifies the Funds entitled to vote on each Proposal:
<TABLE>
<CAPTION>
Fund Proposal 1 Proposal 2
- ---- ---------- ----------
<S> <C> <C>
California Tax-Free Income Fund ("Income Fund") [X] [X]
California Insured Intermediate Fund ("Insured Fund") [X] [X]
California Tax-Free Money Market Fund ("Money Fund") [X] [X]
U.S. Government Securities Fund ("Government Fund") [X] [X]
The United States Treasury Trust ("Treasury Trust") [X] [X]
S&P 500 Index Fund ("500 Fund") [X] [X]
S&P MidCap Index Fund ("MidCap Fund") [X] [X]
S&P SmallCap Index Fund ("SmallCap Fund") [X] [X]
Equity Income Fund ("Equity Income Fund") [X] [X]
</TABLE>
<PAGE>
PROPOSAL NO. 1
ELECTION OF TRUSTEES
Background
The Board of Trustees of each Trust is currently comprised of five
individuals, three of whom were elected by the shareholders and two appointed
by each Board to fill interim vacancies. A majority of the individuals serving
on each Board of Trustees are required by the Investment Company Act of 1940
(the "1940 Act") to have been elected by Shareholders. That is currently the
case with the Board of Trustees of each Trust. In the event of a future vacancy
on the Board of Trustees, however, or a determination by the Board to expand
its size to include a larger percentage of independent Trustees (i.e., Trustees
who are not affiliated with CCM), the Board would not be able to fill that
vacancy or add another independent Trustee by appointment. Its authority to do
so under the Declaration of Trust and Bylaws of each Trust would be limited by
the 1940 Act which permits such an appointment, with certain exceptions, only
when, after giving effect to the appointment, two thirds of the Trustees would
have been elected by the shareholders.
Consequently, one purpose of the Meeting is to elect or re-elect, as the
case may be, all five Trustees of each Trust's Board of Trustees, each to serve
on the respective Board for an indefinite term, so that any future additions
that need to be made to the Board can be handled by the Trustees by appointment.
Information Regarding Nominees
In evaluating the Nominees, each Board of Trustees took into account their
background and experience, including their familiarity with the issues relating
to these types of Funds and investments as well as their careers in business,
finance, marketing and other areas. Below are the names, ages, business
experience during the past five years and other directorships of the Nominees
(as furnished to the Trusts). An asterisk (*) has been placed next to the name
of each Nominee who would constitute an "interested person," as defined in the
Investment Company Act of 1940 by virtue of that person's affiliation with any
of the Funds (other than as a Trustee) or CCM.
<TABLE>
<CAPTION>
Name and Position Principal Occupation Shares Owned Beneficially
with Trust Age within the Past 5 Years and Percentage of Series
- --------------------------- ----- --------------------------------------------------------- --------------------------
<S> <C> <C> <C>
*Stephen C. Rogers 33 Chief Executive Officer, CCM Partners, 1999 to present; * *
Chairman, President, Chief Operating Officer, CCM Partners 1997 to 1999,
Secretary and Trustee Administrative Officer, CCM Partners 1993-1997;
(since 1998) Marketing Representative, CCM Partners, 1992 to 1993.
*Phillip W. McClanahan 64 Director of Investments, CCM Partners,1985-present; * *
Vice President, Treasurer Vice President and Portfolio Manager, Transamerica
and Trustee (since 1985) Investment Services, 1984-1985; Vice President and
Portfolio Manager, Fireman's Fund Insurance Company
and Amfire, Inc., 1966-1984.
Harry Holmes 74 Principal, Harry Holmes & Associates (consulting), * *
Trustee (since 1985) 1982-1984; President and Chief Executive Officer,
Aspen Skiing Company, 1973-1984; President and
Chief Executive Officer, Pebble Beach Company
(property management).
John B. Sias 73 President and CEO, Chronicle Publishing Company, * *
Trustee (since 1990) 1993 to Present; formerly, Director and Executive Vice
President, Capital Cities/ABC Inc. and President, ABC
Network T.V. Group.
Guy Rounsaville, Jr. 56 Partner, Allen, Matkins, Leck, Gamble & Mallory LLP; * *
Trustee (since 1998) General Counsel, Wells Fargo Bank, 1977-1999;
Corporate Secretary, Wells Fargo & Company, 1978-1999.
</TABLE>
- ----------
** As of December 20, 1999, Trustees and Officers as a group owned less than 1%
of the outstanding shares of the Money Fund, the Treasury Trust, the Insured
Fund, the Government Fund, and the 500 Fund. As of December 20, 1999, the
Trustees and Officers of the Trust as a group owned approximately 1.1% of the
Income Fund, 2.0% of the MidCap Fund, 2.7% of the SmallCap Fund and 1.3% of
the Equity Income Fund.
2
<PAGE>
Remuneration of Trustees and Officers
As shown on the following table the Funds pay the fees of the Trustees who
are not affiliated with CCM Partners, which are currently $2,500 per quarter and
$500 for each meeting attended. There is no separate compensation for committee
service. The table provides information regarding all series of the Trusts for
the fiscal year ended August 31, 1999.
<TABLE>
<CAPTION>
Pension or Estimated Total Compensation
retirement benefits Annual respecting Registrant
Aggregate accrued as Benefits upon and Fund complex
Name/Position with Trust compensation Fund Expenses Retirement paid to Trustees
- -------------------------------------------- -------------- ---------------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Stephen C. Rogers
Chairman, President, Secretary and Trustee None None None None
Phillip W. McClanahan
Vice President, Treasurer and Trustee None None None None
Harry Holmes
Trustee $12,000 None None $12,000
John B. Sias
Trustee $12,000 None None $12,000
Guy Rounsaville, Jr.
Trustee $12,000 None None $12,000
</TABLE>
Information Regarding the Board of Trustees
The Board of Trustees of each Trust meets quarterly and during the fiscal
year ended August 31, 1999 met four times. Each Board has one standing
committee, an Audit Committee, whose function is to meet with the independent
accountants for the Trust in order to review the scope of the Trust's audit and
the Trust's financial statements, and to meet with management concerning these
matters. The Audit Committee of each Trust is comprised of the independent
Trustees, Messrs. Holmes, Sias and Rounsaville. The independent Trustees receive
no additional compensation for serving on the Audit Committee. Each Audit
Committee met once during the fiscal year ended August 31, 1999.
