<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
REGISTRATION NO. 33-7699
Post-Effective Amendment No. 17
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
REGISTRATION NO. 811-4786
Amendment No. 17
ARIEL GROWTH FUND
-----------------
307 North Michigan Avenue
Chicago, Illinois 60601
Registrant's Telephone Number, Including Area Code
1-312-726-0140
Agent for Service:
Sheldon R. Stein
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
(312) 580-2014
It is proposed that this filing will become effective:
Immediately upon filing pursuant to paragraph (b)
-------
X on February 1, 1996 pursuant to paragraph (b)
-------
60 days after filing pursuant to paragraph (a)
-------
on (date) pursuant to paragraph (a) of Rule 485
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Registrant has registered an indefinite number of shares of its
beneficial interest pursuant to Rule 24f-2, and filed its Rule 24f-2 Notice for
its fiscal year ended September 30, 1995 on or about November 27, 1995.
<PAGE>
CROSS REFERENCE SHEET
N-1A
Item No. Prospectus Caption or Placement
- -------- -------------------------------
1 Front Cover
2 Fund Expenses
3 Total Return and Other Performance Information
4 Front Cover; Investment Objectives and Policies;
Management and Organization of the Funds
5 Management and Organization of the Funds
6 Front Cover; Management and Organization of the Funds; Dividends,
Capital Gains and Taxes
7 How to Buy Shares; Net Asset Value; Exchanging Shares; Management
and Organization of the Funds
8 Redeeming Shares; Exchanging Shares
9 (Not Applicable)
Part B Caption or Placement
---------------------------
10 Cover Page
11 Table of Contents
12 (Not Applicable)
13 Investment Restrictions; Additional Information About Lending
Securities and Repurchase Agreements; Portfolio Transactions;
Appendix
14 Trustees and Officers
15 Trustees and Officers; Significant Shareholders
16 Investment Adviser and Services Administrator; Transfer Agent and
Custodian; Independent Auditors
17 Portfolio Transactions
18 General Information
19 Net Asset Value
20 (Not Applicable)
21 Investment Adviser and Services Administrator
22 Calculation of Total Return
23 (Not Applicable)
<PAGE>
LOGO
PROSPECTUS
FEBRUARY 1, 1996
Ariel Appreciation Fund
Ariel Growth Fund
307 NORTH MICHIGAN AVENUE, SUITE 500, CHICAGO, ILLINOIS
60601
- --------------------------------------------------------------------------------
The Ariel Appreciation Fund ("Appreciation Fund") and the Ariel Growth Fund
("Growth Fund") (collectively, the "Ariel Mutual Funds" or the "Funds") are
series of the Ariel Growth Fund (doing business as Ariel Investment Trust) (the
"Trust"). Ariel Capital Management, Inc. (the "Adviser") serves as the
investment adviser and service administrator for the Funds.
INVESTMENT OBJECTIVES
The investment objective of each Fund is to achieve long-term capital
appreciation by investing primarily in equity securities of issuers that in the
judgment of the Adviser are undervalued but demonstrate a strong potential for
growth. In seeking their objectives, the Funds attempt to discover relatively
unknown and undervalued companies, primarily through the Adviser's intensive
research. The Appreciation Fund focuses primarily on companies with market
capitalizations of approximately $200 million to $5 billion and emphasizes
medium sized companies. The Growth Fund invests principally in companies with
market capitalizations under $1.5 billion, with an emphasis on smaller
capitalization (small-cap) stocks.
ABOUT THIS PROSPECTUS
This prospectus sets forth important information concerning the Ariel Mutual
Funds. Please read it carefully before investing and keep it for future
reference. It is designed to provide you with information you should know
before investing and to help you decide if the goals of the Funds match your
own.
A Statement of Additional Information (dated February 1, 1996) for the Funds
has been filed with the Securities and Exchange Commission and (together with
any supplement thereto) is incorporated by reference. This Statement is
available upon request, without charge, from the Funds by calling 1-800-29-
ARIEL (1-800-292-7435).
- --------------------------------------------------------------------------------
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE FEDERAL OR
ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
YOU PAY NO LOAD
The Funds' shares are sold on a no-load basis. This means that you do not pay a
sales charge at the time of purchase or at the time of redemption. The Funds
pay 12b-1 fees at the annual rate of 0.25% of average daily net asset values.
2
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page(s)
<TABLE>
<S> <C>
Fund Expenses 4
Financial Highlights 6
Investment Objectives and Policies 11
Total Return and Other Performance Information 15
Management and Organization of the Funds 16
Distribution Plan 19
How to Buy Shares 19
Tax-Saving Retirement Plans 21
Net Asset Value 22
When Your Account Will Be Credited 22
Other Information about Purchasing Shares 23
Exchanging Shares 23
Other Information About Exchanging Shares 24
Telephone Transactions 25
Signature Guarantees 26
Special Services and Charges 26
Redeeming Shares 26
Other Information about Redemptions 28
Dividends, Capital Gains and Taxes 29
</TABLE>
- --------------------------------------------------------------------------------
3
<PAGE>
FUND EXPENSES
SHAREHOLDER Maximum Sales Load on Purchases None
TRANSACTION Maximum Sales Load on Reinvested Dividends None
COSTS Deferred Sales Load None
Redemption Fee None(A)
Exchange Fee None
<TABLE>
<S> <C> <C>
Appreciation Fund Growth Fund
Management Fees 0.53% 0.63%
12b-1 Fees 0.25% 0.25%
Other Expenses 0.58% 0.49%
---- ----
Total Fund Operating Expenses 1.36% 1.37%
==== ====
</TABLE>
ANNUAL FUND
OPERATING EX-
PENSES AFTER
EXPENSE REIM-
BURSEMENTS (AS
A PERCENTAGE
OF AVERAGE NET
ASSETS) (B),
(C):
We can illustrate these expenses with the example below. You
would pay the following expenses on a $1,000 investment
(assuming a 5% annual return and redemption at the end of
each period):
<TABLE>
<S> <C> <C>
Appreciation Fund Growth Fund
One Year $ 14 $ 14
Three Years $ 43 $ 43
Five Years $ 74 $ 75
Ten Years $164 $165
</TABLE>
Explanation of Table: The purpose of the table is to assist
you in understanding the various costs and expenses that an
investor in the Funds would bear directly (shareholder
transaction costs) or indirectly (annual fund operating
expenses). The information is based on the Funds' expenses
for the fiscal year ended September 30, 1995.
THE 5% RATE USED IN THE EXAMPLE IS ONLY FOR ILLUSTRATION AND
IS NOT INTENDED TO BE INDICATIVE OF THE FUTURE PERFORMANCE
OF THE FUNDS, WHICH MAY BE MORE OR LESS THAN THE ASSUMED
RATE. ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
(A) If you request a redemption by wire transfer, you will
be charged a $10 wire fee.
(B) ANNUAL FUND OPERATING EXPENSES. Management Fees are
investment advisory and administrative fees which are paid
by each Fund to Ariel Capital Management, Inc. (the
"Adviser"). The Funds incur Other Expenses for maintaining
shareholder
4
<PAGE>
records, furnishing shareholder statements and reports, and
other services. Management Fees and Other Expenses have
already been reflected in each Fund's share price and are
not charged directly to individual shareholder accounts.
Please refer to the section "Management and Organization of
the Funds" for further information.
Under the Rule 12b-1 plan, each Fund may pay fees of up to
0.30% of average net assets, but such fees are currently
limited by the Board of Trustees to 0.25% of average daily
net assets for the current fiscal year. The effect of a Rule
12b-1 plan is that in certain instances long-term
shareholders in the Funds may eventually pay more than the
economic equivalent of the maximum front-end sales charge
permitted by rules of the National Association of Securities
Dealers, Inc.
(C) THE ADVISER AGREES TO LIMIT CERTAIN EXPENSES. The
Adviser voluntarily agreed to absorb certain expenses of the
Funds during the fiscal year ended September 30, 1995. If
the Adviser had not done so, the Total Fund Operating
Expenses of the Appreciation Fund and Growth Fund would have
been 1.58% and 1.39%, respectively as reflected in the table
above. In addition, Management Fees would have represented
0.75% and 0.65% of the respective average daily net assets
of the Appreciation Fund and Growth Fund.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The information set forth in the following tables is for each share outstanding
during each of the periods shown and is derived from the Funds' financial
statements. The information in the table for each Fund is covered by the Report
of the Funds' Independent Auditors. The Report for each Fund is contained in
the Registration Statement and is available upon request. The financial
statements appearing in the September 30, 1995 Annual Report to Shareholders
are incorporated by reference into the Statement of Additional Information for
the Funds. The table should be read in conjunction with the financial
statements and their related notes.
ARIEL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ten Months
Year Ended Ended Year Ended
September 30, September 30, November 30,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Net asset value, be-
ginning
of period $21.82 $21.67 $19.42 $17.60 $13.82 $ 15.00
====== ====== ====== ====== ====== =======
INCOME FROM INVEST-
MENT OPERATIONS:
Net investment income 0.14 0.04 0.06 0.09 0.14 0.15
Net realized and
unrealized
gains (losses) on
investments 2.26 0.51 2.27 1.92 3.88 (1.25)
------ ------ ------ ------ ------ -------
Total from investment
operations 2.40 0.55 2.33 2.01 4.02 (1.10)
------ ------ ------ ------ ------ -------
DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net
investment income (0.06) (0.05) (0.08) (0.17) (0.17) (0.08)
Distributions from
capital
gains (1.40) (0.35) -- (0.02) (0.07) --
------ ------ ------ ------ ------ -------
Total distributions (1.46) (0.40) (0.08) (0.19) (0.24) (0.08)
------ ------ ------ ------ ------ -------
Net asset value, end
of
period $22.76 $21.82 $21.67 $19.42 $17.60 $ 13.82
====== ====== ====== ====== ====== =======
Total return 12.11% 2.56% 12.03% 11.47%(a) 29.48% (7.37)%
====== ====== ====== ====== ====== =======
</TABLE>
6
<PAGE>
ARIEL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ten Months
Year Ended Ended Year Ended
September 30, September 30, November 30,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL
DATA AND
RATIOS:
Net assets,
end of pe-
riod, in
thousands $143,312 $162,280 $207,065 $146,624 $76,482 $23,343
======== ======== ======== ======== ======= =======
Ratio of ex-
penses to
average
net assets 1.36%(b) 1.35%(b) 1.37% 1.44%(b)(c) 1.50%(b) 0.70%(b)
======== ======== ======== ======== ======= =======
Ratio of net
investment
income
to average
net assets 0.61%(b) 0.17%(b) 0.33% 0.57%(b)(c) 1.61%(b) 2.23%(b)
======== ======== ======== ======== ======= =======
Portfolio
turnover
rate 18% 12% 56% 2% 20% 4%
======== ======== ======== ======== ======= =======
</TABLE>
- ---------
(a)Total return is not annualized.
(b) Without the fee waiver, the ratio of expenses to average net assets would
have been 1.58%, 1.40%, 1.50%, 1.53% and 1.68% and the ratio of net
investment income to average net assets would have been 0.39%, 0.12%,
0.51%, 1.58% and 1.25% for the fiscal periods ended 1995, 1994, 1992, 1991
and 1990, respectively.
(c)Annualized.
7
<PAGE>
ARIEL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ten Months
Year Ended Ended Year Ended
September 30, September 30, November 30,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period $28.84 $30.46 $29.59 $27.36 $21.21 $27.20
======
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.36 0.18 0.73 0.31 0.46 0.30
======
Net realized and
unrealized gains (loss-
es) on investments 3.51 0.23 2.81 3.19 5.97 (5.77)
------ ------ ------ ------ ------ ------
Total from investment
operations 3.87 0.41 3.54 3.50 6.43 (5.47)
------ ------ ------ ------ ------ ------
DISTRIBUTIONS TO SHARE-
HOLDERS:
Dividends from net in-
vestment income (0.23) (0.30) (0.75) (0.56) (0.28) (0.39)
======
Distributions from capi-
tal gains (1.70) (1.73) (1.92) (0.71) -- (0.13)
------ ------ ------ ------ ------ ------
Total distributions (1.93) (2.03) (2.67) (1.27) (0.28) (0.52)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $30.78 $28.84 $30.46 $29.59 $27.36 $21.21
====== ====== ====== ====== ====== ======
Total return 14.38% 1.41% 12.54% 13.15%(a) 30.62% (20.53)%
====== ====== ====== ====== ====== ======
</TABLE>
8
<PAGE>
ARIEL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ten Months
Year Ended Ended Year Ended
September 30, September 30, November 30,
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA AND
RATIOS:
Net assets, end of peri-
od, in thousands $120,953 $149,511 $233,826 $236,186 $240,060 $188,687
======== ======== ======== ======== ======== ========
Ratio of expenses to av-
erage net assets 1.37%(b) 1.25% 1.16% 1.23%(c) 1.25% 1.31%
======== ======== ======== ======== ======== ========
Ratio of net investment
income to average net
assets 1.18%(b) 0.56% 0.72% 0.83%(c) 1.72% 1.28%
======== ======== ======== ======== ======== ========
Portfolio turnover rate 16% 9% 13% 19% 39% 20%
======== ======== ======== ======== ======== ========
</TABLE>
- ---------
(a)Total return is not annualized.
(b) Without the fee waiver, the ratio of expenses to average net assets would
have been 1.39% and the ratio of net investment income to average net
assets would have been 1.16% for the period ended 1995.
(c)Annualized.
9
<PAGE>
ARIEL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From Inception
Year Ended November 30, (Nov. 6, 1986) to
1989 1988 1987 Nov. 30, 1986
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 22.07 $ 15.36 $15.65 $15.23
======== ======= ====== ======
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.60 0.30 0.07 0.01
Net realized and
unrealized gains (losses)
on investments 5.04 7.23 (0.35) 0.41
-------- ------- ------ ------
Total from investment
operations 5.64 7.53 (0.28) 0.42
-------- ------- ------ ------
DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net
investment income (0.13) (0.08) (0.01) --
Distributions from capital
gains (0.38) (0.74) -- --
-------- ------- ------ ------
Total distributions (0.51) (0.82) (0.01) --
-------- ------- ------ ------
Net asset value, end of
period $ 27.20 $ 22.07 $15.36 $15.65
======== ======= ====== ======
Total return 26.06% 50.81% (1.79)% 2.76%(a)
======== ======= ====== ======
SUPPLEMENTAL DATA AND
RATIOS:
Net assets, end of period $164,449 $28,866 $5,540 $2,387
======== ======= ====== ======
Ratio of expenses to
average net assets 1.41% 1.56%(b) 1.2%(b) 0.22%(b)(c)
======== ======= ====== ======
Ratio of net investment
income to average net
assets 2.32% 1.47%(b) 0.54%(b) 0.20%(b)(c)
======== ======= ====== ======
Portfolio turnover rate 14% 22% 60% 0%
======== ======= ====== ======
</TABLE>
- ---------
(a) Total return is not annualized.
(b) Without the fee waiver, the ratio of expenses to average net assets would
have been 1.61%, 2.18% and 1.32%, and the ratio of net investment income
(loss) to average net assets would have been 1.42%, (0.41)% and (0.90)%,
for the fiscal periods ended 1988, 1987 and 1986, respectively.
(c) Annualized.
10
<PAGE>
THE FUNDS SEEK INVESTMENT OBJECTIVES AND POLICIES
TO PROVIDE
LONG-TERM The investment objective of each Fund is to achieve long-
CAPITAL term capital appreciation by investing primarily in equity
APPRECIATION. securities of issuers that in the judgment of the Adviser
are undervalued but demonstrate a strong potential for
growth. In seeking their objectives, the Funds attempt to
discover relatively unknown and undervalued companies,
principally through the Adviser's own intensive research.
THE APPRECIATION FUND focuses primarily on companies with
market capitalizations of approximately $200 million to $5
billion emphasizing medium sized companies.
THE GROWTH FUND invests principally in companies with market
capitalizations under $1.5 billion, with an emphasis on
smaller capitalization (small-cap) stocks.
The Funds will take reasonable risks in seeking to achieve
their investment objectives. There is, of course, no
assurance that the Funds will be successful in meeting their
objectives since there is risk involved in the ownership of
securities.
THE FUNDS The Funds do not trade or time the market for quick gains;
FOLLOW A LONG- rather, they follow a disciplined, conservative philosophy,
TERM investing for long-term capital appreciation in securities
INVESTMENT which appear to be undervalued relative to the market as a
PHILOSOPHY, whole.
INVESTING
PRIMARILY IN
EQUITY
SECURITIES
WHICH APPEAR
TO BE
UNDERVALUED.
The Adviser looks for issuers that provide quality products
or services and which have not attracted significant
attention from securities analysts, institutional investors
and the media. In order to take advantage of the anticipated
growth of their portfolios, the Funds expect to hold
investments for a relatively long period. Occasionally,
however, securities purchased on a long-term basis may be
sold within 12 months after purchase in light of a change in
the circumstances of a particular company or industry, or in
general market or economic conditions. The Funds avoid
issuers in cyclical, commodity-based, start-up and recently
deregulated industries.
11
<PAGE>
THE FUNDS LOOK The Funds are interested in issuers with conservative
FOR ISSUERS management and accounting and financial practices which have
WITH LONG-TERM demonstrated long-term performance through various economic
PERFORMANCE cycles. Such an issuer's balance sheet should show a
THROUGH favorable cash position, limited debt and a reasonable
DIFFERENT amount of working capital. The Adviser looks for equity
ECONOMIC securities trading at a below average price-to-earnings
CYCLES. ratio and a low price relative to the Adviser's evaluation
of expected sales and earnings growth, book value and
assets. The Funds are primarily interested in issuers which
have demonstrated high earnings-per-share growth potential
and the ability to achieve a high annual return on equity.
Although any investment in securities carries risk, the
conservative approach of the Ariel Mutual Funds is designed
to maximize growth in relation to the risks assumed. Since
the securities in which the Funds seek to invest may be less
actively traded than the securities of larger issuers, they
may not always participate in market rallies to the same
extent as more widely known securities. Conversely, these
securities may be expected to be somewhat less vulnerable
during market downturns. There is also somewhat less readily
available information concerning these securities. The
issuers of these securities tend to have a relatively higher
percentage of insider ownership.
THE FUNDS WILL Although there is no predetermined percentage of assets to
NORMALLY be invested in stocks, bonds or money market instruments,
INVEST AT each Fund will normally invest at least 80% of the value of
LEAST 80% OF its net assets in equity securities. Such securities will
THE VALUE OF include common stocks, convertible debt securities and
THEIR preferred stocks. The Funds may invest up to 20% of the
RESPECTIVE NET value of their assets in bonds, other debt obligations or
ASSETS IN fixed income obligations, such as money market instruments,
EQUITY for defensive or liquidity purposes or pending the
SECURITIES AND investment of the proceeds from the sale of portfolio
MAY INVEST UP securities. Securities may be purchased subject to
TO 20% OF THE repurchase agreements with recognized securities dealers and
VALUE OF THEIR banks. If either Fund has assumed a temporary defensive
ASSETS IN posture, there is no limitation on the percentage of its
BONDS, OTHER assets which may be invested in the fixed income
DEBT obligations, including money market instruments, described
OBLIGATIONS OR below under "Debt Obligations."
FIXED INCOME
OBLIGATIONS.
12
<PAGE>
DEBT
OBLIGATIONS Debt obligations in which the Funds invest may be long-term,
intermediate-term, short-term or any combination thereof,
depending on the Adviser's evaluation of current and
anticipated market patterns and trends. Such debt
obligations consist of the following: corporate obligations
which at the date of investment are rated within the four
highest grades established by Moody's Investors Services,
Inc. (Aaa, Aa, A, or Baa), or by Standard & Poor's
Corporation (AAA, AA, A, or BBB), or, if not rated, are of
comparable quality as determined by the Adviser (bonds rated
Baa or BBB are considered medium grade obligations and have
speculative characteristics); obligations issued or
guaranteed as to principal by the United States Government
or its agencies or instrumentalities ("U.S. Government
Securities"); certificates of deposits, and bankers'
acceptances of U.S. banks and their branches located outside
the U.S. and of U.S. branches of foreign banks, provided
that the bank has total assets of at least one billion
dollars or the equivalent in other currencies; commercial
paper which at the date of investment is rated A-2 or better
by Standard & Poor's, Prime-2 or better by Moody's or, if
not rated, is of comparable quality as determined by the
Adviser; and any of the above securities subject to
repurchase agreements with recognized securities dealers and
banks. In the event any debt obligation held by a Fund is
downgraded below the lowest permissible grade, the Fund is
not required to sell the security, but the Adviser will
consider the downgrade in determining whether to hold the
security. In any event, a Fund will not purchase or, if
downgraded, continue to hold debt obligations rated below
the lowest permissible grade if more than 5% of such Fund's
net assets would be invested in such debt obligations
(including, for the purpose of this limitation, convertible
debt securities rated below Baa or BBB, or if unrated, of
comparable quality).
BORROWING A Fund may not borrow money, except temporarily for
emergency purposes in an amount not exceeding 10% of total
assets in order to meet redemption requests without
immediately selling portfolio securities.
REPURCHASE Repurchase agreements are arrangements under which a Fund
AGREEMENTS buys securities and the seller simultaneously agrees to
repurchase the securities at a specified time and price. The
Funds may engage in repurchase agreements to earn a higher
rate of return than they could earn by investing in the
obligation which is the subject of the repurchase agreement.
In
13
<PAGE>
order to minimize the risk of investing in repurchase
agreements, the Funds may engage in such transactions only
with recognized securities dealers and banks and in all
instances must hold underlying securities with a value at
least equal to the total repurchase price such dealer or
bank has agreed to pay.
ILLIQUID The Funds will not make purchases of illiquid securities
SECURITIES (including entering into repurchase agreements for periods
longer than seven days) if such a purchase would cause more
than 10% of the Growth Fund's total assets, or 5% of the
Appreciation Fund's total assets, to be invested in such
securities.
THE FUNDS MAY Each Fund may lend its portfolio securities in order to earn
LEND THEIR additional income, but will not engage in such a transaction
PORTFOLIO if more than 5% of its net assets would be subject to such
SECURITIES. loans.
FUNDAMENTAL
POLICIES MAY The Funds' investment objectives and the investment
NOT BE CHANGED restrictions set forth in the Statement of Additional
WITHOUT Information, including those with respect to borrowing and
SHAREHOLDER illiquid securities as discussed above, are fundamental
APPROVAL. policies and may not be changed without a shareholder vote.
All other investment policies of the Funds are not
fundamental and may be changed by the Board of Trustees. Any
percentage restrictions set forth in this Prospectus or the
Statement of Additional Information apply at the time of
investment without regard to later increases or decreases in
the values of securities or total or net assets.
INVESTMENT A Fund may not purchase the security of any issuer (other
DIVERSIFICATION than cash items or U.S. Government Securities) if such
AND purchase would cause the Fund's holdings of that issuer to
CONCENTRATION amount to more than 5% of the Fund's total assets at the
time of purchase.
The Funds will not concentrate 25% or more of their
respective total assets in any one industry. U.S. Government
Securities are not subject to this limitation.
14
<PAGE>
THE FUNDS
FOLLOW A The Funds currently observe the following operating
POLICY OF policies, which may be changed by the Board of Trustees: (1)
RESPONSIBLE the Adviser actively seeks companies that achieve excellence
INVESTING. in both financial return and environmental soundness,
selecting issuers that take positive steps toward preserving
our environment and avoiding companies with poor
environmental records; (2) a Fund will not make investments
in issuers whose primary source of revenue derives from the
production of tobacco products; and (3) a Fund will not
invest in issuers primarily engaged in the manufacture of
weapons systems, the production of nuclear energy, or the
manufacture of equipment to produce nuclear energy.
The Funds have engaged the services of Franklin Research and
Development Corporation of Boston to provide environmental
screening for all issuers selected for the Funds. Franklin
provides information and opinions on the companies'
environmental histories. However, Franklin does not make
recommendations or provide investment advice concerning the
purchase or sale of securities.
The Adviser believes that there are long-term benefits
inherent in an investment philosophy that demonstrates
concern for human rights, economic priorities and
international relations.
TOTAL RETURN AND OTHER PERFORMANCE INFORMATION
THE FUNDS MAY A total return is a change in the value of an investment
ADVERTISE during the stated period, assuming all dividends and capital
TOTAL RETURN, gain distributions are reinvested. A cumulative total return
WHICH IS BASED reflects performance over a stated period of time. An
ON HISTORICAL average annual total return is the hypothetical annual
RESULTS AND IS compounded return that would have produced the same
NOT INTENDED cumulative total return if the performance had been constant
TO INDICATE over the entire period. Because average annual returns tend
FUTURE to smooth out variations in the returns, you should
PERFORMANCE. recognize that they are not the same as actual year-by-year
results. In addition to advertising average annual returns
for the required standard periods, such returns may be
quoted for other periods, including periods of less than one
year. Further information about each Fund's performance is
contained in the Annual Report to Shareholders, which may be
obtained from the Funds without charge.
15
<PAGE>
From time to time, the Funds or their affiliates may provide
information including, but not limited to, general economic
conditions, comparative performance data and rankings with
respect to comparable investments for the same period and
for unmanaged market indices described in the Statement of
Additional Information.
MANAGEMENT AND ORGANIZATION OF THE FUNDS
THE BOARD OF The Funds are two series of the Ariel Growth Fund, doing
TRUSTEES business as Ariel Investment Trust (the "Trust"), an open-
SUPERVISES THE end diversified management investment company organized as a
FUNDS' Massachusetts business trust on August 1, 1986. The other
ACTIVITIES AND series of the Trust, Ariel Premier Bond Fund, is currently
REVIEWS THE offered only to institutional investors under a separate
TRUST'S prospectus.
CONTRACTS WITH
COMPANIES THAT
PROVIDE
SERVICES TO
THE FUNDS.
The Trust is not required to hold annual shareholder
meetings, but special meetings may be called by the Trustees
for purposes such as electing Trustees, changing fundamental
policies, or approving an investment advisory contract.
Special meetings may also be called when requested in
writing by the holders of 10% or more of the shares eligible
to vote at such meetings. As a shareholder, you receive one
vote for each share of the Funds you own.
BOARD OF
TRUSTEES BERT N. MITCHELL
Chairman and Chief Executive Officer,
Mitchell & Titus, LLP (independent accountants)
MARIO L. BAEZA
President, Wasserstein Perella International Limited
(investment banking), Managing Director and Chief Executive
Officer, Americas Division, Wasserstein Perella & Co., Inc.
(investment banking)
WILLIAM C. DIETRICH
Chief Financial Officer, Shopping Alternatives, Inc.
(computerized shopping service)
ROYCE N. FLIPPIN, JR.
President, Flippin Associates (consultants); formerly,
Director of Program Advancement, Massachusetts Institute of
Technology
16
<PAGE>
JOHN G. GUFFEY, JR.
Chair, Calvert Social Investment Foundation
Treasurer and Director, Silby, Guffey and Co., Inc.
MELLODY L. HOBSON
Senior Vice President, Director of Marketing,
Ariel Capital Management, Inc.
CHRISTOPHER G. KENNEDY
Executive Vice President,
Merchandise Mart Properties, Inc. (real estate management)
ERIC T. McKISSACK
Vice Chairman and Co-Chief Investment Officer,
Ariel Capital Management, Inc.
ARIEL CAPITAL Ariel Capital Management, Inc. (the Adviser), located at 307
MANAGEMENT, N. Michigan Avenue, Suite 500, Chicago, Illinois 60601, is a
INC. SERVES AS privately held investment management firm, controlled by
ADVISER TO THE John W. Rogers, Jr. John Rogers formed the Adviser in 1983
FUNDS. as an institutional investment firm specializing in equity
securities. As of December 31, 1995, the Adviser had assets
under management of over $1.3 billion, including assets of
the Funds.
Subject to the overall supervision of the Board of Trustees
and pursuant to the Management Agreement, the Adviser
provides the Funds with investment advice and research and
is responsible for the selection of the investments for each
Fund. In addition, the Adviser is responsible for performing
or overseeing the Funds' day-to-day management and
administration, providing the Funds with office space,
executive and other personnel and paying the salaries and
fees of all Trustees who are affiliated persons. The Funds
pay all other operating expenses. The Adviser is paid a fee
for its services to the Growth Fund at the annual rate of
0.65% of the Fund's average daily net assets for the first
$500 million, 0.60% of the next $500 million and 0.55% of
average daily net assets over $1 billion; and for its
services to the Appreciation Fund at the annual rate of
0.75% of the Fund's average daily net assets for the first
$500 million, 0.70% of the next $500 million and 0.65% for
average daily net assets over $1 billion.
17
<PAGE>
PORTFOLIO
MANAGER-- The Growth Fund's investment selections are made by John W.
GROWTH FUND Rogers, Jr., Chairman, President, and Treasurer of the
Adviser. Prior to founding the Adviser in 1983, he worked as
an account executive for the investment banking firm of
William Blair & Co. Among his civic affiliations, Mr. Rogers
currently serves as President of the Board of the Chicago
Park District and a Director of the Chicago Urban League. He
also serves as a Director on the Boards of American National
Bank & Trust Company, Burrell Communications Group,
Morrison-Knudsen Corporation and Aon Corporation. He is a
1980 graduate of Princeton University, where he received a
B.A. in Economics.
PORTFOLIO
MANAGER-- The Appreciation Fund's investment selections are made by
APPRECIATION Eric T. McKissack. Mr. McKissack is the Vice Chairman and
FUND Co-Chief Investment Officer for the Adviser as well as a
Trustee and President of the Ariel Investment Trust.
Formerly, Mr. McKissack served as the Adviser's Director of
Research. Prior to joining the Adviser, he worked for five
years as a research analyst for The First National Bank of
Chicago. Mr. McKissack holds a B.S. in both Management and
Architecture from the Massachusetts Institute of Technology
and an M.B.A. from the University of California at Berkeley.
He is a Chartered Financial Analyst and a board member of
the Investment Analysts Society of Chicago. He also serves
as a board member of Travelers & Immigrant Aid, Urban
Gateways and the Financial Advisory Committee of the Magic
Johnson Foundation.
ARIEL Under the terms of its Underwriting Agreement, Ariel
DISTRIBUTORS, Distributors (an affiliate of the Adviser) markets and
INC. IS THE distributes the shares of the Trust and is responsible for
PRINCIPAL payment of commissions and service fees to broker-dealers,
UNDERWRITER TO banks, and financial services firms, preparation of
THE FUNDS. advertising and sales literature, and printing and mailing
of prospectuses to prospective investors. Pursuant to the
underwriting Agreement, Ariel Distributors receives a fee at
the annual rate of 0.25% of the average daily net assets of
the Funds.
THE TRANSFER
AGENT AND Investors Fiduciary Trust Company (IFTC), 127 West 10th
CUSTODIAN Street, Kansas City, Missouri 64105, is the Funds' transfer
agent, custodian, dividend disbursing and shareholder
servicing agent.
18
<PAGE>
DISTRIBUTION PLAN
The Funds bear some of the costs of selling their shares
under a Distribution Plan adopted pursuant to Rule 12b-1
under the 1940 Act (the Plan). The Plan authorizes payments
by the Funds of up to 0.30% annually of each Fund's average
daily net asset value, but payments under the Plan are
currently limited by the Board of Trustees to 0.25% annually
of such average daily net asset value.
The Plan may be terminated at any time by vote of the
Trustees who are not interested persons of the Adviser or
the Funds and have no direct or indirect financial interest
in the Plan or by a vote of a majority of the outstanding
voting shares of each Fund.
Dealers having sales agreements with respect to a Fund may
receive up to 0.25% of average daily net assets of accounts
as ongoing service and account maintenance fees. The
Distributor or the Adviser may make expense reimbursements
for special training and education of a dealer's registered
representatives. Payments pursuant to the Plan are included
in the operating expenses of each Fund.
HOW TO BUY SHARES
INITIAL
PURCHASES The minimum initial investment is $1,000, or $250 for a
retirement account, unless you participate in an automatic
investment plan, in which case there is a $50 minimum. A
completed and signed application is required for each new
account you open, regardless of the method you choose for
making your initial investment. An account application
accompanies this prospectus. Additional forms may be
required from corporations, associations and certain
financial institutions. If you have any questions or need
extra applications, call 1-800-29-ARIEL (1-800-292-7435).
BY MAIL To purchase shares by mail, please make your check payable
to Ariel Mutual Funds and mail it with an application,
indicating which Ariel Mutual Fund shares you would like to
buy, to:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
19
<PAGE>
All purchases made by check should be in U.S. dollars and
made payable to the Ariel Mutual Funds. Third party checks,
except those payable to an existing shareholder who is a
natural person (as opposed to a corporation or partnership),
credit cards, and cash will not be accepted. When purchases
are made by check or periodic automatic investment,
redemptions will not be allowed until the investment being
redeemed has been in the account for 15 business days.
BY WIRE You may also purchase shares by bank wire. Just call us at
1-800-29-ARIEL (1-800-292-7435) and we will ask you your
name, address, social security or tax identification number,
the amount of your investment, the name of the Ariel Mutual
Fund in which you wish to invest and the name and address of
the financial institution that will be wiring your
investment to the Fund and we will immediately give you an
account number. Then have your financial institution wire
federal funds to the Custodian with the following
instructions:
Ariel Mutual Funds
c/o Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO 64105
ABA #101003621
Account No. 7528205
The name of the Ariel Fund(s) in which you
wish to invest
Your shareholder account
number
The name in which your
account is registered
We accept wires at no charge. However, your bank may charge
you for this service.
SUBSEQUENT You may make subsequent investments directly by bank wire.
PURCHASES Follow the instructions above for initial investments,
except that you don't need to call us first. Just contact
your financial institution.
You may also make subsequent investments in a Fund in the
minimum amount of $50. To add to your account by mail,
please send your check or money order payable to Ariel
Mutual Funds with the detachable stub from the bottom of
your most
20
<PAGE>
recent account statement, or you may drop us a note that
includes the registered account name, account number, the
name of the Fund and amount you wish to invest. Please
remember that subsequent purchases should be sent to:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
AUTOMATIC
INVESTING You may arrange for automatic investing whereby the
THROUGH YOUR Custodian will be authorized to initiate a debit to your
BANK bank account of a specific amount (minimum $50) to be used
to purchase shares of a Fund. Scheduled automatic
investments may be made any day of a month. After each
automatic investment, you will receive a transaction
confirmation and the debit should be reflected on your next
bank statement. You may terminate the plan at any time, and
we may modify or terminate the plan at any time. If,
however, you terminate an automatic investment plan with an
account balance of less than $1,000, we may close your
account. See "Redeeming Shares." If you desire to utilize
this investment option, indicate this on the application
attached to this prospectus.
PURCHASING TAX-SAVING RETIREMENT PLANS
THROUGH
RETIREMENT Contact the Adviser for complete information kits discussing
PLANS the plans, and their benefits, provisions and fees.
You may establish your new account under one of several tax-
deferred plans. These plans let you invest for retirement
and shelter your investment income from current taxes. The
minimum investments may differ depending on the type of
plan.
Individual Retirement Accounts (IRAs): available to anyone
who has earned income. You may also be able to make
investments in the name of your spouse, if your spouse has
no earned income.
Qualified Profit-Sharing and Money-Purchase Plans (including
401(k) Plans): available to self-employed people, to
partnerships and their partners and employees, or to
corporations and their employees.