Vote Required
Shareholders of each Trust must separately approve the election of Nominees
for that Trust. When a quorum is present, the affirmative vote of a plurality of
the shares of each Trust voted at the meeting is required to approve the
election of each Nominee for that Trust.
The Board of Trustees of each Trust, including the independent Trustees,
recommends that shareholders vote "For" each of the Nominees under Proposal
No. 1.
PROPOSAL NO. 2
APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
Background
Shareholders of the Funds are being asked to approve new Investment
Management Agreements (the "New Agreements") between the Funds and CCM. The form
of the New Agreements is attached as Appendix B. CCM has been the investment
adviser for the Funds under Investment Management Agreements dated December 27,
1985, October 15, 1992, December 31, 1985 and April 13, 1992 (the "Current
Agreements"). Other than certain conforming changes described below, there is no
proposed change in any of the substantive terms of the New Agreements. Approval
of the New Agreements by the Funds' shareholders is required by the 1940 Act
only as a result of a recent change of control of CCM, the Funds' investment
adviser, as described below.
Richard F. Shelton, the Founder of the California Investment Trust Group,
died unexpectedly in October, 1999. Mr. Shelton was the effective control person
of CCM through a series of partnership, corporate and trust entities, as
follows. Mr. Shelton was the sole trustee of the Richard F. Shelton Trust (the
"RFS Trust"), which owned 100% of the voting shares of Richard F. Shelton, Inc.
("RFS, Inc."). RFS, Inc. is the general partner and control person of RFS
Partners, a California limited partnership ("RFS Partners"), which is the
general partner of CCM. RFS Partners, a broker-dealer, also serves as the Funds'
underwriter.
3
<PAGE>
Upon Mr. Shelton's death, the assets of the RFS Trust were placed in an
administrative trust under the supervision Mr. Shelton's executors. When the
administration of Mr. Shelton's estate is complete, control of RFS, Inc. will be
shared equally by Mr. Stephen C. Rogers, Mrs. Celia S. Rogers, who is Mr.
Rogers' wife and the daughter of Mr. Shelton, and Brooks Cutter, Mr. Shelton's
stepson. Shortly before Mr. Shelton's death, Mr. Rogers became Chief Executive
Officer of CCM, where he had been serving for several years as Chief Operating
Officer and as Administrative Officer. Neither Mrs. Rogers nor Mr. Cutter are
active in CCM's investment management business.
At a meeting of the Board of Trustees of each Trust on October 26, 1999,
each Board unanimously approved the continuation of the Current Agreements on an
interim basis until new advisory agreements could be presented to and approved
by shareholders. At the December 7, 1999 meeting of the Board of Trustees of
each Trust, each New Agreement was approved unanimously by the respective Board
of Trustees, including all of the Trustees who are not parties to the New
Agreements or interested persons of such parties (other than as Trustees of the
Trust). Each New Agreement as approved by the Board of Trustees is submitted for
approval by the shareholders of the Fund to which the New Agreement applies.
Each New Agreement must be voted upon separately by each Fund to which it
pertains.
If the New Agreements are approved by shareholders, they will go into
effect on February 5, 2000. The New Agreements will remain in effect for up to
two years from the date they take effect, and, unless earlier terminated, will
continue for maximum terms of one year thereafter, provided that each such
continuance is approved annually with respect to each Fund (i) by the applicable
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of the particular Fund, and, in either case, (ii) by a majority of
the Trust's Trustees who are not parties to the New Agreement or interested
persons of any such party (other than as a Trustee of the Trust).
If the shareholders of any Fund should fail to approve the New Agreement
pertaining to that Fund, the Trustees will promptly seek to enter into a new
investment advisory agreement for the Fund, subject to approval by the Fund's
shareholders.
No change has occurred in the management of CCM as a result of the change
in control described above. Mr. Shelton was not active in the portfolio
management of the Funds. CCM has advised the Funds that no change is expected in
the investment management and other personnel of CCM as a result of the change
in control and it is currently anticipated the same persons responsible for
management of the Funds under the Current Agreements will continue to be
responsible under the New Agreements. CCM does not anticipate that the change in
control will cause any reduction in the quality of services now provided to the
Funds or have any effect on CCM's ability to fulfill its obligations to the
Funds.
The Terms of the New Agreements
The terms of the New Agreements are the same in all material respects as
the terms of the Current Agreements, which were last approved by each Trust's
Board of Trustees, including a majority of the Trustees who were not parties to
such Agreements or interested persons of such parties, at a meeting held on
February 16, 1999. The initial shareholder of each Fund approved the Current
Agreement for each Fund at the time each Fund was launched.
We are taking this opportunity, however, to conform agreements for all
Funds in both Trusts and to remove inconsistent language. Currently, there are
inconsistencies in the extent of the indemnification afforded by the Funds to
CCM and there are inconsistencies in specifying which entity (the Fund or CCM)
is responsible for bearing costs of routine SEC examinations. The New Agreements
will clarify that CCM is responsible for bearing the costs associated with
routine SEC examinations and that there is no indemnification of CCM for actions
(or for failures to act) in contravention of any provisions of the New
Agreements, a Fund's investment restrictions or any provisions of applicable
law.
Pursuant to the New Agreements, CCM will continue to provide investment
research and portfolio management, including the selection of securities for
the Funds to purchase, hold, or sell and the selection of brokers or dealers
through whom the portfolio transactions of each fund are executed. CCM's
activities are subject to review and supervision by the Trustees to whom CCM
renders periodic reports of the Funds' investment activities. CCM, at its own
expense, also will furnish the Trusts with executive and administrative
personnel, office space and facilities, and pays certain additional
administrative expenses incurred in connection with the operation of each Fund.
Each Fund will to continue to pay for its own operating expenses and for
its share of its respective Trust's expenses not assumed by CCM, including, but
not limited to, costs of custodian services, brokerage
4
<PAGE>
fees, taxes, interest, costs of reports and notices to shareholders, costs of
dividend disbursing and shareholder record-keeping services (including
telephone costs), auditing and legal fees, the fees of the independent Trustees
and the salaries of any officers or employees who are not affiliated with CCM,
and its pro-rata portion of premiums on the fidelity bond covering the Funds.
There will be no increase in advisory fees for any of the Funds. The
annual advisory fees under the New Agreements for each Fund are:
<TABLE>
<CAPTION>
Fund Name Advisory Fees
- --------- -------------
<S> <C>
California Tax-Free Income Fund A monthly fee computed at the annual rate of 0.50% of average
California Insured Intermediate Fund daily net assets up to and including $100 million; plus 0.45%
California Tax-Free Money Market Fund of average daily net assets over $100 million up to and including
U.S. Government Securities Fund $500 million; plus 0.40% of average daily net assets above
The United States Treasury Trust $500 million.
S&P MidCap Index Fund A monthly fee computed at the annual rate of 0.40% of average
daily net assets.
S&P 500 Index Fund A monthly fee computed at the annual rate of 0.25% of average
daily net assets.
S&P SmallCap Index Fund A monthly fee computed at the annual rate of 0.50% of average
Equity Income Fund daily net assets up to and including $500 million; plus 0.45%
of average daily net assets up to and including $1 billion; plus
0.40% of average daily net assets above $1 billion.
</TABLE>
The New Agreements provide that CCM is obligated to reimburse each of the
Funds which are series of California Investment Trust monthly (through a
reduction of its management fees and otherwise) for all expenses (except for
extraordinary expenses such as litigation) in excess of 1.00% of each Fund's
average daily net assets. The Manager has also agreed to further limit the
expenses of each Fund, other than the Income Fund, through December 31, 2000, to
the following annual percentage of daily net assets: Insured Fund, 0.55%; Money
Fund, 0.40%; 500 Fund, 0.20%; MidCap Fund, 0.40%; SmallCap Fund, 0.65%; Equity
Income Fund, 0.80%; Government Fund, 0.65%; and Treasury Trust, 0.40%.
The New Agreements may be terminated without penalty at any time by the
applicable Trust with respect to one or more of the Funds to which the relevant
Agreement applies (either by the applicable Board of Trustees or by a majority
vote of the terminating Fund's outstanding shares); or by the Manager on
60-days' written notice, and will automatically terminate in the event of its
assignment as defined in the 1940 Act.
Information about CCM Partners
CCM Partners, a California limited partnership, is the investment adviser
for the Funds under the Current Agreements. CCM is registered as an investment
advisor with the Securities and Exchange Commission. As of December 20, 1999 CCM
managed over $650 million in assets. Other than the Trusts, CCM does not act as
investment adviser to any other registered investment companies.
Phillip W. McClanahan is the portfolio Manager for the California Tax-Free
Income Fund, the California Insured Intermediate Fund, the U.S. Government
Securities Fund and The United States Treasury Trust. He joined the firm in 1985
and has over 35 years of investment experience. Mr. McClanahan graduated from
the University of Kansas in 1958 and earned his MBA from the University of
Pennsylvania, Wharton School in 1966.
Roderick G. Baldwin is the portfolio manager for the S&P 500 Index Fund,
S&P MidCap Index Fund, S&P SmallCap Index Fund and the Equity Income Fund. He
joined CCM in 1999. Prior to his employment with CCM, he was Vice President of
Index Investing at Bank of America Capital Management. Mr. Baldwin graduated
from Hamilton College in 1968 and earned his MBA from the University of
Pennsylvania, Wharton School in 1970. He has approximately 30 years of
experience with equity fund management.
Michael J. Conn is the portfolio manager for the California Tax-Free Money
Market Fund. Mr. Conn joined CCM in 1996 and prior to his joining the firm,
spent several years working for Gruntal & Co. specializing in trading and
institutional sales of various fixed income securities. Mr. Conn graduated from
the Leavy School of Business at Santa Clara University.
5
<PAGE>
CCM Partners' officers are shown below:
<TABLE>
<CAPTION>
Principal Occupation
Name and Address Within the Past 5 years
- ----------------------- --------------------------------------------------------------
<S> <C>
Stephen C. Rogers Chief Executive Officer, CCM Partners 1999 to present; Chief
44 Montgomery Street Operating Officer, CCM Partners 1997 to 1999; Administrative
Suite 2100 Officer, CCM Partners 1993 to 1997; Marketing Representative,
San Francisco, CA 94104 CCM Partners, 1992 to 1993.
Phillip W. McClanahan Director of Investments, CCM Partners, 1985 to present; Vice
44 Montgomery Street President and Portfolio Manager, Transamerica Investment
Suite 2100 Services, 1984 to 1985; Vice President and Portfolio Manager,
San Francisco, CA 94104 Fireman's Fund Insurance Company and Amfire, Inc., 1966
to 1984.
</TABLE>
For the fiscal year ended August 31, 1999, CCM received a management fee
of $558,691 from the Money Fund and reimbursed that Fund $233,014, which
resulted in a net management fee of $325,677; a management fee of $1,043,156
from the Income Fund, and did not make any reimbursements; a fee of $174,183
from the Government Fund and reimbursed that Fund $3,320 which resulted in a
net management fee of $170,863; a fee of $253,658 from the Treasury Trust and
reimbursed that Fund $109,740, which resulted in a net management fee of
$143,918; and a fee of $123,678 from the Insured Fund and reimbursed that Fund
$27,698 which resulted in a net management fee of $95,982.
For the fiscal year ended August 31, 1999, CCM received a management fee of
$212,287 from the MidCap Fund and reimbursed that Fund $89,438, which resulted
in a net management fee of $122,849; a fee of $313,194 from the 500 Fund and
reimbursed that Fund $218,960, which resulted in a net management fee of
$94,234; a fee of $47,058 from the SmallCap Fund and reimbursed that Fund
$38,043, which resulted in a net management fee of $9,015; and a fee of $67,107
from the Equity Income Fund and reimbursed that Fund $8,051, which resulted in a
net management fee of $59,056.
Evaluation by the Board of Trustees
In determining whether or not it was appropriate to approve the New
Agreements and to recommend their approval to the shareholders, each Board of
Trustees, including the Trustees who are not interested persons of CCM,
considered various materials and representations provided by CCM and was advised
by independent legal counsel with respect to these matters.