21
<PAGE>
. Simplified Employee Pension Plan (SEP-IRA): available to
self-employed people, to partnerships and their partners and
employees, or to corporations. Salary reduction pension
plans (SAR-SEP IRAs) are also available to employers with 25
or fewer employees.
. 403(b)(7) Custodial Accounts: available to employees of
most non-profit organizations and public schools and
universities.
NET ASSET VALUE
Net asset value per share ("NAV") refers to the worth of one
share. NAV is computed by adding the value of all portfolio
holdings, plus other assets, deducting liabilities and then
dividing the result by the number of shares outstanding. A
Fund's NAV will vary daily based on the market values of its
investments.
Portfolio securities and other assets are valued based on
market quotations, except that debt securities maturing
within 60 days are valued at amortized cost, which
approximates market value. If quotations for a security are
not readily available, the security is valued by a method
that the Board of Trustees believes accurately reflects fair
value.
The NAV is calculated at the close of the regular session of
the New York Stock Exchange (normally 3:00 p.m. Central
time). The Funds are open for business each day the New York
Stock Exchange is open. All purchases of Fund shares will be
confirmed and credited to your account in full and
fractional shares.
WHEN YOUR ACCOUNT WILL BE CREDITED
BEFORE YOU BUY
SHARES, PLEASE Your purchase will be processed at the next offering price
READ THE based on the net asset value next calculated after your
FOLLOWING order is received and accepted. Such calculation is made at
INFORMATION TO the close of regular session trading on the New York Stock
MAKE SURE YOUR Exchange, which is usually 3:00 p.m. Central time. All your
INVESTMENT IS purchases must be made in U.S. dollars and checks must be
ACCEPTED AND drawn on U.S. banks. No cash will be accepted. The Funds
CREDITED reserve the right to suspend the offering of shares for a
PROPERLY. period of time or to reject any specific purchase order. If
your check does not clear, your purchase will be canceled
and you will be charged a $10 fee plus costs incurred by the
Funds. When you purchase
22
<PAGE>
by check, the Funds can hold payment on redemptions until
they are reasonably satisfied that the investment is
collected (normally 15 calendar days). To avoid this
collection period, you can wire federal funds from your
bank, which may charge you a fee.
Certain financial institutions or broker-dealers which have
entered into a sales agreement with the Distributor may
enter confirmed purchase orders on behalf of customers by
phone, with payment to follow within a number of days of the
order as specified by the program. If payment is not
received in the time specified, the financial institution or
broker-dealer could be liable for resulting fees or losses.
State securities laws may require financial institutions
such as banks to be licensed as securities dealers in order
to sell shares of the Funds.
OTHER INFORMATION ABOUT PURCHASING SHARES
Although there is generally no sales charge when you
purchase shares, certain dealers or financial institutions
which sell shares of Ariel Mutual Funds may impose charges
for their services, and such charges may constitute a
significant portion of a smaller account.
The Funds do not issue share certificates unless you
specifically request one each time you make a purchase.
Certificates are not issued for fractional shares or to
shareholders who have elected a systematic withdrawal plan.
Also, shares represented by certificates may not be redeemed
by telephone. See "Redeeming Shares" for information on how
to redeem your shares.
EXCHANGING SHARES
YOU MAY You may exchange your shares in each Fund for shares of the
EXCHANGE other Ariel Mutual Funds at no charge as long as your total
SHARES OF EACH investment in each class or Fund meets the minimum
FUND FOR investment required for that class or Fund. The Ariel
SHARES OF Premier Bond Fund is sold under a separate prospectus.
MONEY MARKET
FUNDS AND
SHARES OF THE
OTHER ARIEL
MUTUAL FUNDS.
You may also exchange your shares in either Ariel Mutual
Fund for shares of Cash Resource Money Market Fund, Cash
Resource U.S. Government Money Market Fund or Cash Resource
Tax-Exempt Money Market Fund at no charge. This exchange
privilege is a convenient way to buy shares in a money
market fund in order to respond to changes in your
23
<PAGE>
goals or in market conditions. These no-load money market
funds are managed by Commonwealth Advisors, Inc.
Before exchanging your shares into shares of Cash Resource
Money Market Fund, Cash Resource U.S. Government Money
Market Fund or Cash Resource Tax-Exempt Money Market Fund,
or the Ariel Premier Bond Fund, read the applicable
prospectus. To obtain a prospectus and an application for
any of these funds, just call 1-800-29-ARIEL (1-800-292-
7435).
BY MAIL
To exchange your shares of one Fund into shares of either of
the other Ariel Mutual Funds, just send a written request
to:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
This request should include your name, account number, the
name of the Fund you currently own, the name of the Fund you
wish to exchange into, and the dollar amount or number of
shares you wish to exchange. Please remember that you cannot
place any conditions on your request.
To exchange your shares of a Fund into shares of Cash
Resource Money Market Fund, Cash Resource U.S. Government
Money Market Fund or Cash Resource Tax-Exempt Money Market
Fund, complete and sign an application and mail it to the
address set forth above.
BY TELEPHONE
Unless you have elected not to have telephone transaction
privileges by checking the box in your application, you may
also make exchanges by calling 1-800-29-ARIEL (1-800-292-
7435). Exchanges made over the phone may be made by any
person, not just the shareholder of record. You may only
exchange shares by telephone if the shares you are
exchanging are not in certificate form. Certain other
limitations and conditions apply to all telephone
transactions. Before using your telephone privilege, please
read "Telephone Transactions."
OTHER INFORMATION ABOUT EXCHANGING SHARES
All accounts opened as a result of using the exchange
privilege must be registered in the same name and taxpayer
identification number as your existing account with the
Ariel Mutual Funds.
24
<PAGE>
Because of the time needed to transfer money between funds,
you may not exchange into and out of the same fund on the
same or successive days; there must be at least one day
between exchanges. You may exchange your shares of the Funds
only for shares that have been registered for sale in your
state.
Remember that each exchange represents the sale of shares of
one fund and the purchase of shares of another. Therefore,
you could realize a taxable gain or loss on the transaction.
The Funds reserve the right to terminate or modify the
exchange privilege with 60 days' written notice. If your
account is subject to backup withholding, you may not use
the exchange privilege.
Because excessive trading can hurt the Funds' performance
and shareholders, the Funds also reserve the right to
temporarily or permanently terminate, with or without
advance notice, the exchange privilege of any investor who
makes excessive use of the exchange privilege (e.g. more
than five exchanges per calendar year). Your exchanges may
be restricted or refused if a Fund receives or anticipates
simultaneous orders affecting significant portions of its
assets. In particular, a pattern of exchanges with a "market
timer" strategy may be disruptive to the Funds.
If you have any share certificates, you must include them
with your exchange request. A signature guarantee is not
required except in cases where shares are also redeemed at
the same time for cash in an amount exceeding $25,000. For
certificate delivery instructions see "Redeeming Shares By
Mail" and for signature guarantee instructions see
"Signature Guarantees."
TELEPHONE TRANSACTIONS
If you have telephone transaction privileges, you may redeem
or exchange shares or wire funds by telephone as described
in this prospectus. You automatically have telephone
privileges unless you elect otherwise. These privileges,
however, may not be available through certain dealers and
financial institutions. By exercising the telephone
privilege to sell or exchange shares, you agree that the
Funds shall not be liable for following telephone
instructions reasonably believed to be genuine. Reasonable
procedures will be employed to confirm
25
<PAGE>
that such instructions are genuine and, if not employed, the
Funds may be liable for unauthorized instructions. Such
procedures will include a request for a personal
identification number and tape recording of the
instructions. You should verify the accuracy of telephone
transactions immediately upon receipt of your confirmation
statement.
During unusual market conditions, we may have difficulty in
accepting telephone requests, in which case you should mail
your request. The Funds reserve the right to terminate,
suspend or modify telephone transaction privileges.
SIGNATURE GUARANTEES
WE MAY REQUIRE For our mutual protection, we may require a signature
SIGNATURE guarantee on certain transaction requests. A signature
GUARANTEES. guarantee verifies the authenticity of your signature, and
may be obtained from any bank, trust company, savings and
loan association, credit union, broker-dealer firm or member
of a domestic stock exchange. A signature guarantee cannot
be provided by a notary public. If redemption proceeds are
$25,000 or less and are to be paid or credited to an
individual shareholder of record at the address of record, a
signature guarantee is not required (unless there has been
an address change within 60 days). All other redemption
requests must have signatures guaranteed.
SPECIAL SERVICES AND CHARGES
The Funds pay for shareholder services but not for special
services that are required by a few shareholders, such as a
request for a historical transcript of an account. You may
be required to pay a research fee for these special
services.
If you are purchasing shares of a Fund through a program of
services offered by a broker-dealer or financial
institution, you should read the program materials in
conjunction with this prospectus. Certain features may be
modified in these programs, and administrative charges may
be imposed by the broker-dealer or financial institution for
the services rendered.
REDEEMING SHARES
BY MAIL You may redeem shares from your account by sending a letter
of instruction, your name, the name of the Fund and account
number from which shares are to be redeemed, the number of
26
<PAGE>
shares or dollar amount and where you want your check to be
sent. Simply send your written request to redeem your shares
to our Transfer Agent as follows:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
Certain shareholders, such as corporations, trusts and
estates, may be required to submit additional documents. The
letter of instruction must be signed by all required
authorized signers. If you want your money to be wired to a
bank not previously authorized or if you would like funds
sent to a different address or another person, your letter
must be signature guaranteed. Please remember that you
cannot place any conditions on your request. If any share
certificates were issued, they must be returned duly
endorsed or accompanied by a separate stock assignment. See
"Signature Guarantees."
BY TELEPHONE Unless you have elected not to have telephone transaction
privileges by checking the box in your application, you may
also redeem shares by calling 1-800-29-ARIEL (1-800-292-
7435) and receive a check by mail. Remember, however, that
the check can only be issued for up to $25,000, and only to
the registered owner (who must be an individual), and may
only be sent to the address of record, which must have been
on file for at least 60 days. Shares represented by
certificates may not be redeemed by telephone.
BY WIRE Payment for your shares may also be made to you by wire if
you have selected this option in your application and have
named a commercial bank or savings institution with a
routing number to which we can send your money.
Once you have applied for wire redemption privileges, you or
any other person can make such a request by calling 1-800-
29-ARIEL (1-800-292-7435). You may also use your wire
privilege by mailing a signed request that includes the name
of the Fund, account number and amount you wish to have
wired, by writing to:
Ariel Mutual Funds
P.O. Box 419121
Kansas City, Missouri 64141-6121
27
<PAGE>
The proceeds will be sent only to the financial institution
you have designated on your application. You may terminate
the wire redemption privilege by notifying us in writing. A
charge of $10 is imposed on wire redemptions. See the
restrictions under "Telephone Transactions" as they also
apply to wire redemptions.
SYSTEMATIC
CHECK If you maintain an account with a balance of $10,000 or
REDEMPTIONS more, you may have regular monthly or quarterly redemption
checks for a fixed amount sent to you simply by sending a
letter with all the information, including the Fund name,
your account number, the dollar amount ($100 minimum) and
when you want the checks mailed to your address on the
account. If you would like checks regularly mailed to
another person or place, the signature on your letter must
be guaranteed. See "Signature Guarantees."
OTHER INFORMATION ABOUT REDEMPTIONS
TO ENSURE Other than the $10 fee imposed on wire redemptions, there is
ACCEPTANCE OF no charge for redeeming your shares. If, however, you redeem
YOUR shares through certain dealers not having selling agreements
REDEMPTION with respect to the Funds your broker may charge a fee when
REQUEST, you redeem your shares.
PLEASE FOLLOW
THE PROCEDURES
DESCRIBED HERE
AND BELOW.
Once your shares are redeemed, the proceeds will normally be
sent to you on the next business day. However, if making
immediate payment could adversely affect the Fund, it may
take up to seven calendar days. Redemptions may be suspended
or payment dates postponed when (i) the New York Stock
Exchange is closed (or when trading is restricted) for any
reason other than its customary weekend or holiday closing;
(ii) an emergency exists as a result of which (A) disposal
by a Fund of securities owned by it is not reasonably
practical or (B) it is not reasonably practical for a Fund
fairly to determine the value of its net assets; or (iii)
under any emergency circumstances as determined by the
Securities and Exchange Commission.
You may redeem all or a portion of your shares on any
business day during which the New York Stock Exchange is
open for business. Your shares will be redeemed at the net
asset value next calculated after your redemption request is
received by the Transfer Agent in proper form. Redemptions
made after the New York Stock Exchange has closed will be
made at the next
28
<PAGE>
day's net asset value. Remember that, if you redeem shortly
after purchasing shares, the Funds may hold payment on the
redemption of your shares until they are reasonably
satisfied that payments made by check have been collected
(normally up to 15 calendar days after investment).
MINIMUM Please maintain a balance in your account of at least
ACCOUNT $1,000. If, due to redemptions, the value of your account in
BALANCE IS a Fund falls below $1,000, or you fail to invest at least
$1,000. $1,000, the account may be closed and the proceeds mailed to
you at your address of record. You will be given 30 days'
notice that your account will be closed unless you make an
additional investment to increase your account balance to
the $1,000 minimum.
DIVIDENDS, CAPITAL GAINS AND TAXES
EACH YEAR, THE
FUNDS Dividends from net investment income are declared and paid
DISTRIBUTE annually. Net investment income consists of the interest
SUBSTANTIALLY income, net short-term capital gains, if any, and dividends
ALL OF THEIR declared and received on investments, less expenses.
NET INVESTMENT Distributions of net short-term capital gains (treated as
INCOME AND dividends for tax purposes) and net long-term capital gains,
CAPITAL GAINS if any, are normally declared and paid once a year; however,
TO the Funds do not anticipate making any such distributions
SHAREHOLDERS. unless available capital loss carryovers have been used or
have expired.
DIVIDEND AND Dividends and any distributions from a Fund are
DISTRIBUTION automatically reinvested in that Fund at net asset value,
PAYMENT unless you elect to have the dividends of $10 or more paid
OPTIONS in cash. New shares will be purchased at net asset value on
the reinvestment date, which is generally up to three days
prior to the payment date. You must notify the Funds in
writing prior to the record date to change your payment
options. If you elect to have dividends and/or distributions
paid in cash, and the U.S. Postal Service cannot deliver the
check, or if it remains uncashed for six months, it, as well
as future dividends and distributions, will be reinvested in
additional shares.
FEDERAL TAXES In January, you will be sent a form indicating the federal
tax status of dividends and capital gain distributions paid
to you during the past year. Generally, dividends (including
short-term capital gains) are taxable to you as ordinary
income regardless of whether they are taken in as cash or
reinvested.
29
<PAGE>
Distributions from long-term capital gains are taxable as
long-term capital gains, regardless of how long you owned
your shares.
YOU MAY If you sell or exchange your shares you will have a short or
REALIZE A long-term capital gain or loss, depending on how long you
CAPITAL GAIN owned the shares which were sold. In January, you will be
OR LOSS WHEN sent a form indicating the proceeds from all sales,
YOU SELL OR including exchanges. You should keep your annual year-end
EXCHANGE account statements to determine the cost (basis) of the
SHARES. shares to report on your tax returns.
If we do not have your correct Social Security or Corporate
Tax Identification Number ("TIN") and a signed certified
application or Form W-9, Federal law requires the Funds to
withhold 31% of your dividends and certain redemptions. In
addition, you may be subject to a fine. You will also be
prohibited from opening another account by exchange. If this
TIN information is not received within 60 days after your
account is established, your account may be redeemed at the
current NAV on the date of redemption. The Funds reserve the
right to reject any new account or any purchase order for
failure to supply a certified TIN.
30
<PAGE>
INVESTMENT ADVISER AND
SERVICES ADMINISTRATOR
Ariel Capital Management, Inc.
307 North Michigan Avenue
Suite 500
Chicago, Illinois 60601
1-800-29-ARIEL (1-800-292-7435)
fax (312) 726-7473
PRINCIPAL UNDERWRITER
Ariel Distributors, Inc.
307 North Michigan Avenue
Suite 500
Chicago, Illinois 60601
1-800-29-ARIEL (1-800-292-7435)
fax (312) 726-7473
INDEPENDENT AUDITORS
Ernst & Young LLP
233 South Wacker Drive
Chicago, Illinois 60606
TRANSFER AGENT AND CUSTODIAN
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, Missouri 64105
LEGAL COUNSEL
D'Ancona & Pflaum
30 North LaSalle Street
Chicago, Illinois 60602
31
<PAGE>
BOARD OF TRUSTEES
Bert N. Mitchell, CPA
Founder, Chairman and Chief Executive Officer, Mitchell & Titus, LLP
Mario L. Baeza, Esq.
President, Wasserstein Perella International;
Managing Director and Chief Executive Officer,
Americas Division, Wasserstein Perella & Co., Inc.
William C. Dietrich, CPA
Chief Financial Officer, Shopping Alternatives, Inc.
Royce N. Flippin, Jr.
President, Flippin Associates; formerly
Director of Program Advancement,
Massachusetts Institute of Technology
John G. Guffey, Jr.
Chair, Calvert Social Investment Foundation
Treasurer and Director, Silby, Guffey and Co., Inc.
Mellody L. Hobson
Senior Vice President,
Director of Marketing,
Ariel Capital Management, Inc.
Christopher G. Kennedy
Executive Vice President and Director,
Merchandise Mart Properties, Inc.
Eric T. McKissack, CFA
Vice Chairman and Co-Chief Investment Officer,
Ariel Capital Management, Inc.