Information considered by the Trustees included, among other things, the
following: (1) representation that the same persons responsible for management
of the Funds under the Current Agreements are currently expected to continue to
manage the Funds under the New Agreements; (2) that the compensation to be
received by CCM under the New Agreements is the same as the compensation paid
under the Current Agreements; (3) CCM's representation that it will not seek to
increase the rate of advisory fees paid by the Funds for a period of at least
two years and that it will keep any existing expense limitation agreement in
effect for a period of at least two years; (4) that the senior management
personnel responsible for the management of CCM are expected to continue to be
responsible for the management of CCM; and (5) the commonality of the terms and
provisions of the New Agreements and Current Agreements.
Further, the Board of Trustees reviewed its determinations reached at the
meetings of the Board of Trustees of California Investment Trust Funds Group
held on February 16, 1999, and December 7, 1999, respecting the Current
Agreements and, with respect to the Current Agreements, (1) the nature and
quality of the services rendered by CCM under the Current Agreements; (2) the
fairness of the compensation payable to CCM under the Current Agreements; (3)
the results achieved by CCM for the Funds; and (4) the personnel, operations and
financial condition, and investment management capabilities, methodologies, and
performance of CCM.
Based upon its review, each Board of Trustees determined that, by approving
the New Agreements, the Funds can best be assured that services from CCM will be
provided without interruption. Each Board of Trustees also determined that the
New Agreements are in the best interests of each Fund and its shareholders.
Accordingly, after consideration of the above factors, and such other factors
and information it considered relevant, each Board of Trustees unanimously
approved the New Agreements and voted to recommend its approval by each Fund's
shareholders.
6
<PAGE>
Vote Required
Shareholders of each Fund must separately approve the applicable New
Agreement with respect to that Fund. Approval of this Proposal No. 2 by a Fund
requires an affirmative vote of the lesser of (i) 67% or more of the shares of
the Fund present at the Meeting if more than 50% of the outstanding shares of
the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund.
The Board of Trustees of the Funds, including a majority of the independent
Trustees, recommends that you vote "FOR" this Proposal No. 2.
GENERAL INFORMATION
The Legal Framework
Pursuant to Section 15 of the 1940 Act, each investment advisory agreement
between a Fund and an adviser terminates automatically upon its assignment,
which is deemed to include any change of control of the investment adviser.
Section 15(a) of the 1940 Act prohibits any person from serving as an investment
adviser to a registered investment company except pursuant to a written contract
that has been approved by the shareholders. Therefore, in order for CCM to
continue to provide investment advisory services to the Funds after the change
of control described above, the shareholders of each Fund must approve the New
Agreement between each Fund and CCM.
General
The Funds' Distributor is RFS Partners, 44 Montgomery Street, Suite 2100,
San Francisco, California, 94104. Mr. McClanahan owns 12.19% of RFS Partners as
a limited partner. Mr. Rogers' wife indirectly has an interest in RFS Partners
through RFS Trust. The Funds' Custodian Bank, Shareholder Servicing and Transfer
Agent is Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin
53202. During the year ended August 31, 1999, the Funds paid no commissions to
the affiliated broker-dealer RFS Partners.
Voting Rights and Procedures and Shareholder Meeting Costs
Each share of each Fund is entitled to one vote. Shareholders of each Fund
at the close of business on December 22, 1999 (the "Record Date") will be
entitled to be present and give voting instructions for the Funds at the Meeting
with respect to their shares owned as of the Record Date. For each Fund, as of
December 22, 1999, the total number of shares outstanding and entitled to vote
and the total net assets represented by those shares was:
<TABLE>
<CAPTION>
Total Number Total Net
Fund of Shares Assets
- --------------------------------------- --------------- ----------------
<S> <C> <C>
California Tax Free Income Fund 15,618,724.098 $189,071,925.46
California Insured Intermediate Fund 2,341,042.354 24,298,328.07
California Tax-Free Money Market Fund 102,282,267.700 103,118,846.10
U.S. Government Securities Fund 2,965,229.145 29,830,220.82
The United States Treasury Trust 68,169,507.740 68,191,270.73
S&P 500 Index Fund 5,460,618.586 159,709,303.09
S&P MidCap Index Fund 3,750,118.607 61,393,717.24
S&P SmallCap Index Fund 919,078.561 12,438,761.02
Equity Income Fund 895,043.205 11,005,389.15
</TABLE>
Except as indicated under "Information Regarding Nominees" above, as of
December 20, 1999, to the knowledge of the Trusts' management, the officers and
Trustees of the Trusts owned, collectively, less than 1% of the shares of each
Fund. To the knowledge of the Trusts' management, at the close of business
November 30, 1999, the only persons owning beneficially more than five percent
of the outstanding shares of each Fund were those listed in Appendix A.
The Declaration of Trust of each Trust provides that the presence at a
shareholder meeting in person or by proxy of 40 percent of the shares of each
Trust entitled to vote at the Meeting constitutes a quorum. Thus, the Meeting
will take place on its scheduled date if 40 percent or more of the shares of the
series of each Trust entitled to vote are represented. If a quorum is not
present or if a quorum is present but sufficient votes in favor of any of the
Proposals are not received, the meeting may be held for the purposes of voting
on those proposals for which sufficient votes have been received and the persons
named as proxies may propose one or more adjournments of the meeting to permit
further solicitation of proxies with respect to any proposal for a Fund for
which sufficient votes have not been received. Any such adjournment will require
the affirmative vote of a majority of the votes cast on the question of
adjournment in person or by proxy. The persons named
7
<PAGE>
as proxies will vote in favor of any such adjournment. Any proxy may be revoked
at any time prior to the exercise thereof by submitting another proxy bearing a
later date or by giving written notice to the Secretary of the respective Trust
at the address indicated above or by voting in person at the meeting.
In tallying shareholder votes, abstentions (i.e., shares for which a proxy
is presented, but which abstains from voting on one or more matters) and
"nominee non-votes" (i.e., shares held by nominees for which proxies are
presented but as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the nominee does not have
discretionary voting power on a particular matter) will be counted for purposes
of determining whether a quorum, or majority of voting shares, is present for
the conduct of business at the Meeting and will be voted in favor of any
adjournment proposed. However, nominee non-votes will not constitute votes for
or against any proposal, will not constitute an abstention, and will be
disregarded in determining votes cast for purposes of determining whether a
proposal has received a majority of the outstanding voting shares.