32
<PAGE>
ARIEL INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION--FEBRUARY 1, 1996
ARIEL APPRECIATION FUND
AND ARIEL GROWTH FUND
307 North Michigan Avenue
Suite 500
Chicago, Illinois 60601
1-800-29-ARIEL (1-800-292-7435)
Ariel Appreciation Fund ("Appreciation Fund") and Ariel Growth Fund ("Growth
Fund") (collectively, the "Ariel Mutual Funds" or the "Funds") are series of
Ariel Growth Fund, doing business as Ariel Investment Trust (the "Trust").
The Trust's audited financial statements included in the Annual Report to
Shareholders for the Funds dated September 30, 1995 are expressly incorporated
by reference and made a part of this Statement of Additional Information. Copies
of the Annual Report may be obtained free of charge by writing or calling the
Funds.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS BUT PROVIDES
INFORMATION THAT SHOULD BE READ IN CONJUNCTION WITH THE FUNDS' PROSPECTUS DATED
FEBRUARY 1, 1996 AND ANY SUPPLEMENT THERETO, WHICH MAY BE OBTAINED FREE OF
CHARGE BY WRITING OR CALLING THE FUNDS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT RESTRICTIONS 2
ADDITIONAL INFORMATION ABOUT LENDING SECURITIES AND 3
REPURCHASE AGREEMENTS
DIVIDENDS, DISTRIBUTIONS AND TAXES 4
CALCULATION OF TOTAL RETURN 5
NET ASSET VALUE 6
INVESTMENT ADVISER AND SERVICES ADMINISTRATOR 6
METHOD OF DISTRIBUTION 7
TRANSFER AGENT AND CUSTODIAN 8
PORTFOLIO TRANSACTIONS 8
INDEPENDENT AUDITORS 8
GENERAL INFORMATION 9
TRUSTEES AND OFFICERS 10
SIGNIFICANT SHAREHOLDERS 11
APPENDIX 12
</TABLE>
<PAGE>
INVESTMENT RESTRICTIONS
The Trust has adopted the following investment restrictions as fundamental
policies. These restrictions cannot be changed as to a Fund without the approval
of the holders of a majority of the outstanding shares of the Fund. As defined
in the Investment Company Act of 1940, this means the lesser of the vote of (a)
67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy, or (b) more than 50% of
the outstanding shares of the Fund. Shares have equal rights as to voting.
A Fund may not:
(1) Purchase securities of any issuer (other than obligations issued, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the value of the Fund's
total assets would be invested in securities of such issuer.
(2) Concentrate more than 25% of the value of its total assets in any one
industry; provided, however, that there is no limitation with respect to
investments in obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities.
(3) Purchase more than 10% of the outstanding voting securities of any issuer.
(4) Make loans (other than loans of its portfolio securities, loans through
the purchase of money market instruments and repurchase agreements, or loans
through the purchase of bonds, debentures or other debt securities of the
types commonly offered privately and purchased by financial institutions). The
purchase of a portion of an issue of publicly distributed debt obligations
shall not constitute the making of loans. (See also "Additional Information
about Lending Securities and Repurchase Agreements -- Loans of Portfolio
Securities.")
(5) Underwrite the securities of other issuers.
(6) Purchase securities which are subject to legal or contractual restrictions
on resale or for which there is no readily available market or which are
repurchase agreements not terminable within seven days if at the time of
purchase more than 5% of the Appreciation Fund's total assets or 10% of the
Growth Fund's total assets would be so invested.
(7) Purchase from or sell to any of the Fund's officers or trustees, or firms
of which any of them are members, any securities (other than capital stock of
the Fund), but such persons or firms may act as brokers for the Fund for
customary commissions.
(8) Issue senior securities or borrow money, except from banks as a temporary
measure for extraordinary or emergency purposes and then only in an amount up
to 10% of the value of its total assets in order to meet redemption requests
without immediately selling portfolio securities. In order to secure any such
bank borrowings under this section, the Fund may pledge, mortgage or
hypothecate the Fund's assets and then in an amount not greater than 15% of
the value of its total assets. The Fund will not borrow for leverage purposes
and investment securities will not be purchased while any borrowings are
outstanding.
(9) Make short sales of securities, purchase any securities on margin, or
invest in warrants or commodities.
(10) Write, purchase or sell puts, calls, straddles or spreads, or
combinations thereof.
(11) Purchase or retain the securities of any issuer if any officer or trustee
of the Fund or its investment adviser owns beneficially more than 1/2 of 1%
of the securities of such issuer and if together such individuals own more
than 5% of the securities of such issuer.
(12) Invest for the purpose of exercising control or management of another
issuer.
2
<PAGE>
(13) Invest in real estate or real estate limited partnerships, although it
may invest in securities which are secured by real estate or real estate
mortgages and may invest in the securities of issuers which invest or deal in
commodities, commodity futures, real estate or real estate mortgages.
(14) Invest in interests in oil, gas, or other mineral exploration or
development programs, although it may invest in securities of issuers which
invest in or sponsor such programs.
(15) Purchase the securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
(16) Purchase the securities of companies which have a record of less than
three years' continuous operation if, as a result, more than 5% of the value
of the Fund's assets would be invested in securities of such issuer.
(17) Engage in arbitrage transactions.
Restrictions apply as of the time of the transaction entered into by a Fund
without regard to later changes in the value of any portfolio security or the
assets of the Fund.
ADDITIONAL INFORMATION ABOUT
LENDING SECURITIES AND REPURCHASE AGREEMENTS
LOANS OF PORTFOLIO SECURITIES
Securities of a Fund may be lent to member firms of the New York Stock Exchange
and commercial banks with assets of one billion dollars or more. Any such loans
must be secured continuously in the form of cash or cash equivalents, such as
U.S. Treasury bills. The amount of the collateral must, on a current basis,
equal or exceed the market value of the loaned securities, and must be
terminable upon notice, at any time. The Trust will exercise its right to
terminate a securities loan in order to preserve its right to vote upon matters
of importance affecting holders of the securities. A Fund may make a securities
loan if the value of the securities loaned from the Fund will not exceed 10% of
the Fund's assets. However, as a matter of non-fundamental policy, such loan is
not made if it would cause more than 5% of net assets of a Fund to be subject to
such loans.
The advantage of such loans would be that the Fund continues to receive the
equivalent of the interest earned or dividends paid by the issuer on the loaned
securities while at the same time earning interest on the cash or equivalent
collateral.
Securities loans would be made to broker-dealers and other financial
institutions to facilitate their deliveries of such securities. As with any
extension of credit there may be risks of delay in recovery and possibly loss of
rights in the loaned securities should the borrower of the loaned securities
fail financially. However, loans will be made only to those firms that Ariel
Capital Management, Inc. (the "Adviser") deems creditworthy and only on such
terms as the Adviser believes should compensate for such risk. On termination of
the loan the borrower is obligated to return the securities to the Fund; any
gain or loss in the market value of the security during the loan period will
inure to the Fund. Custodial fees may be paid in connection with the loan.
REPURCHASE AGREEMENTS
A Fund may purchase securities subject to repurchase agreements. Repurchase
agreements are transactions in which a person purchases a security and
simultaneously commits to resell that security to the seller at a mutually
agreed upon time and price. The seller's obligation is secured by the underlying
security. The repurchase price reflects the initial purchase price plus an
agreed upon market rate of interest. While the underlying security may bear a
maturity in excess of one year, the term of the repurchase agreement is always
less than one year. Repurchase agreements not terminable within seven days will
be limited
3
<PAGE>
to no more than 5% of a Fund's assets. Repurchase agreements are short-term
money market investments, designed to generate current income.
A Fund will only engage in repurchase agreements with recognized securities
dealers and banks determined to present minimal credit risk by the Adviser.
A Fund will only engage in repurchase agreements reasonably designed to secure
fully, during the term of the agreement, the seller's obligation to repurchase
the underlying security and will monitor the market value of the underlying
security during the term of the agreement. If the value of the underlying
security declines and is not at least equal to the repurchase price due to the
Fund pursuant to the agreement, the Fund will require the seller to pledge
additional securities or cash to secure the seller's obligations pursuant to the
agreement. If the seller defaults on its obligation to repurchase and the value
of the underlying security declines, the Fund may incur a loss and may incur
expenses in selling the underlying security.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund's dividends, if any, are declared and paid from net investment income
on an annual basis. Generally, net investment income consists of the interest
income earned (adjusted for amortization of original issue or market discounts
or premiums) and dividends declared and received on investments, less expenses.
Distributions of net capital gains, if any, are generally declared and paid by
each Fund annually; however, the Funds do not intend to make any such
distributions from net capital gains unless available capital loss carryovers,
if any, have been used or have expired.
Generally, dividends (including short-term capital gains) and distributions are
taxable to the shareholder in the year they are paid. However, any dividends and
distributions paid in January but declared during the prior three months are
taxable in the year declared.
The Trust is required to withhold 31% of any dividends (including long-term
capital gain dividends) paid and 31% of each redemption transaction, if: (a) the
shareholder's social security number or other taxpayer identification number
("TIN") is not provided or an obviously incorrect TIN is provided; (b) the
shareholder does not certify under penalties of perjury that the TIN provided is
the shareholder's correct TIN and that the shareholder is not subject to backup
withholding under section 3406(a)(1)(C) of the Internal Revenue Code because of
underreporting (however, failure to provide certification as to the application
of section 3406(a)(1)(C) will result only in backup withholding on dividends,
not on redemptions); or (c) the Fund is notified by the Internal Revenue Service
that the TIN provided by the shareholder is incorrect or that there has been
underreporting of interest or dividends by the shareholder. Affected
shareholders will receive statements at least annually specifying the amount
withheld.
In addition, the Trust is required under the broker reporting provisions of the
Code to report to the Internal Revenue Service the following information with
respect to each redemption transaction: (a) the shareholder's name, address,
account number and taxpayer identification number; (b) the total dollar value of
the redemptions; and (c) each Fund's identifying CUSIP number.
Certain shareholders are, however, exempt from the backup withholding and broker
reporting requirements. Exempt shareholders include: corporations; financial
institutions; tax-exempt organizations; individual retirement plans; the U.S., a
State, the District of Columbia, a U.S. possession, a foreign government, an
international organization, or any political subdivision, agency or
instrumentality of any of the foregoing; U.S. registered commodities or
securities dealers; real estate investment trusts; registered investment
companies; bank common trust funds; certain charitable trusts; foreign central
banks of issue. Non-resident aliens also are generally not subject to either
requirement but, along with certain foreign partnerships and foreign
corporations, may instead be subject to withholding under Section 1441 of the
Code. Shareholders claiming exemption from backup withholding and broker
reporting should call or write the Trust for further information.
4
<PAGE>
The Trust intends to operate each Fund to qualify as a "regulated investment
company" under Subchapter M of the Code. By so qualifying, a Fund will not be
subject to federal income taxes to the extent its earnings are distributed. The
Trust also intends to manage the Funds so they are not subject to the excise tax
imposed by the Tax Reform Act of 1986 (the "Act").
CALCULATION OF TOTAL RETURN
A Fund's "total return" may be advertised from time to time. Total return for a
period is the percentage change in value during the period of an investment in
shares of a Fund, including all additional shares purchased within the period
with reinvested dividends and distributions. Average annual total return is the
average annual compounded rate of change in value represented by the total
return for the period.
Average annual total return is computed according to the following formula:
P(1 + T)/n/ = ERV
where P = the amount of an assumed initial investment in shares of a Fund (less
the maximum sales charge, if any, during the period); T = average annual total
return; n = the number of years from initial investment to the end of the
period; and ERV = the ending redeemable value of shares held at the end of the
period.
Average Annual total return for each of the Fund's shares for the periods
indicated are as follows:
APPRECIATION FUND
<TABLE>
<CAPTION>
Periods Ended September 30, 1995 Total Return
-------------------------------- ------------
<S> <C>
One year 12.1%
Five Years 14.9%
From inception (December 1, 1989) 9.8%
</TABLE>
GROWTH FUND
<TABLE>
<CAPTION>
Periods Ended September 30, 1995 Total Return
-------------------------------- ------------
<S> <C>
One year 14.4%
Five years 14.6%
From inception (November 6, 1986) 12.9%
</TABLE>
Total return may be advertised for other periods, such as by quarter, or
cumulatively for more than one year.
Total return, like net asset value per share, fluctuates in response to changes
in market conditions. Performance for any particular time period is historical
in nature and is not intended and should not be considered to be an indication
of future return.
NET ASSET VALUE
The net asset value per share of a Fund, the price at which the Fund's shares
are purchased and redeemed, is determined every business day as of the close of
the New York Stock Exchange (generally 3:00 p.m., Central time), and at such
other times as may be necessary or appropriate. The Funds do not determine net
asset value on certain
5
<PAGE>
national holidays or other days on which the New York Stock Exchange is closed:
New Year's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
The net asset value per share is computed by dividing the value of a Fund's
total assets, less its liabilities, by the total number of shares outstanding.
The Funds' securities are valued as follows: (a) securities for which market
quotations are readily available are valued at the most recent closing price.
All other securities for which reliable bid quotations are available are valued
at the mean between the bid and asked price, or yield equivalent as obtained
from one or more market makers for such securities; (b) securities maturing
within 60 days are valued at cost, plus or minus any amortized discount or
premium, unless the Board of Trustees determines such method not to be
appropriate under the circumstances; and (c) all other securities and assets for
which market quotations are not readily available are fairly valued by the
Adviser in good faith under the supervision of the Board of Trustees.
INVESTMENT ADVISER AND SERVICES ADMINISTRATOR
Ariel Capital Management, Inc. (the "Adviser"), 307 North Michigan Avenue, Suite
500, Chicago, Illinois 60601, which is controlled by John W. Rogers, Jr., acts
as investment adviser and services administrator under a management agreement
with the Trust ("Management Agreement").
The Management Agreement between the Trust and the Adviser will remain in effect
as to a Fund indefinitely, provided continuance is approved at least annually by
vote of the holders of a majority of the outstanding shares of the Fund or by
the Board of Trustees of the Trust; and further provided that such continuance
is also approved annually by the vote of a majority of the Trustees of the Trust
who are not parties to the Agreement or interested persons of parties to the
Agreement or interested persons of such parties, cast in person at a meeting
called for the purpose of voting on such approval. The Management Agreement may
be terminated without penalty by the Trust or the Adviser upon 60 days' prior
written notice; it automatically terminates in the event of its assignment.
Pursuant to the Management Agreement, the Adviser is responsible for determining
the investment selections for a Fund in accordance with the Fund's investment
objectives and policies stated above, subject to the direction and control of
the Board of Trustees. The Adviser pays the salaries and fees of all officers
and Trustees who are affiliated persons of the Adviser.
The Adviser also serves as the Funds' services administrator with the Trust.
Pursuant to the Management Agreement, the Adviser provides the Funds with office
space, administrative services, furnishes executive and other personnel to the
Funds and is responsible for providing or overseeing the Fund's day-to-day
management and administration.
The Funds pay all operating expenses not expressly assumed by the Adviser,
including custodial and transfer agency fees, federal and state securities
registration fees, legal and audit fees, and brokerage commissions and other
costs associated with the purchase and sale of portfolio securities, except that
the Adviser must reimburse a Fund if its annual expenses (excluding brokerage,
taxes, interest, Distribution Plan expenses and extraordinary items) exceed
1.50% of the first $30 million of each Fund's average daily net assets and 1% of
such assets in excess of $30 million.
The fees paid to the Adviser for the fiscal periods ended September 30, 1993 and
1994 were $465,276, and 575,622, respectively, for the Appreciation Fund and
$608,382 and $549,007, respectively, for the Growth Fund.
Until September 6, 1994 there was a different services administrator which
received for the fiscal year ended September 30, 1993 and the period ended
September 5, 1994, $930,169 and $987,802, respectively, for the Appreciation
Fund and $973,413 and $769,661, respectively for the Growth Fund.
Reimbursements were made by such administrator to the Appreciation Fund during
these periods of $0 and
6
<PAGE>
$88,239, respectively. The Adviser reimbursed the Appreciation Fund $16,101 for
the period from September 6, 1994 to September 30, 1994.
In 1995, the investment advisory and services administration agreements were
combined into one Management Agreement. Fees paid to the Adviser for the fiscal
year ended September 30, 1995 under the Management Agreement (including amounts
received under the old investment advisory agreement) were $1,050,040 and
$865,718, for the Appreciation Fund and the Growth Fund, respectively. The
Adviser reimbursed the Appreciation Fund $303,795 and the Growth Fund $33,526,
for the same period.
In connection with the exchange privilege with respect to Cash Resource Money
Market Fund, Cash Resource U.S. Government Money Market Fund and Cash Resource
Tax-Exempt Money Market Fund, the Distributor acts as a shareholder servicing
agent. For its services, the Distributor receives a fee from each such fund at
the rate of 0.25% of the average net assets of each account in such funds
established through the use of the exchange privilege pursuant to a Rule 12b-1
distribution plan adopted by Cash Resource Money Market Fund, Cash Resource U.S.
Government Money Market Fund and Cash Resource Tax-Exempt Money Market Fund.
The Adviser has adopted a Code of Ethics which regulates the personal securities
transactions of the Adviser's investment personnel and other employees and
affiliates with access to information regarding securities transactions of the
Fund. The Code of Ethics requires investment personnel to disclose all personal
securities holdings upon commencement of employment and all subsequent trading
activity to the Adviser's Compliance Officer. Investment personnel are
prohibited from engaging in any securities transactions, including the purchase
of securities in a private offering, without the prior consent of the Compliance
Officer. Additionally, such personnel are prohibited from purchasing securities
in an initial public offering and are prohibited from trading in any securities
(i) for which either Fund has a pending buy or sell order, (ii) which either
Fund is considering buying or selling, or (iii) which either Fund purchased or
sold within seven calendar days.
METHOD OF DISTRIBUTION
Ariel Distributors, Inc., an affiliate of the Adviser, is the principal
underwriter for the Funds under an agreement with the Trust. Pursuant to the
Underwriting Agreement, Ariel Distributors receives a fee at the annual rate of
0.25% of each Fund's average daily net assets for its distribution services and
for assuming certain marketing expenses. Ariel Distributors is located at 307 N.
Michigan Avenue, Chicago, Illinois 60601. Prior to ________, 1995, the Adviser
served as the principal underwriter.
The Trust has also adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940 with respect to the Funds (the "Distribution
Plan"). Rule 12b-1 permits an investment company to finance, directly or
indirectly, any activity which is primarily intended to result in the sale of
its shares only if it does so in accordance with the provisions of such Rule.
The Distribution Plan authorizes the Trust to pay up to 0.30% annually of a
Fund's average daily net assets in connection with the distribution of the
Fund's shares. Consistent with the Underwriting Agreement, however, payments
under the Distribution Plan are currently limited by the Board of Trustees to
0.25% annually of such average daily net assets.
During the fiscal year ended September 30, 1995, the Appreciation Fund and
Growth Fund paid Distribution Plan expenses of $350,140 and $332,968,
respectively, to the principal underwriter. Of the total amounts paid $368,724
was used to pay broker-dealers for their distribution and maintenance services
and $314,384 was used for advertising, shareholder account maintenance, printing
and related costs.
7
<PAGE>
The Distribution Plan was approved by the Board of Trustees, including the
Trustees who are not "interested persons" of the Fund (as that term is defined
in the Investment Company Act of 1940) and who have no direct financial interest
in the operation of the Plan or in any agreements related to the Distribution
Plan (the "Independent Trustees"). The selection and nomination of the
Independent Trustees is committed to the discretion of such Independent
Trustees. In establishing the Distribution Plan, the Trustees considered various
factors including the amount of the distribution fee. The Trustees determined
that there is a reasonable likelihood that the Distribution Plan will benefit
the Trust and its shareholders.
The Distribution Plan may be terminated as to a Fund by vote of a majority of
the Independent Trustees, or by vote of a majority of the outstanding shares of
the Fund. Any change in the Distribution Plan that would materially increase the
distribution cost to a Fund requires approval of the shareholders of that Fund;
otherwise, the Distribution Plan may be amended by the Trustees, including a
majority of the Independent Trustees.
The Distribution Plan will continue in effect indefinitely, if not terminated in
accordance with its terms, provided that such continuance is annually approved
by (i) the vote of a majority of the Independent Trustees and (ii) the vote of a
majority of the entire Board of Trustees.
Apart from the Distribution Plan, the Adviser, at its expense, may incur costs
and pay expenses associated with the distribution of shares of the Fund,
including compensation to broker-dealers in consideration of promotional or
administrative services.
TRANSFER AGENT AND CUSTODIAN
Investors Fiduciary Trust Company ("IFTC") has been retained by the Trust to act
as transfer agent, custodian, dividend disbursing agent and shareholder
servicing agent. These responsibilities include: responding to shareholder
inquiries and instructions concerning their accounts; crediting and debiting
shareholder accounts for purchases and redemptions of Fund shares and confirming
such transactions; updating of shareholder accounts to reflect declaration and
payment of dividends; keeping custody of all of the Funds' investments; and
preparing and distributing quarterly statements to shareholders regarding their
accounts.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their desirability from an
investment standpoint. Investment decisions and choice of brokers and dealers
are made by the Adviser under the direction and supervision of the Trust's Board
of Trustees.
The Trust seeks to obtain the best price and most favorable execution and
selects broker-dealers on the basis of their professional capability and the
value and quality of their services. Broker-dealers that provide the Trust with
statistical, research, or other information and services may be selected. Such
broker-dealers may receive compensation for executing portfolio transactions
that is in excess of the compensation another broker-dealer would have received
for executing such transactions, if the Adviser determines in good faith that
such compensation is reasonable in relation to the value of the information and
services provided. Research services furnished by investment firms may be
utilized by the Adviser in connection with its investment services for other
accounts; likewise, research services provided by investment firms used for
other accounts may be utilized by the Adviser in performing its services for the
Trust. Although any statistical, research, or other information or services
provided by broker-dealers may be useful to the Adviser, its dollar value is
generally indeterminable and its availability or receipt does not materially
reduce the Adviser's normal research activities or expenses.
The Adviser may also execute Fund transactions with or through broker-dealers
who have sold shares of the Funds. However, such sales will not be a qualifying
or disqualifying factor in a broker-dealer's selection nor will the selection of
any broker-dealer be based on the volume of Fund shares sold.
8
<PAGE>
INDEPENDENT AUDITORS
The Funds' independent auditors, Ernst & Young LLP, 233 South Wacker Drive,
Chicago, IL 60606, audit and report on the Funds' annual financial statements,
review certain regulatory reports and the Funds' federal income tax returns, and
perform other professional accounting, auditing, tax and advisory services when
engaged to do so by the Funds. Shareholders will receive annual audited
financial statements and semi-annual unaudited financial statements.
GENERAL INFORMATION
The Ariel Growth Fund and the Ariel Appreciation Fund are series of Ariel Growth
Fund (doing business as Ariel Investment Trust), an open-end, diversified
management investment company organized as a serial Massachusetts business trust
on April 1, 1986. The Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust. The shareholders of
a Massachusetts business trust might, however, under certain circumstances, be
held personally liable as partners for its obligations. The Declaration of Trust
provides for indemnification and reimbursement of expenses out of Trust assets
for any shareholder held personally liable for obligations of the Trust. The
Declaration of Trust further provides that the Trust may maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust, its shareholders, trustees, officers, employees and
agents to cover possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance exists and the Trust
itself is unable to meet its obligations.
Each share of each series of the Trust represents an equal proportionate
interest in that series and is entitled to such dividends and distributions out
of the income belonging to such shares as declared by the Board. Upon any
liquidation of the Trust, shareholders are entitled to share pro rata in the net
assets belonging to that series available for distribution.
The Prospectus and this Statement of Additional Information do not contain all
the information in the Funds' registration statement. The registration statement
is on file with the Securities and Exchange Commission and is available to the
public.
TRUSTEES AND OFFICERS
Set forth below are the principal business affiliations of the Trustees and
Officers during the last five years:
BERT N. MITCHELL, CPA, 57, Trustee and Chairman of the Board. Mr. Mitchell is
the Chairman and Chief Executive Officer of Mitchell, Titus LLP, the nation's
largest minority-owned certified public accounting firm. Address: One Battery
Park Plaza, New York, New York 10004.
MARIO L. BAEZA, ESQ., 45, Trustee. Mr. Baeza is President of Wasserstein Perella
International Limited, and Managing Director and Chief Executive Officer,
Americas Division, Wasserstein Perella & Co., Inc. (investment banking).
Formerly, he was a partner with Debevoise and Plimpton. Address: 875 Third
Avenue, New York, New York 10022.
WILLIAM C. DIETRICH, CPA, 46, Trustee. Mr. Dietrich is Chief Financial Officer
for Shopping Alternatives, Inc. He formerly served as Vice President and Chief
Financial Officer for Shoppers Express, Inc. and Practice Director for Johnson,
Lambert & Co. Address: 5110 Ridgefield Road, Bethesda, Maryland 20816.
ROYCE N. FLIPPIN, JR., 61, Trustee. President of Flippin Associates
(consultants) and Director of Program Advancement at the Massachusetts Institute
of Technology. Formerly, he was Director of Athletics, Physical Education and
Recreation at MIT and Princeton University. Address: 51 Frost Avenue, East
Brunswick, New Jersey 08816.
JOHN G. GUFFEY, JR., 47, Trustee. Mr. Guffey is chairman of the Calvert Social
Investment Foundation, organizing director of the Community Capital Bank in
Brooklyn, New York, and a financial consultant to various organizations. In
9
<PAGE>
addition, he is a Director of the Community Bankers Mutual Fund of Denver,
Colorado, and the Treasurer and Director of Silby, Guffey and Co., Inc., a
venture capital firm. Mr. Guffey was formerly an officer and is a
trustee/director of each of the investment companies in the Calvert Group of
Funds, except for Acacia Capital Corporation. Address: 7205 Pomander Lane, Chevy
Chase, Maryland 20815.
CHRISTOPHER G. KENNEDY, 32, Trustee. Mr. Kennedy is Executive Vice President and
a Director of Merchandise Mart Properties, Inc., a real estate management firm.
Address: The Merchandise Mart, 200 World Trade Center, Suite 470, Chicago,
Illinois 60654.
MELLODY L. HOBSON*, 26, Trustee. Ms. Hobson is Senior Vice President and
Director of Marketing of Ariel Capital Management. Address: 307 North Michigan
Avenue, Suite 500, Chicago, Illinois 60601.
ERIC T. MCKISSACK, CFA*, 42, Trustee and President. Mr. McKissack is Vice
Chairman and Co-Chief Investment Officer of Ariel Capital Management. Formerly,
Mr. McKissack was a research analyst at First National Bank of Chicago. Address:
307 North Michigan Avenue, Suite 500, Chicago, Illinois 60601.
ROGER P. SCHMITT*, 38, Vice President, Secretary and Assistant Treasurer. Mr.
Schmitt is Chief Operating Officer of Ariel Capital Management. Formerly, Mr.
Schmitt was a Marketing Manager with IBM. Address: 307 North Michigan Avenue,
Suite 500, Chicago, Illinois 60601.
EDWARD SINGLETON*, 45, Treasurer and Assistant Secretary. Mr. Singleton is Chief
Financial Officer of Ariel Capital Management. He also operates an accounting
and tax consulting business. Formerly, Mr. Singleton was Manager of Tax and
Regulatory Compliance for American Drug Stores, Inc., a subsidiary of American
Stores Company. Address: 307 North Michigan Avenue, Suite 500, Chicago, Illinois
60601.
*Officers and Trustees deemed to be "interested persons" of the Fund under the
Investment Company Act of 1940.
COMPENSATION SCHEDULE
During the fiscal year ended September 30, 1995, compensation paid to the
Trustees of the Trust not affiliated with the Adviser was as follows:
<TABLE>
<CAPTION>
NAME COMPENSATION
- ---- ------------
<S> <C>
Mario L. Baeza $7,400
William C. Dietrich $7,400
Royce N. Flipin, Jr. $7,400
John G. Guffey, Jr. $7,000
Christopher G. Kennedy $5,750*
Bert N. Mitchell $7,400
</TABLE>
*Christopher Kennedy became a Trustee in February, 1995.
10
<PAGE>
SIGNIFICANT SHAREHOLDERS
The following table lists the holders of more than five percent of the
outstanding shares of each Fund:
Growth Fund
-----------
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage of
of Owner Owned Outstanding Shares
- -------- ---------------- ------------------
<S> <C> <C>
Illinois State Employees 426,019.314 9.54%
Deferred Compensation
604 Stratton Office Building
Springfield, IL 62706
</TABLE>
Appreciation Fund
-----------------
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage of
of Owner Owned Outstanding Shares
- -------- ---------------- ------------------
<S> <C> <C>
Great West Life & Annuity Co. 681,395.917 10.98%
8515 E. Orchard Road
Englewood, CO 80111
Merrill Lynch Pierce Fenner & Smith 365,266 5.89%
Trade House Account
P.O. Box 45286
Jacksonville, FL 32232
</TABLE>
11
<PAGE>
APPENDIX
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
The following is a description of Moody's Investors Service, Inc.'s bond
ratings:
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they compromise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make long-term risks appear somewhat larger than Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
The following is a description of Standard & Poor's Corporation's investment
grade bond ratings:
AAA: Bonds rated AAA are considered highest grade obligations. They possess the
ultimate degree of protection as to principal and interest. They move with
market interest rates, and thus provide the maximum safety on all counts.
AA: Bonds rated AA are high-grade obligations. In the majority of instances,
they differ from AAA issues only to a small degree. Prices of AA bonds also move
with the long-term money market.
A: Bonds rated A are upper medium grade obligations. They have considerable
investment strength, but are not entirely free from adverse effects of change in
economic and trade conditions. Interest and principal are regarded as safe. They
predominantly reflect money rates in their market behavior but, to some extent,
also economic conditions.
BBB: Bonds rated BBB are medium grade obligations. They are considered
borderline between definitely sound obligations and those where the speculative
element begins to predominate. These bonds have adequate asset coverage and are
normally protected by satisfactory earnings. Their susceptibility to changing
conditions, particularly to depressions, necessitates constant monitoring. These
bonds are more responsive to business and trade conditions than to interest
rates. This group is the lowest that qualifies for commercial bank investment.
Commercial paper rated A by Standard & Poor's Corporation has the following
characteristics: liquidity ratios are adequate to meet cash requirements; long-
term senior debt is rated "A" or better; the issuer has access to at least two
adequate channels of borrowing; basic earnings and cash flow have an upward
trend with allowance made for unusual circumstances; typically, the issuer's
industry is well-established and the issuer has a strong position within the
industry; and the reliability and quality of management are unquestioned. The
relative strength or weakness of the above factors determines whether an
issuer's commercial paper is rated A-1, A-2, or A-3.
12
<PAGE>
Issuers rated Prime-1 by Moody's Investors Services, Inc., are considered to
have superior capacity of repayment of short-term promissory obligations. Such
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 have a strong capacity for repayment of short-term
promissory obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
13
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements - None
(b) Exhibits:
1. Declaration of Trust.
2. By-Laws.
3. Not Applicable.
4. Not Applicable.
5a. Management Agreement.
5b. Investment Advisory Agreement with respect to Ariel Premier Bond
Fund (incorporated by reference to Registrant's Post-Effective
Amendment No. 16, August 28, 1995).
5c. Sub-Advisory Agreement (incorporated by reference to Registrant's
Post-Effective Amendment No. 15, June 6, 1995).
5d. Administrative Services Agreement with respect to Ariel Premier
Bond Fund (incorporated by reference to Registrant's Post-
Effective Amendment No. 16, August 28, 1995).
6. Underwriting Agreement.
7. Not Applicable.
8. Custody Agreement.
9. Transfer Agency Contract.
10. Opinion and Consent of Counsel as to Legality of Shares Being
Registered.
11a. Report of Independent Auditors.
11b. Consent of Independent Auditors to Use of Report.
12. Not Applicable.
<PAGE>
13. Not Applicable.
14. Retirement Plans (incorporated by reference to Registrant's Post-
Effective Amendment No. 13, July 6, 1994).
15. Rule 12b-1 Distribution Plan.
16. Schedule for Computation of Performance Quotation.
17. Not Applicable.
18a. Powers of Attorney.
18b. Plan Pursuant to Rule 18f-3 (incorporated by reference to
Registrant's Post-Effective Amendment No. 15, June 6, 1995).
27. Financial Data Schedule.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of December 31, 1995, there were 9,632 holders of record of Registrant's
shares of beneficial interest for Ariel Growth Fund.
As of December 31, 1995, there were 11,578 holders of record of
Registrant's shares of beneficial interest for Ariel Appreciation Fund.
As of December 31, 1995, there were 25 holders of record of Registrant's
shares of beneficial interest for Ariel Premier Bond Fund.
ITEM 27. INDEMNIFICATION
Registrant's Declaration of Trust, which Declaration is Exhibit 1 of the
Initial Registration Statement dated August 1, 1986, provides, in summary, that
officers, trustees, employees, and agents shall be indemnified by Registrant
against liabilities and expenses incurred by such persons in connection with
actions, suits, or proceedings arising out of their offices or duties of
employment, except that no indemnification can be made to such a person if he
has been adjudged liable of willful misfeasance, bad faith, gross negligence, or
reckless disregard of his duties.
2
<PAGE>
Registrant's Declaration of Trust also provides that Registrant may
purchase and maintain liability insurance on behalf of any officer, trustee,
employee or agent against any liabilities arising from such status. In this
regard, Registrant maintains, jointly with the Adviser, a Directors & Officers
(Partners) Liability Insurance policy with American International Surplus Lines
Insurance Company, 15 Mountain View Road, Warren, New Jersey 07061, providing
Registrant and the Adviser with $4 million in directors and officers liability
coverage. Pursuant to an agreement between the Registrant and the Adviser, no
more than $2 million can be used by either party.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Ariel Capital Management, Inc., the Registrant's investment adviser,
renders investment advisory services to individual, institutional and pension
and profit-sharing plan accounts. The following directors of the adviser have
been engaged in other professions and/or employment capacities during the past
two fiscal years, as indicated below.
Name of Company,
Name and Title Principal Business
With Adviser Address Capacity
- ------------ ------------------ --------
Jim Atkinson Stein Roe & Farnham, Inc. Sr. V.P., CFO
Executive Vice-President of One South Wacker Drive
Finance and Administration Chicago, IL 60606
James E. Bowman, Jr., M.D. University of Chicago Professor
Director Dept. of Pathology
Chicago, IL 60637
Tinh Bui USAA Investment Management Co. Sr. Security
Vice-President P.O. 33338 Analyst
San Antonio, TX 78265
Cheryl Cargie Fiduciary Management Association V.P., Head
Vice-President 55 West Monroe, Ste. 2550 Trader
Chicago, IL 60603
Randall C. Hampton The Northern Trust Senior Vice
Vice-Chairman 30 S. LaSalle Street President
Chicago, IL 60675
3
<PAGE>
Herbert D. Odom, D.D.S. Mal-Mart Medical Group President
Director 6333 S. Green Street and Chief
Chicago, IL 60621 Executive
Officer
Henry B. Pearsall JWE Enterprises Chairman
380 S. Schmale Rd.
Carol Stream, IL
Anna Perez The Walt Disney Company V.P.,
Director 500 S. Buena Vista St. Government
Burbank, CA 91512 Relations
Creative Artists Agency Director of
9830 Wilshire Blvd. Media
Beverly Hills, CA 90212
Robert I. Solomon Silliker Laboratories Vice
Director 900 Maple Road President,
Homewood, IL 60430 Marketing
Paula Wolff Governors' State University President
Director University Park, IL 60466
ITEM 29. PRINCIPAL UNDERWRITERS
Ariel Distributors, Inc., located at 307 North Michigan Avenue, Suite 500,
Chicago IL 60601, serves as the principal underwriter of the Registrant. Ariel
Distributors, Inc. does not act as principal underwriter for any other
investment company.