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs in connection with
solicitation of proxies related to the required approvals will be paid by the
Trusts, including any additional solicitation made by letter, telephone or
telegraph. In addition to solicitation by mail, certain officers and
representatives of the Trusts, officers and employees of CCM and certain
financial services firms and their representatives, who will receive no extra
compensation for their services, may solicit proxies by telephone, telegram or
personally. In addition, CCM may retain a firm to solicit proxies on behalf of
the Board, the fee for which will be borne by CCM.
Annual Reports
A COPY OF EACH FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED AUGUST 31,
1999, IS AVAILABLE WITHOUT CHARGE UPON REQUEST BY WRITING TO CALIFORNIA
INVESTMENT TRUST GROUP, 44 MONTGOMERY STREET, SUITE 2100, SAN FRANCISCO, CA
94104 OR BY CALLING 1-800-225-8778.
Other Matters to Come Before the Meeting
Neither Board of Trustees is aware of any matters that will be presented
for action at the Meeting other than the matters set forth herein. Should any
other matters requiring a vote of shareholders arise, the proxy in the
accompanying form will confer upon the person or persons entitled to vote the
shares represented by such proxy the discretionary authority to vote matters in
accordance with their best judgment.
Shareholder Proposals
The Meeting is a special meeting of shareholders. Neither Trust is required
to, nor does either intend to, hold regular meetings of its shareholders. If
such a meeting is called, any shareholder who wishes to submit a proposal for
consideration at the meeting should submit the proposal promptly to the
respective Trust.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
/s/ Stephen C. Rogers
Stephen C. Rogers
Chairman and President
January 3, 2000
8
<PAGE>
APPENDIX A
5% SHAREHOLDERS
As of November 30, 1999, the following shareholders, to the Trusts'
knowledge, owned beneficially more than 5% of a Fund's outstanding shares, as
noted:
<TABLE>
<S> <C>
MONEY FUND:
Donald Fisher & Doris Fisher (9.27%) John J. Fisher (5.146%)
One Maritime Plaza #1400 One Maritime Plaza #1400
San Francisco, CA 94111-3503 San Francisco, CA 94111-3503
Robert J. Fisher (5.174%)
One Maritime Plaza #1400
San Francisco, CA 94111-3503
INSURED FUND:
Northern Trust Co. (10.197%) Deborah Murray (7.067%)
P.O. Box 92956 27 Makin Grade
Chicago, IL 60675 Ross, CA 94957
John Larson (7.473%) The Harold Messmer Family Trust (5.475%)
1 Market Plaza 2884 Sand Hill Rd., Suite 200
San Francisco, CA 94105 Menlo Park, CA 94025
GOVERNMENT FUND:
Blush & Co. (8.496%) Firstar Trust Company CUST (6.68%)
P.O. Box 976 David Vernon Thomas IRA
New York, NY 10268 1393 Oak Avenue
Los Altos Hills, CA 94024-5768
TREASURY TRUST:
William Edwards (23.352%) Edwin Callan (6.923%)
3000 Sand Hill Rd. 71 Stevenson Street, #1300
Menlo Park, CA 94025 San Francisco, CA 94105
D & DF Foundation (5.000%)
1 Maritime Plaza, Suite 1300
San Francisco, CA 94111-3503
S&P 500 FUND: Charles Schwab & Co. (7.128%)
State Street CA Inc., Custodian (14.519%) 101 Montgomery Street
FBO Cal/STRS San Francisco, CA 94104
1001 Marina Village PKWY FL 3
Alameda, CA 94501
MIDCAP FUND:
Donald Fisher & Doris Fisher, Trustees (12.221%) Charles Schwab & Co. (11.531%)
Donald G. Fisher 1991 101 Montgomery Street
Charitable Remainder Trust 1 San Francisco, CA 94104
c/o Pisces Inc.
1 Maritime Plaza, Suite 1300
San Francisco, CA 94111-3503
EQUITY INCOME FUND:
Timothy Abel (12.011%) Susan Ballinger (10.048%)
1331 B St., #B 50 Makin Grade
Hayward, CA 94541 Kentfield, CA 94904
Richard F. Shelton Trust (6.249%)
1 Market
San Francisco, CA 94105
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
SMALLCAP FUND:
Alexander D. Calhoun & (6.599%) FBO Spieker 1991 Trust (5.264%)
Charles S. Lafollette Trust Michael McAuliffe Trust
Thomas B. Calhoun 1992 Trust 1 Market Plaza, Suite 2100
1 Maritime Plaza, Suite 300 San Francisco, CA 94105
San Francisco, CA 94111
Richard F. Shelton Trust Charles Schwab & Co. Inc. (9.943%)
Richard F. Shelton Trustee (6.122%) Reinvest Account
1 Market 101 Montgomery Street
San Francisco, CA 94105 San Francisco, CA 94104
</TABLE>
A-2
<PAGE>
APPENDIX B
FORM OF NEW INVESTMENT MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT made as of _______________, by and between [Name
of Trust] ______________________________, a Massachusetts business trust (the
"Trust"), on behalf the series of the Trust identified in the Appendix attached
hereto (the "Fund"), and CCM PARTNERS, a limited partnership organized and
existing under the laws of the State of California (the "Manager"),
WHEREAS, the Trust is an open-end management investment company, registered
as such under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and is engaged in the business of
supplying investment advice, investment management and administrative services,
as an independent contractor; and
WHEREAS, the Trust desires to retain the Manager to render advice and
services to the Fund pursuant to the terms and provisions of this Agreement, and
the Manager is interested in furnishing said advice and services;
NOW THEREFORE, the Trust and the Manager mutually agree as follows:
1. Appointment of Manager. The Trust hereby employs the Manager and the
Manager hereby accepts such employment, to render investment advice and
management services with respect to the assets of the Fund for the
period and on the terms set forth in this Agreement, subject to the
supervision and direction of the Trust's Board of Trustees.