(b) Positions of Ariel Distributors' Officers and Directors:
Name and Principal Position(s) with Position(s) with
Business Address Underwriter Registrant
---------------- ----------- ----------
John Washington Rogers, Jr. President, Treasurer and None
Chairman of the Board
Eric T. McKissack Vice-Chairman Trustee and President
Randall C. Hampton Vice-Chairman None
4
<PAGE>
Name and Principal Position(s) with Position(s) with
Business Address Underwriter Registrant
---------------- ----------- ----------
Jim Atkinson Executive Vice-President None
of Finance and
Administration
Edward Singleton Chief Financial Officer, Treasurer and
Vice President Assistant Secretary
Roger P. Schmitt Chief Operating Officer, Vice President,
Vice President, Secretary Secretary and
Assistant Treasurer
Mellody Hobson Senior Vice President Trustee
Betty J. Bennett Vice President None
Tinh D. Bui Vice President None
Cheryl A. Cargie Vice President None
Gary J. Leong Vice President None
Franklin Morton Vice President None
The business address of the above individuals is 307 North Michigan Avenue,
Suite 500, Chicago, Illinois 60601.
Name and Principal Position(s) with Position(s) with
Business Address Underwriter Registrant
---------------- ----------- ----------
James E. Bowman, Jr. Director None
University of Chicago
Dept. of Pathology
Chicago, Illinois 60637
Herbert D. Odom, D.D.S. Director None
Mal-Mart Medical Group
6333 S. Green St.
Chicago, Illinois 60621
Henry B. Pearsall Director None
JWE Enterprises
380 S. Schmale Road
Carol Stream, IL
5
<PAGE>
Name and Principal Position(s) with Position(s) with
Business Address Underwriter Registrant
---------------- ----------- ----------
Anna Perez Director None
The Walt Disney Company
500 S. Buena Vista Street
Burbank, CA 91512
Robert I. Solomon Director None
Silliker Laboratories
900 Maple Road
Homewood, Illinois 60430
Paula Wolff Director None
Governors' State University
University Park, Illinois
60466
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All documents and records are located at Ariel Capital Management, Inc.,
307 North Michigan Avenue, Chicago, Illinois 60601
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
The Registrant undertakes to furnish to each person to whom a Prospectus is
delivered, a copy of the Registrant's latest Annual Report to Shareholders, upon
request and without charge.
6
<PAGE>
ARIEL GROWTH FUND
SIGNATURES
----------
Registrant certifies that this Amendment meets all of the requirements for
effectiveness pursuant to Rule 485(b).
Pursuant to the requirements of the Securities Act of 1933 and/or the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Chicago and State of Illinois on the
22nd day of January, 1996.
ARIEL GROWTH FUND
By: /s/Sheldon R. Stein
-------------------
Sheldon R. Stein,
Attorney-in-fact
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
--------- ----- ----
Eric T. McKissack* Chief Executive January 22, 1996
- ------------------
Eric T. McKissack Officer and Trustee
Edward Singleton* Principal Financial January 22, 1996
- ------------------ and Accounting Officer
Edward Singleton
*By: /s/Sheldon R. Stein
-------------------
Sheldon R. Stein,
Attorney-in-Fact
*Sheldon R. Stein signs this document on behalf of the Registrant pursuant
to the power of attorney filed as Exhibit 18A to Post-Effective Amendment No. 16
and the foregoing officers pursuant to the Powers of Attorney filed as Exhibit
18A to this Registration Statement.
<PAGE>
ARIEL GROWTH FUND
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
--------- ----- ----
Mario Baeza* Trustee January 22, 1996
- -----------------------
Mario Baeza
William C. Dietrich* Trustee January 22, 1996
- -----------------------
William C. Dietrich
Royce N. Flippin, Jr.* Trustee January 22, 1996
- -----------------------
Royce N. Flippin, Jr.
John G. Guffey, Jr.* Trustee January 22, 1996
- -----------------------
John G. Guffey, Jr.
Christopher G. Kennedy* Trustee January 22, 1996
- -----------------------
Christopher G. Kennedy
Bert N. Mitchell* Trustee January 22, 1996
- -----------------------
Bert N. Mitchell
Mellody Hobson* Trustee January 22, 1996
- -----------------------
Mellody Hobson
*Sheldon R. Stein signs this document on behalf of each of the foregoing
persons pursuant to the Powers of Attorney filed as Exhibit 18A to this
Registration Statement.
/s/Sheldon R. Stein
----------------------
Sheldon R. Stein,
Attorney-in-Fact
<PAGE>
Exhibit 1
ARIEL GROWTH FUND
DECLARATION OF TRUST
DECLARATION OF TRUST made this _______ day of ________________, 19___, by
John G. Guffey, Jr., and Wayne B. Bardsley, as Trustees.
WHEREAS, the Trustees desire to establish a trust fund for the investment
and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust IN TRUST as herein set forth below.
ARTICLE I
NAMES AND DEFINITIONS
Section 1. Name. This Trust shall be known as Ariel Growth Fund. Should
the Trustees determine that the use of such name is not advisable or otherwise
cease using such name, then they may hold the property of the Trust and conduct
its business under another name of their choosing, and shall undertake to change
the name of the Trust accordingly.
Section 2. Definitions. Wherever used herein, unless otherwise required
by the context or specifically provided:
(a) The terms "Affiliated Person," "Assignment," "Interested Person,"
"Majority Shareholder Vote" (the 67% or 50% requirement of the third
sentence of Section 2(a) (42) of the 1940 act, whichever may be
applicable), and "Principal Underwriter" shall have the meanings given them
in the Investment Company Act of 1940, as amended from time to time;
(b) The "Trust" refers to Ariel Growth Fund.
(c) "Accumulated Net Income" means the accumulated net income of the
Trust determined in the manner provided or authorized in Article X, Section
3;
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" refers to the individual trustees in their
capacity as trustees hereunder of the Trust and their successor or
successors for the time being in office as such Trustees;
<PAGE>
(f) "Shares" means the equal proportionate units of interest into
which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of shares as well as whole shares;
(g) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time;
(h) The "Commission" refers to the Commission described in the 1940
Act and to any succeeding governmental authority; and
(i) A "Business Day" day means a day when the New York Stock Exchange
is open for trading and the Trustees have not determined that the Trust
shall be closed for business in observance of a holiday observed generally
by banks in New York City, Washington, D.C., or by the offices of the
Federal Government in Washington, D.C.
ARTICLE II
PURPOSE OF TRUST
The Trust is organized to operate as an investment company registered under
the 1940 Act for the purpose of investing and reinvesting its assets in
securities.
ARTICLE III
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest. The beneficial interest in the
Trust shall at all times be divided into transferable Shares, without par value,
each of which shall represent an equal proportionate interest in the Trust with
each other Share outstanding, none having priority or preference over another,
except to the extent modified by the Trustees under the provisions of this
section. The number of Shares which may be issued is unlimited. The Trustees may
from time to time divide or combine the outstanding Shares into a greater or
lesser number without thereby changing the proportionate beneficial interest in
the Trust. Contributions to the Trust may be accepted for, and Shares shall be
redeemed as, whole shares and/or fractions. Shares may be represented by
certificates or by suitable entries in the books of the Trust.
From time to time as they deem appropriate, the Trustees may create Series
and/or Classes of Shares. References in this Declaration of Trust to Shares of
the Trust shall apply to each such Series of Shares and (to the extent not
inconsistent with the rights and restrictions of a Class) to each such Class of
Shares, except to the extent modified by the Trustees under the provisions of
this Section.
Any Series of Shares created hereunder shall represent the beneficial
interest in the assets (and related liabilities) allocated by the Trustees to
such Series of Shares and acquired by the Trust only after creation of the
respective Series of Shares and only on the account of such Series. Upon
creation of any Series of Shares, the Trustees shall designate it appropriately
and determine
2
<PAGE>
the investment policies with respect to the assets allocated to such Series of
Shares, preferences, redemption rights, dividend rights, conversion rights,
liquidation rights, voting rights, and such other rights and restrictions as the
Trustees deem appropriate, to the extent not inconsistent with the provisions of
this Declaration of Trust.
The Trustees may divide the Shares or any Series of Shares into more than
one Class. Upon creation of any additional Class of Shares, the Trustees shall
designate it appropriately and determine its preferences, redemption rights,
dividend rights, conversion rights, liquidation rights, voting rights, and such
other rights and restrictions as the Trustees deem appropriate.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded in the books of the Trust or of a transfer agent. The Trustees may
make such rules as they consider appropriate for the transfer of shares and
similar matters. The record books of the Trust or any transfer agent, as the
case may be, shall be conclusive as to who are the holders of the Shares and as
to the number of Shares held from time to time by each.
Section 3. Investment in the Trust. The Trustees may accept investments
in the Trust from such persons and on such terms as they may from time to time
authorize and may cease offering Shares to the public at any time. After the
date of the initial contribution of capital to the Trust, the number of Shares
determined by the Trustees to represent the initial contribution shall be
considered as outstanding, and the amount received by the Trustees on account of
the contribution shall be treated as an asset of the Trust. Subsequent to such
initial contribution of capital, Shares (including Shares which may have been
redeemed or repurchased by the Trust) may be issued or sold at a price which
will net the Trust, before paying any taxes in connection with such issue or
sale, not less than the net asset value (as defined in Article X, Section 4)
hereof; provided, however, that the Trustees may in their discretion impose a
sales charge upon investments in the Trust.
Section 4. No Pre-emptive Rights. Shareholders shall have no pre-emptive
or other right to subscribe to any additional Shares or other securities issued
by the Trust or the Trustees.
Section 5. Provisions Relating to Series of Shares. Whenever no Shares of
a Series are outstanding, then the Trustees may abolish such Series (or any
Class of Shares of a Series for which there are no outstanding Shares). Whenever
more than one Series of Shares is outstanding, then the following provisions
shall apply:
(a) Assets Belonging to Each 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, and proceeds thereof, and any funds derived from any reinvestment of
such proceeds, 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 the
Trust. In the event there are assets, income, earnings, and proceeds thereof
which are not readily identifiable as belonging to a particular Series, then the
Trustees shall allocate such items to the various Series then existing, in such
manner and on such basis as they, in their sole discretion, deem fair and
3
<PAGE>
equitable. The amount of each such item allocated to a particular Series by the
Trustees shall then belong to that Series, and each such allocation shall be
conclusive and binding upon Shareholders of all Series for all purposes.
(b) Liabilities Belonging to Each Series. The assets belonging to each
particular Series shall be charged with the liabilities, expenses, costs and
reserves of the Trust attributable to that Series; any general liabilities,
expenses, costs and reserves of the Trust which are not readily identifiable as
attributable to a particular Series shall be allocated by the Trustees to the
various Series then existing, in such manner and on such basis as they, in their
sole discretion, deem fair and equitable. Each such allocation shall be
conclusive and binding upon the Shareholders of all Series for all purposes.
(c) Series Shares, Dividends and Liquidation. Each Share of each
respective Class of a Series shall have the same rights and pro rata beneficial
interest in the assets and liabilities of the Series as any other such Share.
Any dividends paid on the Shares of any Series shall be only payable from and to
the extent of the assets (net of liabilities) belonging to that Series. In the
event of liquidation of a Series, only the assets (less provision for
liabilities) of that Series shall be distributed to the holders of the Shares of
that Series.
(d) Voting by Series. Except as provided in this section or as limited by
the rights and restrictions of any Class, each Share of the Trust shall vote
with and in the same manner as any other Share on matters submitted to a vote of
the Shareholders, without differentiation among votes from the separate Series;
provided, however, that (i) as to any matter with respect to which a separate
vote of any Series is required by the 1940 Act or would be required under the
Massachusetts Business Corporation Law if the Trust were a Massachusetts
Business Corporation, such requirements as to a separate vote by the Series
shall apply in lieu of the voting described above herein; (ii) in the event that
the separate vote requirements referred to in (i) above apply with respect to
one or more Series, then, subject to (iii) below, the Shares of all other Series
shall vote without differentiation among their votes; and (iii) as to any matter
which does not affect the interest of a particular Series, only the holders of
Shares of one or more affected Series shall be entitled to vote.
ARTICLE IV
THE TRUSTEES
Section 1. Management of the Trust. The business and affairs of the Trust
shall be managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. Election of Trustees. The individuals executing as Trustees
this Declaration of Trust shall serve until their successors are elected at the
first meeting of the sole shareholder of the Trust and such successors accept
their appointments. Thereafter, the Trustees shall serve for such regular terms
as may be provided in the By-laws of the Trust.
4
<PAGE>
Section 3. Term of Office of Trustees. The Trustees shall hold office
during the lifetime of this Trust and until the expiration of the term of office
for which each was elected, except that (a) any Trustee may resign this trust by
written instrument signed by him and delivered to the other Trustees, which
shall take effect upon such delivery or upon such later date as is specified
therein; (b) any Trustee may be removed at any time by written instrument signed
by at least two-thirds of the number of Trustees prior to such removal,
specifying the date when such removal shall become effective; (c) any Trustee
who requests in writing to be retired or who has become mentally or physically
incapacitated may be retired by written instrument signed by a majority of the
other Trustees, specifying the date of his retirement; (d) a Trustee may be
removed at any special meeting of Shareholders of the Trust by a vote of two-
thirds of the outstanding Shares; and (e) a Trustee may be removed upon the
filing with the Custodian appointed pursuant to Article IX hereof a written
declaration signed by shareholders holding in the aggregate two-thirds of the
outstanding stocks.
Section 4. Termination of Service and Appointment of Trustees. In case of
the death, resignation, retirement, removal or mental or physical incapacity of
any of the Trustees, or in case a vacancy shall, by reason of an increase in
number, or for any other reason, exist, the remaining Trustees shall fill such
vacancy by appointing for the remaining term of the predecessor Trustee such
other person as they in their discretion shall see fit. Such appointment shall
be effected by the signing of a written instrument by a majority of the Trustees
in office. Within three months of such appointment, the Trustees shall cause
notice of such appointment to be mailed to each Shareholder at his address as
recorded on the books of the Trust. An appointment of a Trustee may be made by
the Trustees then in office and notice thereof mailed to Shareholders as
aforesaid in anticipation of a vacancy to occur by reason of retirement,
resignation or increase in number of Trustees effective at a later date,
provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. As soon as any Trustee so appointed shall have accepted this Trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder. Any appointment authorized by this Section 4 is
subject to the provisions of Section 16(a) of the 1940 Act, as applicable.
Section 5. Temporary Absence of Trustee. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two of the Trustees personally exercise their power hereunder, except as herein
otherwise expressly provided.
Section 6. Number of Trustees. The number of Trustees serving hereunder
at any time shall be determined by the Trustees themselves, but once Shares have
been issued shall not be less than three (3) nor more than fifteen (15).
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled or while any Trustee is physically or mentally incapacitated,
the other Trustees shall have all the powers hereunder and the certificate
signed by a majority of the other Trustees of such vacancy, absence or
incapacity, shall be conclusive, provided, however, that no vacancy which
reduced the
5
<PAGE>
number of Trustees below three (3) shall remain unfilled for a period longer
than six calendar months.
Section 7. Effect of Death, Resignation, etc., of a Trustee. The death,
resignation, retirement, removal or mental or physical incapacity of the
Trustees, or any one of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this Declaration of Trust.
Section 8. Ownership of the Trust. The assets of the Trust shall be held
separate and apart from any assets now or hereafter held in any capacity other
than as Trustee hereunder by the Trustees or by any successor Trustees. All of
the assets of the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
but each Shareholder shall have a proportionate undivided beneficial interest in
the Trusts.
ARTICLE V
POWER OF THE TRUSTEES
Section 1. Powers. The Trustees in all instances shall act as principals
and are and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make and
execute any and all contracts and instruments that they may consider necessary
or appropriate in connection with the management of the Trust. The Trustees
shall not be bound or limited by present or future laws or customs in regard to
investment by Trustees or fiduciaries, but shall have full authority and power
to make any and all investments which they, in their uncontrolled discretion,
shall deem proper to accomplish the purpose of this Trust. Without limiting the
foregoing, the Trustees shall have the following specific powers and authority,
subject to any applicable limitation in this Declaration of Trust or in the By-
Laws of the Trust.