2. Duties of Manager.
(a) General Duties. The Manager shall act as investment manager to the Fund
and shall supervise investments of the Fund on behalf of the Fund in
accordance with the investment objectives, programs and restrictions of
the Fund as provided in the Trust's governing documents, including,
without limitation, the Trust's Agreement and Declaration of Trust and
By-Laws, and such other limitations as the Trustees may impose from
time to time in writing to the Manager. The Manager shall, except as
otherwise provided for herein, render or make available all services
needed for the management, administration and operation of the Fund.
Without limiting the generality of the foregoing, the Manager shall:
(i) furnish the Fund with advice and recommendations with respect to
the investment of the Fund's assets and the purchase and sale of
portfolio securities for the Fund, including the taking of such other
steps as may be necessary to implement such advice and recommendations;
(ii) furnish the Fund with reports, statements and other data on
securities, economic conditions and other pertinent subjects which the
Trust's Board of Trustees may reasonably request; (iii) manage the
investments of the Fund, subject to the ultimate supervision and
direction of the Trust's Board of Trustees; (iv) provide persons
satisfactory to the Trust's Board of Trustees to act as officers and
employees of the Trust and the Fund (such officers and employees, as
well as certain Trustees, may be trustees, directors, officers,
partners, or employees of the Manager or its affiliates); and (v)
render to the Trust's Board of Trustees such periodic and special
reports with respect to the Fund's investment activities as the Board
may reasonably request
(b) Brokerage. The Manager shall place orders for the purchase and sale of
securities either directly with the issuer or with a broker or dealer
selected by the Manager. In placing the Fund's securities trades, it is
recognized that the Manager will give primary consideration to securing
the most favorable price and efficient execution, so that the Fund's
total cost or proceeds in each transaction will be the most favorable
under all the circumstances. Within the framework of this policy, the
Manager may consider the financial responsibility, research and
investment information, and other services provided by brokers or
dealers who may effect or be a party to any such transaction or other
transactions to which other clients of the Manager may be a party. It
is understood that an affiliate of the Manager may act as one of the
Fund's brokers in the purchase and sale of portfolio securities for the
Fund, consistent with the requirements of the 1940 Act.
It is also understood that it may be desirable for the Fund that the
Manager have access to investment and market research and securities and
economic analyses provided by brokers and others. It is also understood that
brokers providing such services may execute brokerage transactions at a higher
cost to the
B-1
<PAGE>
Fund than might result from the allocation of brokerage to other brokers on the
basis or seeking the most favorable price and efficient execution. Therefore,
the purchase and sale of securities for the Fund may be made with brokers who
provide such research and analysis, subject to review by the Trust's Board of
Trustees from time to time with respect to the extent and continuation of this
practice to determine whether the Fund benefits, directly or indirectly, from
such practice. It is understood by both parties that the Manager may select
broker-dealers for the execution of the Fund's portfolio transactions who
provide research and analysis as the Manager may lawfully and appropriately use
in its investment management and advisory capacities, whether or not such
research and analysis may also be useful to the Manager in connection with its
services to other clients.
On occasions when the Manager deems the purchase or sale of a security to
be in the best interest of the Fund as well as of other clients, the Manager, to
the extent permitted by applicable laws and regulations, may aggregate the
securities to be so purchased or sold in order to obtain the most favorable
price or lower brokerage commissions and the most efficient execution. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Manager in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
3. Best Efforts and Judgment. The Manager shall use its best judgment and
efforts in rendering the advice and, services to the Fund as
contemplated by this Agreement.
4. Independent Contractor. The Manager shall, for all purposes herein, be
deemed to be an independent contractor, and shall, unless otherwise
expressly provided and authorized to do so, have no authority to act for
or represent the Trust or the Fund in any way, or in any way be deemed
an agent for the Trust or for the Fund. It is expressly understood and
agreed that the services to be rendered by the Manager to the Fund under
the provisions of this Agreement are not to be deemed exclusive, and the
Manager shall be free to render similar or different services to others
so long as its ability to render the services provided for in this
Agreement shall not be impaired thereby.
5. Manager's Personnel. The Manager shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such
other persons as it shall from time to time determine to be necessary to
the performance of its obligations under this Agreement. Without
limiting the generality of the foregoing, the staff and personnel of the
Manager shall be deemed to include persons employed or retained by the
Manager to furnish statistical information, research, and other factual
information, advice regarding economic factors and trends, information
with respect to technical and scientific developments, and such other
information, advice and assistance as the Manager or the Trust's Board
of Trustees may desire and reasonably request.
6. Reports by Fund to Manager. Each Fund from time to time will furnish to
the Manager detailed statements of its investments and assets, and
information as to its investment objective and needs, and will make
available to the Manager such financial reports, proxy statements, legal
and other information relating to the Fund's investments as may be in
its possession or available to it, together with such other information
as the Manager may reasonably request.
7. Expenses.
(a) The Manager shall bear and pay the costs of rendering the services
to be performed by it under this Agreement. In addition, with
respect to the operation of the Fund, the Manager is responsible
for (i) the compensation of any of the Trust's trustees, officers,
and employees who are affiliates of the Manager, (ii) the expenses
of printing and distributing the Fund's prospectuses, statements of
additional information, and sales and advertising materials (but
not the legal, auditing or accounting fees attendant thereto) to
prospective investors (but not to existing shareholders), and (iii)
providing office space and equipment reasonably necessary for the
operation of the Fund.
(b) The Fund is responsible for and has assumed the obligation for
payment of all of its expenses, other than as stated in
Subparagraph 7(a) above, including but not limited to: fees and
expenses incurred in connection with the issuance, registration and
transfer of its shares; brokerage and commission expenses; all
expenses of transfer, receipt, safekeeping, servicing and
accounting for the cash, securities and other property of the Trust
for the benefit of the Fund including all fees and expenses of its
custodian, shareholder services agent and accounting services
agent; interest charges on any borrowings; costs and expenses of
pricing and calculating its daily net asset
B-2
<PAGE>
value and of maintaining its books of account required under the
1940 Act; taxes, if any; expenditures in connection with meetings
of the Fund's Shareholders and Board of Trustees that are properly
payable by the Fund; salaries and expenses of officers and fees and
expenses of members of the Trust's Board of Trustees or members of
any advisory board or committee who are not members of, affiliated
with or interested persons of the Manager; insurance premiums on
property or personnel of the Fund which inure to its benefit,
including liability and fidelity bond insurance; the cost of
preparing and printing reports, proxy statements, prospectuses and
statements of additional information of the Fund or other
communications for distribution to existing shareholders; legal,
auditing and accounting fees; trade association dues; fees and
expenses (including legal fees) of registering and maintaining
registration of its shares for sale under federal and applicable
state and foreign securities laws; all expenses of maintaining and
servicing shareholder accounts, including all charges for transfer,
shareholder recordkeeping, dividend disbursing, redemption, and
other agents for the benefit of the Fund, if any; and all other
charges and costs of its operation plus any extraordinary and
non-recurring expenses, except as herein otherwise prescribed.
(c) To the extent the Manager incurs any costs by assuming expenses
which are an obligation of the Fund as set forth herein, the Fund
shall promptly reimburse the Manager for such costs and expenses,
except to the extent the Manager has otherwise agreed to bear such
expenses. To the extent the services for which the Fund is
obligated to pay are performed by the Manager, the Manager shall be
entitled to recover from the Fund to the extent of the Manager's
actual costs for providing such services.
8. Investment Advisory and Management Fee
(a) The Fund shall pay to the Manager, and the Manager agrees to
accept, as full compensation for all administrative and investment
management and advisory services furnished or provided to the Fund
pursuant to this Agreement, a management fee as set forth in the
Fee Schedule attached hereto as the Appendix, as may be amended in
writing from time to time by the Trust and the Manager.
(b) The management fee shall be accrued daily by the Fund and paid to
the Manager on the first business day of the succeeding month.
(c) The initial fee under this Agreement shall be payable on the first
business day of the first month following the effective date of
this Agreement and shall be prorated as set forth below. If this
Agreement is terminated prior to the end of any month, the fee to
the Manager shall be prorated for the portion of any month in which
this Agreement is in effect which is not a complete month according
to the proportion which the number of calendar days in the month
during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10)
days after the date of termination.
(d) The fees payable to the Manager under this Agreement will be
reduced to the extent required under the most stringent expense
limitation applicable to the Fund imposed by any state in which
shares of the Fund are qualified for sale. The Manager may reduce
any portion of the compensation or reimbursement of expenses due to
it pursuant to this Agreement and may agree to make payments to
limit the expenses that are the responsibility of a Fund under this
Agreement. Except as the Manager may otherwise agree with respect
to the Fund, any such reduction or payment shall be applicable only
to such specific reduction or payment and shall not constitute an
agreement to reduce any future compensation or reimbursement due to
the Manager hereunder or to continue future payments. Any such
reduction will be agreed to prior to accrual of the related expense
or fee and will be estimated daily and reconciled and paid on a
monthly basis. Any fee withheld pursuant to this paragraph 8(d)
from the Manager shall be reimbursed by the Fund to the Manager in
the first fiscal year or the second fiscal year next succeeding the
fiscal year of the withholding to the extent permitted by the
applicable state law if the aggregate expenses for the next
succeeding fiscal year or second succeeding fiscal year do not
exceed the applicable state limitation or any more restrictive
limitation to which the Manager has agreed.
(e) The Manager may agree not to require payment of any portion of the
compensation or reimbursement of expenses otherwise due to it
pursuant to this Agreement prior to the time such
B-3
<PAGE>
compensation or reimbursement has accrued as a liability of the
Fund. Any such agreement shall be applicable only with respect to
the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or
reimbursement due to the Manager hereunder.
9. Trading in Fund Shares. The Manager agrees that neither it nor any of
its partners, officers or employees shall take any short position in
the shares of the Fund. This prohibition shall not prevent the purchase
of such shares by any of the officers and partners or bona fide
employees of the Manager or any trust, pension, profit-sharing or other
benefit plan for such persons or affiliates thereof, at a price not
less than the net asset value thereof at the time of purchase, as
allowed pursuant to rules promulgated under the 1940 Act.
10. Conflicts with Trust's Governing Documents and Applicable Laws. Nothing
herein contained shall be deemed to require the Trust or the Fund to
take any action contrary to the Trust's Agreement and Declaration of
Trust, By-Laws, or any applicable statute or regulation, or to relieve
or deprive the Board of Trustees of the Trust of its responsibility for
and control of the conduct of the affairs of the Trust and the Fund.
11. Manager's Liabilities and Indemnification.
(a) The Manager shall have responsibility for the accuracy and
completeness (and liability for the lack thereof) of the statements
in the Fund's offering materials (including the prospectus, the
statement of additional information, advertising and sales
materials), except for information supplied by the Trust or another
third party for inclusion therein.
(b) The Manager shall be liable to the Fund for any loss (including
brokerage charges) incurred by the Fund as a result of any improper
investment made by the Manager.
(c) In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the obligations or duties hereunder on the
part of the Manager, the Manager shall not be subject to liability
to the Trust or 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 by the Fund.
(d) Notwithstanding the foregoing, the Manager agrees to reimburse the
Trust for any and all costs, expenses, and counsel and trustees'
fees reasonably incurred by the Trust in the preparation, printing
and distribution of proxy statements, amendments to its
Registration Statement, holdings of meetings of its shareholders or
trustees, the conduct of factual investigations, any legal or
administrative proceedings (including any applications for
exemptions or determinations by the Securities and Exchange
Commission) which the Trust incurs as the result of action or
inaction of the Manager or any of its partners where the action or
inaction necessitating such expenditures (i) is directly or
indirectly related to any transactions or proposed transaction in
the interests or control of the Manager or its affiliates (or
litigation related to any pending or proposed future transaction in
such interests or control) which shall have been undertaken without
the prior, express approval of the Trust's Board of Trustees; or
(ii) is within the sole control of the Manager or any of its
affiliates or any of their officers, partners, employees, or
agents. So long as this Agreement is in effect, the Manager shall
pay to the Trust the amount due for expenses subject to this
Subparagraph 10(b) within thirty (30) days after a bill or
statement has been received from the Trust therefor. This provision
shall not be deemed to be a waiver of any claim which the Trust may
have or may assert against the Manager or others for costs,
expenses, or damages heretofore incurred by the Trust or for costs,
expenses" or damages the Trust may hereafter incur which are not
reimbursable to it hereunder.