(a) To buy, and invest funds of the Trust, in securities including, but
not limited to, common stocks, preferred stocks, bonds, debentures, warrants and
rights to purchase securities, options, certificates of beneficial interest,
money market instruments, notes or other evidences of indebtedness issued by
corporations, trusts, associations, or banking institutions, domestic or
foreign, or issued or guaranteed by the United States of America or any agency
or instrumentality thereof, by the government of any foreign country, by any
State of the United States (including the District of Columbia, Puerto Rico and
Guam) or by any political subdivision or agency or instrumentality of any State
or foreign country, or in "when-issued" or "delayed-delivery" contracts for any
such securities, or in any repurchase agreement (agreement under which the
seller agrees at the time of sale to repurchase the security at an agreed time
and price); or retain Trust assets in cash, and from time to time change the
investments constituting the assets of the Trust;
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(b) To adopt By-Laws not inconsistent with the Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve that right to the Shareholders;
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(d) To appoint or otherwise engage one or more banks or trust companies or
member firms of any national securities exchange registered under the Securities
Exchange Act of 1934 as custodian of any assets of the Trust, subject to any
conditions set forth in this Declaration of Trust or in the By-Laws;
(e) To appoint or otherwise engage custodial agents, transfer agents,
dividend disbursing agents, shareholder servicing agents, investment advisers,
sub-investment advisers, principal underwriters, administrative service agents,
and such other agents as the Trustees may from time-to-time appoint or otherwise
engage;
(f) To provide for the distribution or interests of the Trust either
through a principal underwriter in the manner hereinafter provided for or by the
Trust itself, or both;
(g) To set record dates in the manner hereinafter provided for;
(h) To delegate such authority as they consider desirable to a Committee
or Committees composed of Trustees, including without limitation, an Executive
Committee, or to any officers of the Trust and to any agent, custodian or
underwriter;
(i) To sell or exchange any or all of the assets of the Trust, subject to
the provisions of Article XII, Section 4(b) hereof;
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(k) To exercise powers and rights of subscription or otherwise which in
any manner arises out of ownership of securities;
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in its own
name or in the name of a custodian or a nominee or nominees, subject in either
case to proper safeguards according to the usual practice of Massachusetts trust
companies or investment companies;
(m) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any
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contract, lease, mortgage, purchase, or sale of property by such corporation or
concern, and to pay calls or subscriptions with respect to any security held in
the Trust;
(n) To engage in and to prosecute, compound, compromise, abandon, or
adjust, by arbitration, or otherwise, any actions, suits, proceedings, disputes,
claims, demands, and things relating to the Trust, and out of the assets of the
Trust to pay, or to satisfy, any debts, claims or expenses incurred in
connection therewith, including those of litigation, upon any evidence that the
Trustees may deem sufficient (such powers shall include without limitation any
actions, suits, proceedings, disputes, claims demands and things relating to the
Trust wherein any of the Trustees may be named individually and the subject
matter of which arises by reason of business for or on behalf of the Trust);
(o) To make distributions of income and of capital gains to Shareholders
in the manner hereinafter provided for;
(p) To borrow money and enter into reverse repurchase agreements
(agreements in which the Trust sells assets while concurrently agreeing to
repurchase such assets at a later date at a specific price) if such borrowings
are made temporarily for extraordinary or emergency purposes or to permit
redemptions of Shares without selling portfolio securities. Any borrowings
hereunder may be made with or without collateral security, and the Trustees may,
in their discretion, pledge, mortgage, charge, hypothecate or otherwise encumber
the gross assets of the Trust as security for any loans or reverse repurchase
agreements, subject to the limitations provided herein;
(q) To lend portfolio securities of the Trust pursuant to policies
established by the Trustees;
(r) To invest in securities having legal or contractual restrictions on
their resale or for which no readily available market exists;
(s) From time-to-time to issue and sell the Shares of the Trust either for
cash or for property whenever and in such amounts as the Trustees may deem
desirable, but subject to the limitations set forth in Section 3 of Article III;
(t) To purchase insurance of any kind, including, without limitation,
insurance on behalf of any person who is or was a Trustee, officer employee or
agent of the Trust, or is or was serving at the request of the Trust as a
trustee, director, officer, agent or employee of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any such capacity or
arising out of such person's status as such;
(u) To redeem and repurchase shares in accordance with the provisions of
Article X hereof.
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No one dealing with the Trustees shall be under obligation to make any
inquiry concerning the authority of the Trustees.
Section 2. Trustees and Officers as Shareholders. 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 issue and sell or cause to be issued or sold Shares of the Trust to an
interested person subject only to the general limitations herein contained as to
the sale and purchase of such Shares; and all subject to any restrictions which
may be contained in the By-Laws.
Section 3. Parties to Contract. The Trustees may enter into any contract
of the character described in Section 1, 2, 3, or 4 of Article VII, or in
Article IX hereof, or of any other character not prohibited by the 1940 Act with
any corporation, firm, trust or association, although one or more of the
Shareholders, Trustee, officers, employees, or agents of the Trust or their
affiliates may be an Officer, director, trustee, shareholder or interested
person of such other party to the contract, and no such contract shall be
invalidated or rendered voidable by reason of the existence of any such
relationship, nor shall any person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Trust under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, in the absence of actual fraud. The same person (including
a firm, corporation, trust or association) may be the other party to contracts
entered into pursuant to Sections 1, 2, 3, and 4 of Article VII or Article IX or
any other capacity deemed legal under the 1940 Act, and any individual may be
financially interested or otherwise an interested person of parties to any or
all of the contracts mentioned in this Section 4.
ARTICLE VI
TRUSTEES' EXPENSES AND COMPENSATION
Section 1. Trustee Reimbursement. The Trustees shall be reimbursed from
the Trust estate for all of their expenses and disbursements not otherwise
reimbursed, including, without limitation, expenses of organizing the Trust and
continuing its existence; fees and expenses of Trustees and officers of the
Trust; fees for investment advisory services, administrative services and
principal underwriting services provided for in Article VII, Sections 1, 2, 3;
fees and expenses of preparing and printing its Registration Statements under
the Securities Act of 1993 and the Investment Company Act of 1940 and any
amendments thereto; expenses of registering and qualifying the Trust and its
shares under Federal and state laws and regulations; expenses of preparing,
printing and distributing prospectuses and any amendments thereof sent to
Shareholders, underwriters, broker-dealers and to investors who may be
considering the purchase of shares; expenses of registering, licensing or other
authorization of the Trust as a broker-dealer and of its officers as agents and
salesmen under Federal and state laws and regulations; interest expense, taxes,
fees and commissions of every kind; expenses of issue (including cost of share
certificates), repurchase and redemption of shares, including expenses
attributable to a program or periodic issue; charges and expenses of custodians,
transfer agents, dividend disbursing agents, shareholder servicing agents and
registrars; printing and mailing costs; auditing, accounting and
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legal expenses; reports to Shareholders and governmental officers and
commissions; expenses of meetings of Shareholders and proxy solicitations
therefor; insurance expenses; association membership dues and nonrecurring items
as may arise, including all losses and liabilities by them incurred in
administering the Trust, including expenses incurred in connection with
litigation, proceedings and claims and the obligations of the Trust under
Article XI hereof to indemnify its Trustees, officers, employees, Shareholders
and agents, and for the payment of such expenses, disbursements, losses and
liabilities, the Trustees shall have a lien on the Trust estate prior to any
rights or interests of the Shareholders thereto. This section shall not
preclude the Trust from directly paying any of the aforementioned fees and
expenses.
Section 2. Trustee Compensation. The Trustees shall be entitled to
compensation from the Trust for their respective services as Trustees, to be
determined from time-to-time by vote of the Trustees, and the Trustees shall
also determine that compensation of all officers, consultants and agents who
they may elect or appoint. The Trust may pay any Trustee or any corporation,
firm, trust or association of which a Trustee is an interested person for
services rendered to the Trust in any capacity not prohibited by the 1940 Act,
and such payments shall not be deemed compensation for services as a Trustee
under the first sentence of this Section 2 of Article VI.
ARTICLE VII
INVESTMENT ADVISER, ADMINISTRATIVE SERVICES,
PRINCIPAL UNDERWRITER AND TRANSFER AGENT
Section 1. Investment Adviser. Subject to a Majority Shareholder Vote,
the Trustee may in their discretion from time-to-time enter into an investment
advisory contract whereby the other party to such contract shall undertake to
furnish the Trustees investment advisory services upon such terms and conditions
and for such compensation by the Trustees may in their discretion determine.
Subject to a Majority Shareholder Vote, the investment adviser may enter into a
sub-investment advisory contract to receive investment advice, statistical and
factual information from the sub-investment adviser upon such terms and
conditions and for such compensation as the Trustees may in their discretion
agree to. Notwithstanding any provisions of this Declaration of Trust, the
Trustees may authorize the investment adviser or sub-investment adviser or any
person furnishing administrative personnel and services as set forth in Article
VII, Section 2 (subject to such general or specific instructions as the Trustees
may from time-to-time adopt) to effect purchases, sales or exchanges of
portfolio securities of the Trust of behalf of the Trustees or may authorize any
officer or Trustee to effect such purchases, sales or exchanges pursuant to
recommendations of the investment adviser (and all without further action by the
Trustees). Any such purchases, sales and exchanges shall be deemed to have been
authorized by the Trustees. The Trustees may also authorize the investment
adviser to determine what firms shall be employed to effect transactions in
securities for the account of the Trust and to determine what firms shall
participate in any such transactions or shall share in commissions or fees
charged in connection with such transactions.
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Section 2. Administrative Services. The Trustees may in their discretion
from time-to-time contract for administrative personnel and services whereby the
other party shall agree to provide the Trustees administrative personnel and
services to operate the Trust on a daily basis, on such terms and conditions as
the Trustees may in their discretion determine. Such services may be provided by
one or more entities.
Section 3. Principal Underwriter. The Trustees may in their discretion
from time-to-time enter into an exclusive or non-exclusive contract or contracts
providing for the sale of the shares of the Trust to net the Trust not less than
the amount provided in Article III, Section 3 hereof, whereby the Trust may
either agree to sell the Shares to the other party to the contract or appoint
such other party its sales agent for such shares. In either case, the contract
shall be on such terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Article VII; and such
contracts may also provide for the repurchase or sales of Shares of the Trust by
such other party as principal or as agent of the Trust and may provide that the
other party may maintain a market for shares of the Trust.
Section 4. Transfer Agent. The Trustees may in their discretion from
time-to-time enter into transfer agency and shareholder services contracts
whereby the other party shall undertake to furnish to the Trustees transfer
agency and Shareholder services. The contracts shall be on such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the provisions of this Declaration of Trust. Such services may be provided
by one or more entities.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers. The Shareholders shall have power to vote (i)
for the election of Trustees as provided in Article IV, Section 2; (ii) for
the removal of Trustees as provided in Article IV, Section 3(d); (iii) with
respect to any investment adviser or sub-investment adviser as provided in
Article VII, Section 1; (iv) with respect to the amendment of this Declaration
of Trust as provided in Article XII, Section 7; (v) to the same extent as the
Shareholders of a Massachusetts business corporation as to whether or not a
court action, proceeding or claim should be brought or maintained derivatively
or 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
law, by this Declaration of Trust, or by By-Laws of the Trust or any regulation
of the Trust by the Commission or any State, or as the Trustees may consider
desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote, and each fractional Share shall be entitled to a
proportionate fractional vote. There shall be no cumulative voting in the
election of Trustees. Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required or permitted by law,
this Declaration of Trust or any By-Laws of the Trust to be taken by
Shareholders.
Section 2. Meetings. Shareholder meetings shall be held as specified in
Section 2 of Article IV and in the By-Laws at the principal office of the Trust
or at such other place as the
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Trustees may designate. Special meetings of the Shareholders may be called by
the Trustees or by officers of the Trust given such authority in the By-Laws and
shall be called by the Trustees at a place designated by them upon the written
request of Shareholders owning at least one-tenth of the outstanding Shares
entitled to vote. Shareholders shall be entitled to at least ten days' notice
of any meeting.
Section 3. Quorum and Required Vote. Except as otherwise provided by law,
to constitute a quorum for the transaction of any business at any meeting of
Shareholders there must be present, in person or by proxy, holders of one-fourth
of the total number of Shares of the Trust then outstanding and entitled to vote
at such meeting. If a quorum, as above defined, shall not be present for the
purpose of any vote that may properly come before the meeting, the Shareholders
present in person or by proxy and entitled to vote at such meeting on such
matter holding a majority of the Shares present entitled to vote on such matter
may by vote adjourn the meeting from time-to-time to be held at the same place
without further notice than by announcement to be given at the meeting until a
quorum, as above defined, entitled to vote on such matter shall be present,
whereupon any such matter may be noted upon at the meeting as though held when
originally convened. Subject to any applicable requirement of law or of this
Declaration of Trust or by the By-Laws, a plurality of the votes cast shall
elect a Trustee and all other matters shall be decided by a majority of the
votes cast entitled to vote thereon.
Section 4. Proxies. Any vote by a Shareholder of the Trust may be made in
person or by proxy, provided that no proxy shall be noted at any meeting unless
it shall have been placed on file with the Trustees or their designate prior to
the time the vote is taken. Pursuant to a resolution of a majority of the
Trustees, proxies may be solicited in the name of one or more Trustees or one or
more officers of the Trust. Only Shareholders of record shall be entitled to
vote. 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
providing invalidity shall rest on the challenger.
Section 5. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE IX
CUSTODIANS
Section 1. Appointment of Custodian and Duties. The Trustees shall
appoint or otherwise engage a bank or trust company having an aggregate capital,
surplus and undivided profits (as shown in its last published report) of at
least two million dollars ($2,000,000) as its Custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements, if
any, as may be contained in the By-Laws of the Trust:
(a) To receive and hold securities owned by the Trust and deliver the same
upon written order;
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(b) To receive and receipt for any moneys due to the Trust and deposit the
same in its own banking department or elsewhere as the Trustees may direct;
(c) To disburse such funds upon orders or vouchers;
(d) To keep, if authorized to do so by the Trustees, the books and
accounts of the Trust and furnish clerical and accounting services; and
(e) To compute, if authorized to do so by the Trustees, the Accumulated Net
Income of the Trust and the net asset value of the Shares in accordance with the
provisions hereof;
all upon such basis of compensation as may be agreed upon between the Trustees
and the Custodian. If so directed by a Majority Shareholder Vote, the Custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustee may also authorize the Custodian to employ one or more
sub-custodians from time-to-time to perform such of the acts and services of the
Custodian and upon such terms and conditions, as may be agreed upon between the
Custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the States thereof and having an
aggregate capital, surplus and undivided profits (as shown in its last published
report) of at least two million dollars ($2,000,000) or a member firm of a
national securities exchange registered under the Securities Exchange Act of
1934.
Section 2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
Custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission or otherwise in accordance with the 1940 Act,
pursuant to which system all securities of any particular class or series of any
issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Custodian at the direction of the Trustees.
Section 3. Special Custodians. The Trustees may appoint or otherwise
engage any institution which would be permitted to act as a sub-custodian
hereunder to act as a Special Custodian of the Trust. Any Special Custodian
which is a member firm of a national securities exchange shall have custody only
of securities owned by the Trust and shall not hold any of its cash. Special
Custodians shall be appointed pursuant to a written agreement approved and
thereafter at least annually ratified by the Trustees, and any such written
agreement shall meet such requirements as may be specified by law or by the
regulations of the Commission. Any such written agreement with a member firm of
a national securities exchange shall also require that the Special Custodian
shall deliver to the Custodian its receipt, evidencing that it holds the
specific
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securities in question of behalf of the Trust in its safekeeping, before any
payment can be made for such securities by the Trust. Special Custodians shall
be used by the Trust only for proposes of safekeeping designated types of
securities for periods of limited duration in cases where, in the opinion of the
Trustees, officers of the Trust, its investment adviser or other authorized
agent, such safekeeping services would be more appropriate or convenient to the
Trust than the safekeeping of such securities with the Custodian.
Section 4. Special Depositories. The Trustees may by resolution
appoint as Special Depositories any commercial banks insured by the Federal
Deposit Insurance Corporation having aggregate capital, surplus and undivided
profits (as shown in their respective last published reports) of at least two
million dollars ($2,000,000). The Trust may maintain with a Special Depository
only demand deposit accounts and shall not permit the aggregate balances in such
accounts to exceed the amount of any fidelity bond covering any officer of the
Trust authorized by the Trustees to have signature authority over such demand
deposit accounts.
ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions.
(a) The Trustees may from time-to-time declare and pay dividends, and the
amount of such dividends and the payment of them shall be wholly in the
direction of the Trustees.
(b) The Trustees may declare Accumulated Net Income of the Trust (as
defined in Section 3 of this Article X) as a dividend to Shareholders of record
at such time as the Trustees shall designate, payable in additional full and
fractional Shares or in cash. The Trustees may, if they deem it advisable,
declare a negative dividend (or reverse split) and deduct such amount from the
previously accumulated dividends of each Shareholder or from such Shareholder's
interest in the Trust.
(c) The Trustees may distribute in respect of any fiscal year as ordinary
dividends and as capital gains distributions, respectively, amounts sufficient
to enable the Trust as a regulated investment company to avoid any liability for
federal income taxes in respect of that year.
(d) The decision of the Trustees as to what, in accordance with good
accounting practice, is income and what is principal shall be final, and except
as specifically provided herein, the decision of the Trustees as to what
expenses and charges of the Trust shall be charged against principal and what
against income shall be final. Any income not distributed in any year may be
permitted to accumulate and as long as not distributed may be invested from
time-to-time in the same manner as the principal funds of the Trust.
(e) The Trustees shall have power, to the fullest extent permitted by law,
at any time or from time-to-time, to declare and cause to be paid dividends,
which, at the election of the
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Trustees, may be accrued, automatically reinvested in additional Shares (or
fractions thereof) of the Trust or paid in cash or additional Shares, all upon
such terms and conditions as the Trustees may prescribe.
(f) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a dividend consisting of Shares
of the Trust.
Section 2. Redemptions and Repurchases.
(a) If any Shareholder of record of the Trust at any time desires or
authorizes the disposition of Shares recorded in his name, he or his authorized
agent may deposit a written request (or such other form of request as the
Trustees may from time-to-time authorize) requesting that the Trust purchase his
Shares, together with such other instruments or authorization to effect the
transfer as the Trustees may from time-to-time require, at the office of the
Trust, and the Trust shall purchase his said Shares, but only at the net asset
value of such Shares (as defined in Section 4 of this Article X) next determined
by or on behalf of the Trustees after said request.