(e) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or partner or officer of the
Manager, from liability in violation of Sections 17(h) and (i) of
the 1940 Act.
12. Non-Exclusivity. The Trust's employment of the Manager is not an
exclusive arrangement, and the Trust may from time to time employ other
individuals or entities to furnish it with the services provided for
herein.
13. Term. This Agreement shall become effective as of the date of execution
and shall remain in effect for a period of two (2) years, unless sooner
terminated as hereinafter provided. This Agreement shall
B-4
<PAGE>
continue in effect thereafter for additional periods not exceeding one
(1) year so long as such continuation is approved for each Fund at
least annually by (i) the Board of Trustees of the Trust or by the vote
of a majority of the outstanding voting securities of each Fund and
(ii) the vote of a majority of the Trustees of the Trust who are not
parties to this Agreement nor interested persons thereof, cast in
person at a meeting called for the purpose of voting on such approval.
14. Termination. This Agreement may be terminated by the Trust on behalf of
the Fund at any time without payment of any penalty, by the Board of
Trustees of the Trust or by vote of a majority of the outstanding
voting securities of the Fund, upon sixty (60) days' written notice to
the Manager, and by the Manager upon sixty (60) days' written notice to
the Fund.
15. Termination by Assignment. This Agreement shall terminate automatically
in the event of any transfer or assignment thereof, as defined in the
1940 Act.
16. Transfer, Assignment. This Agreement may not be transferred, assigned,
sold or in any manner hypothecated or pledged without the affirmative
vote or written consent of the holders of a majority of the outstanding
voting securities of each Fund.
17. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise
rendered invalid, the remainder of this Agreement shall not be affected
thereby.
18. Definitions. The terms "majority of the outstanding voting securities"
and "interested persons" shall have the meanings as set forth in the
1940 Act.
19. Notice of Limitation an Liability. The Manager acknowledges that it has
received notice of and accepts the limitations of the Trust's liability
set forth in Article III, Section 6(b) of its Agreement and Declaration
of Trust. The Manager agrees that the Trust's obligations under this
Agreement with respect to the Fund shall be limited to the Fund and to
its assets, and that the Manager shall not seek satisfaction of any
such obligation from the shareholders of the Fund nor from any trustee,
officer, employee or agent of the Trust or the Fund, nor from the
assets of shareholders of any other series of the Trust.
20. Captions. 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.
21. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving
effect to the conflict of laws principles thereof; provided that
nothing herein shall be construed to preempt, or to be inconsistent
with, any federal law, regulation or rule, including the 1940 Act and
the Investment Advisers Act of 1940 and any rules and regulations
promulgated thereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first written above.
[NAME OF TRUST]
By: -------------------------------
Name:
Title
CCM PARTNERS,
a California Limited Partnership
By: -------------------------------
RFS Partners,
its General Partner
By: -------------------------------
Richard F. Shelton, Inc.,
its General Partner
By: -------------------------------
Name:
Its:
B-5
<PAGE>
APPENDIX TO MANAGEMENT AGREEMENT
Dated _______________________________ (the "Management Agreement")
The provisions of the Management Agreement between the Trust and the Manager
apply to the following series of the Trust: _______________________________
FEE SCHEDULE
The Fund shall pay to the Manager, as full compensation for all investment
management, advisory and administrative services furnished or provided to the
Fund, pursuant to the Management Agreement, a management fee based upon the
Fund's average daily net assets at the following per annum rates:
FEE LIMITATIONS
[California Investment Trust Funds: To the extent that the gross operating costs
and expenses of the Fund (excluding any extraordinary expenses, such as
litigation) exceed 1.00% of the Fund's average daily net asset value for any one
fiscal year, the Manager shall reimburse the Fund for the amount of such excess
expenses.]
B-6
<PAGE>
APPENDIX C
FORM OF PROXY
<PAGE>
Please fold and detach card at perforation before mailing
SPECIAL MEETING OF SHAREHOLDERS
January 28, 2000
CALIFORNIA INVESTMENT TRUST
CALIFORNIA TAX-FREE INCOME FUND
SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF CALIFORNIA INVESTMENT TRUST
AND CALIFORNIA INVESTMENT TRUST II
The undersigned hereby appoints Stephen C. Rogers and Phillip W.
McClanahan, and each of them, as proxies of the undersigned, each with the power
to appoint his substitute, for the Special Meeting of Shareholders of each
series of California Investment Trust and California Investment Trust II (each,
a "Trust") to be held on January 28, 2000, at the offices of California
Investment Trust Group, 44 Montgomery Street, Suite 2100, San Francisco,
California, and at any and all adjournments thereof (the "Meeting"), to vote, as
designated below, all shares of the series (the "Fund") of the respective Trust,
as indicated above, held by the undersigned at the close of business on December
22, 1999.
Dated: ______________________, 2000
___________________________________
Signature(s) (if held jointly)
Please sign exactly as name or
names appear on your shareholder
account statement. When signing as
attorney, trustee, executor,
administrator, custodian, guardian,
or corporate officer, please give
your full title. If shares are held
jointly, each shareholder should
sign.
CIT
<PAGE>
Please detach at perforation before mailing.
A SIGNED PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS LISTED BELOW UNLESS
YOU HAVE SPECIFIED OTHERWISE. Please sign, date and return this proxy promptly.
Your signature authorizes the proxies to vote in their discretion on such other
business as may properly come before the Meeting including, without limitation,
all matters incident to the conduct of the Meeting.
Please indicate your vote by an "X" in the appropriate box below.
1. To elect Trustees of the Trust. The nominees are:
Stephen C. Rogers, Phillip W. McClanahan, Harry Holmes,
John B. Sias and Guy Rounsaville, Jr.
FOR WITHHOLD FOR ALL
EXCEPT
[ ] [ ] [ ] 1.
TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX AND WRITE THE NAME OF
THE NOMINEE ON THE LINE BELOW.
____________________________________________________________
2. Approval of a new investment advisory agreement between
the Fund and CCM Partners, the investment adviser to
the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ] 2.