Payment for such Shares shall be made by the Trust to the Shareholder of
record at a time determined by the Trustees within seven (7) days after the
date upon which the request (and, if required, such other instruments or
authorizations of transfer is deposited, subject to the right of the Trustees to
postpone the date of payment pursuant to Section 5 of this Article X. If the
redemption is postponed beyond the date on which it would normally occur by
reason of a declaration by the Trustees suspending the right of redemption
pursuant to Section 5 of this Article X, the right of the Shareholder to have
his shares purchased by the Trust shall be similarly suspended, and he may
withdraw his request (or such other instruments or authorizations of transfer)
from deposit if he so elects; or, if he does not so elect, the purchase price
shall be the net asset value of his Shares, determined next after termination of
such suspension and payment therefor shall be made within seven (7) days
thereafter.
(b) The Trust may purchase Shares of the Trust by agreement with the
owner thereof (1) at the price not exceeding the net asset value per share
determined next after the purchase or contract of purchase is made or (2) at a
price not exceeding the net asset value per Share determined at some later time.
(c) Shares purchased by the Trust either pursuant to paragraph (a) or
paragraph (b) of this Section 2 shall be deemed treasury Shares and may be
resold by the Trust.
(d) If the Trustees determine that economic conditions would make it
seriously detrimental to the best interests of the remaining Shareholders of the
Trust to make payment wholly or partly in cash, the Trust may pay the redemption
price in whole or in part by a distribution in kind of securities from the
portfolio of the Trust, in lieu of cash, in conformity with applicable rules of
the Commission, taking such securities at the same value employed in
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determining net asset value and selecting the securities in such manner as the
Trustees may deem fair and equitable.
Section 3. Determination of Accumulated Net Income. The Accumulated Net
Income of the Trust shall be determined by or on behalf of the Trustees daily or
more frequently at the discretion of the Trustees, on each business day at such
time or times as the Trustees shall in their discretion determine. Such
determination shall be made in accordance with generally accepted accounting
principles and practices and the accounting policies established by the Trustees
and may include realized and/or unrealized gains from the sale or disposition of
securities or other property of the Trust. The power and duty to determine
Accumulated Net Income may be delegated by the Trustees from time-to-time to one
or more of the Trustees or officers of the Trust, to the other party to any
contract entered into pursuant to Section 1 or 2 of Article VII, or to the
Custodian or to a transfer agent.
Section 4. Net Asset Value of Shares. The net asset value of each share
of the Trust outstanding shall be determined at least once on each business day
by or on behalf of the Trustees. The power and duty to determine net asset value
may be delegated by the Trustees from time-to-time to one or more of the
Trustees or officers of the Trust, to the other party to any contract entered
into pursuant to Section 1 or 2 of Article VII, or to the Custodian or to a
transfer agent.
The net asset value of each Share of the Trust as of any particular time
shall be the quotient (adjusted to the number of significant digits determined
by the Trustees) obtained by dividing the value, as of such time, of the net
assets of the Trust (i.e., the value of the assets of the Trust less its
liabilities exclusive of capital and surplus) by the total number of Shares
outstanding (exclusive of treasury Shares) at such time in accordance with the
requirements of the 1940 Act and any applicable rules, regulations and orders
thereunder, and applicable provisions of the By-Laws of the Trust in conformity
with generally accepted accounting practices and principles.
Section 5. Suspension of the Rights of Redemption. The Trustees may
declare a suspension of the determination of net asset value and/or the right of
redemption or postpone the date of payment for the whole or any part of any
period (i) during which the New York Stock Exchange is closed other than
customary weekend and holiday closings, (ii) during which trading on the New
York Stock Exchange is restricted, (iii) during which an emergency exists as a
result of which disposal by the Trust of securities owned by it is not
reasonably practicable or it is not reasonable practicable for the Trust fairly
to determine the value of its net assets, or (iv) during any other period when
the Commission may permit suspension of the right of redemption or postponement
of the date of payment on redemption by order, rule or interpretation for the
protection of security holdings of the Trust; provided that applicable rules,
interpretations and regulations of the Commission shall govern as to whether the
conditions prescribed in (ii) or (iii) exist. Such suspension shall take effect
at such time as the Trustees shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment until the Trustees
shall declare the suspension at an end, except that the suspension shall
terminate in any event on the first day on which said Stock Exchange shall have
reopened or the period specified in (ii) or (iii) shall have
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expired (as to which in the absence of an official ruling by the Commission, the
determination of the Trustees shall be conclusive).
Section 6. Trust's Right to Redeem Shares. The Trust shall have the
right to cause the redemption of Shares in any Shareholder's account for their
then current net asset value (which will be promptly paid to the Shareholder in
cash) if at any time the total investment in the account does not have a minimum
dollar value determined from time-to-time by the Trustees in their sole
discretion. Shares of the Trust are redeemable at the option of the Trust if, in
the opinion of the Trustees, ownership of the Trust Shares has or may become
concentrated to an extent which would cause the Trust to be a personal holding
company within the meaning of the Internal Revenue Code of 1954, as amended, and
any successor statute (and thereby disqualified under Sub-chapter M of said
Code); in such circumstances the Trust may compel the redemption of Shares,
reject any order for the purchase of Shares or refuse to give effect to the
Transfer of Shares.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Personal Liability and Indemnification of
Shareholders. The Trustees, officers, employees or agents of the Trust shall
have no power to bind any Shareholder personally or to call upon any Shareholder
for the payment of any sum of money or assessment whatsoever, other than such as
the Shareholder may at any time agree to pay by way of subscription to any
Shares or otherwise.
No Shareholder or former Shareholder of the Trust shall be liable solely by
reason of his being or having been a Shareholder for any debt, claim, action,
demand, suit, proceeding, judgment, degree, liability or obligation of any kind,
against, or with respect to the Trust arising out of any action taken or omitted
for or on behalf of the Trust, and the Trust shall be solely liable therefor and
resort shall be had solely to the Trust property for the payment or performance
thereof.
Each Shareholder or former Shareholder of the Trust (or their heirs,
executors, administrators or other legal representatives of, in case of a
corporate entity, its corporate or general successor) shall be entitled to
indemnity and reimbursement out of the Trust property to the full extent of such
liability and the costs of any litigation or other proceedings in which such
liability shall have been determined, including, without limitation, the fees
and disbursements of counsel if, contrary to the provisions hereof, such
Shareholder or former Shareholder of the Trust shall be held to personal
liability.
The Trust shall, upon request by the Shareholder or former Shareholder,
assume the defense of any claim made against any shareholder for any act or
obligation of the Trust and satisfy any judgment thereon.
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Section 2. Limitation of Personal Liability of Trustees, Officers,
Employees or Agents of the Trust. No Trustee, officer, employee or agent of the
Trust shall have the power to bind any other Trustee, officer, employee or agent
of the Trust personally. The Trustees, officers, employees or agents of the
Trust incurring any debts, liabilities or obligations, or in taking or omitting
any other actions for or in connection with the Trust are, and each shall be
deemed to be, acting as Trustee, officer, employee or agent of the Trust and not
in his own individual capacity.
Provided they have acted under the belief that their actions are in the
best interest of the Trust, the Trustees and officers shall not be responsible
for or liable in any event for neglect or wrongdoing by them or any officer,
agent, employee, investment adviser, principal underwriter, transfer agent or
custodian of the Trust or of any entity providing administrative services for
the Trust, but nothing herein contained shall protect any Trustee or officer
against any liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Section 3. Express Exculpatory Clauses and Instruments. The Trustees
shall use appropriate means to assure that all persons having dealings with the
Trust shall be informed that the property of the Shareholders and the Trustees,
officers, employees and agents of the Trust shall not be subject to claims
against or obligations of the Trust to any extent whatsoever. The Trustees may
cause to be inserted in any written agreement, undertaking or obligation made or
issued on behalf of the Trust (including certificates for Shares of the Trust)
an appropriate reference to this Declaration, providing that neither the
Shareholders, the Trustees, the officers, the employees nor any agent of the
Trust shall be liable thereunder, and that the other parties to such instrument
shall look solely to the Trust property for the payment of any claim thereunder
or for the performance thereof; but the omission of such provisions from any
such instrument shall not render any Shareholder, Trustee, officer, employee or
agent liable, nor shall the Trustee, or any officer, agent or employee of the
Trust be liable to anyone for such omission. If, notwithstanding this
provision, any Shareholder, Trustee, officer, employee or agent shall be held
liable to any other person by reason of the omission of such provision from any
such agreement, undertaking or obligation, the Shareholder, Trustee, officer,
employee or agent shall be entitled to indemnity and reimbursement out of the
Trust property, as provided in this Article XI.
Section 4. Mandatory Indemnification.
(a) Subject only to the provisions hereof and any applicable provisions of
the By-Laws of the Trust, every person who is or has been a Trustee, officer,
employee or agent of the Trust and every person who serves at the Trust's
request as director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprises shall be indemnified by
the Trust to the fullest extent permitted by law against all liabilities and
against all expenses reasonably incurred or paid by him in connection with any
debt, claim, action, demand, suit, proceeding, judgment, decree, liability or
obligation of any kind in which he becomes involved as a party or otherwise or
is threatened by virtue of his being or having been a Trustee, officer, employee
or agent of the Trust or of another corporation, partnership, joint venture,
trust or other
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enterprise at the request of the Trust against amounts paid or incurred by him
in the compromise or settlement thereof.
(b) The words "claim", "action", "suit", or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, administrative,
legislative, investigative or other, including appeals), actual or threatened,
and the words "liabilities" and "expenses" shall include, without limitation,
attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties
and other liabilities.
(c) No indemnification shall be provided to any person hereunder against
any liabilities to the Trust or its Shareholders adjudicated to have been
incurred by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of such person's
office.
(d) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not affect any
other rights to which any Trustee, officer, employee or agent may now or
hereafter be entitled, shall continue as to a person who has ceased to be such
Trustee, officer, employee, or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person; provided, however, that no
person may satisfy any right of indemnity or reimbursement granted herein except
out of the property of the Trust, and no other person shall be personally liable
to provide indemnity or reimbursement hereunder (except an insurer of surety of
person otherwise bound by contract).
(e) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 4 may be paid by the Trust prior to final
disposition thereof upon receipt of a written undertaking by or on behalf of the
Trustee, officer, employee or agent to reimburse the Trust if it is ultimately
determined under this Section 4 that he is not entitled to indemnification.
ARTICLE XII
MISCELLANEOUS
Section 1. Trust is not a Partnership. It is hereby expressly declared
that a trust and not a partnership is created hereby.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder in good
faith and with reasonable care under the circumstances then prevailing, shall be
binding upon everyone interested. Subject to the provisions of Article XI, the
Trustees shall not be liable for errors of judgment or mistakes of fact or law.
The Trustees may take advice of counsel or other experts with respect to the
meaning and operation of this Declaration of Trust, and, subject to the
provisions of Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such
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advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is required.
Section 3. Establishment of Record Dates. The Trustees may close the
Share transfer books of the Trust for a period not exceeding ninety (90) days
preceding the date of any meeting of Shareholders, or the date for the payment
of any dividend or the making of any distribution to Shareholders, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of Shares shall go into effect; or in lieu of closing the Share
transfer books as aforesaid, the Trustees may fix in advance a date, not
exceeding ninety (90) days preceding the date of any meeting of Shareholders, or
the date for the payment of any dividend or the making of any distribution to
Shareholders, or the date for the allotment of rights, or the date when any
change or conversion or exchange of Shares shall go into effect, or the last day
on which the consent or dissent of Shareholders may be effectively expressed for
any purpose, as a record date for the determination of the Shareholders entitled
to notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend or distribution, or to any such
allotment of rights, or to exercise the rights in respect of any such change,
conversion or exchange of shares, or to exercise the right to give such consent
or dissent, and in such case, such Shareholders and only such Shareholders as
shall be Shareholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting, or to receive payment of such dividend
or distribution, or to receive such allotment or rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any Shares on the
books of the Trust after any such date fixed as aforesaid.
Section 4. Termination of Trust.
(a) This Trust shall continue without limitation of time but subject to
the provisions of paragraphs (b), (c) and (d) of this Section 4.
(b) The Trustees, with the approval of the holders of a majority of the
outstanding Shares, may merge, consolidate, or sell and convey the assets of
the Trust including its goodwill to another trust or corporation organized under
the laws of any state of the United States for an adequate consideration which
may include the assumption of all outstanding obligations, taxes, and other
liabilities, accrued or contingent, of the Trust and which may include shares of
beneficial interest or stock of such trust or corporation. Upon making
provision for the payment of all such liabilities by such assumption or
otherwise, the Trustees shall distribute the net proceeds of the transaction
ratably among the holdings of the Shares of the Trust then outstanding.
(c) Subject to a Majority Shareholder Vote, the Trustees may at any time
sell and convert into money all the assets of the Trust. Upon making provision
for the payment of all outstanding obligations, taxes and other liabilities,
accrued or contingent, of the Trust, the Trustees shall distribute the remaining
assets of the Trust ratably among the holders of the outstanding Shares.
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(d) Upon completion of the distribution of the remaining proceeds or the
remaining assets as provided in paragraphs (b) and (c), the Trust shall be
discharged of any and all further liabilities and duties hereunder and the
right, title, and interest of all parties shall be canceled and discharged.
Section 5. Officers of the Trust, Filing of Copies, References, Headings.
The Trust may maintain such offices in such locations as the Trustees may from
time-to-time determine. The original or a copy of this instrument and of each
declaration of trust supplemental 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 supplemental declaration of trust shall be filed by the Trustees
with the Massachusetts Secretary of State, as well as any other governmental
office where such filings may from time-to-time be required. Anyone dealing with
the Trust may rely on a certificate by an officer of the Trust as to whether or
not any such supplemental declaration of trust has been made and as to any
matters in connection with the Trust hereunder, and with the same effect as if
it were the original, may rely on a copy certified by an officer of the Trust to
be a copy of this instrument or in any such supplemental declaration of trust.
In this instrument or in any such supplemental declaration of trust, references
to this instrument, and all expressions like "herein," "hereof" and "hereunder,"
shall be deemed to refer to this instrument as amended or affected by any such
supplemental declaration of trust. Headings are placed herein for convenience or
reference only, and in case of any conflict, the text of this instrument, rather
than the headings, shall control. This instrument may be executed in any number
of counterparts each of which shall be deemed an original.
Section 6. Applicable Law. The Trust set forth in this instrument is
created under and is to be governed by and construed and administered according
to the laws of the Commonwealth of Massachusetts. The Trust shall be of the
type commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
Section 7. Amendments. Prior to the initial issuance of Shares pursuant
to the second sentence of Section 3 of Article III, a majority of the Trustees
then in office may amend or otherwise supplement this instrument by making a
declaration of trust supplemental hereto, which thereafter shall form a part
hereof. Subsequent to such initial issuance of Shares, if authorized by a
majority of the Trustees then in office and by a Majority Shareholder Vote, or
by any larger vote which may be required by applicable law or this declaration
of trust in any particular case, the Trustees shall amend or otherwise
supplement this instrument, by making a Declaration of Trust supplemental
hereto, which thereafter shall form a part hereof. Any such supplemental
declaration of trust shall be signed by at least a majority of the Trustees then
in office. Copies of the supplemental declaration of trust shall be filed as
specified in Section 5 of this Article XII.
Section 8. Conflicts with Law or Regulations.
(a) The provisions of this Declaration of Trust are severable, and if the
Trustees determine, with the advice of counsel, that any such provision is in
unresolvable conflict with the
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1940 Act, with the provisions of the Internal Revenue Code relating to the tax
treatment of a regulated investment company or other matters concerning
regulated investment companies, or with other applicable laws or regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration of Trust; provided, however, that such determination shall not
affect any of the remaining provisions hereof nor tender invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration of Trust shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
attach to such provision in any other jurisdiction or any other provision hereof
in any jurisdiction.
Section 9. Use of Name. The Trustees of the Trust acknowledge that, in
consideration of its assumption of certain expenses of formation of the Trust,
Calvert Asset Management Company, Inc., has reserved for itself the rights to
the name "ARIEL GROWTH FUND" (or any similar name) and that use by the Trust of
such name shall continue only with the continuing consent of Calvert Asset
Management Company, Inc., which consent may be withdrawn at any time, effect
immediately, upon written notice thereof to the trust.
IN WITNESS WHEREOF, the undersigned have executed this instrument on the
date first written above.
------------------------------
John G. Guffey, Jr.
------------------------------
Wayne B. Bardsley
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Exhibit 2
BY-LAWS
OF
ARIEL GROWTH FUND
ARTICLE I
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders shall be held at the
principal offices of the Trust in Washington. D.C., or at such place within or
without the Commonwealth of Massachusetts and on such dates and at such times as
the Trustees shall designate.
Section 2. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place, and purposes of the meeting, shall be
given by the Trustees by mail to each shareholder at his address as recorded
with the Trust at least ten (10) days and not more than ninety (90) days before
the meeting. Any adjourned meeting may be held as adjourned without further
notice. No notice need be given to any Shareholder who shall have failed to
inform the Trust of his current address or if a written waiver of notice,
executed before or after the meeting by the Shareholder or his attorney
thereunto authorized, is filed with the records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the purpose
of determining the Shareholders who are entitled to notice of and to vote at any
meeting, including any adjournment thereof, or who are entitled to participate
in any distribution, or for the purpose of any other action, the Trustees may
from time-to-time close the transfer books, the Trustees may fix a date not more
than ninety (90) days prior to the date of any meeting of Shareholders or
distribution or other action as a record date for the determination of the
persons to be treated as shareholders governed by the Declaration of Trust.
Section 4. Proxies. At any meeting of Shareholders, any holder of Shares
entitled to vote thereat may vote either in person or by proxy, provided that no
proxy shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as the
Secretary may direct, for verification prior to the time at which such vote
shall be taken. Pursuant to a resolution of a majority of the Trustees, proxies
may be solicited in the name of one or more Trustees or one or more officers of
the Trust. Only Shareholders of record shall be entitled to vote. Each full
share shall be entitled to one vote, and fractional Shares shall be entitled to
a vote of such fraction. When any Share is held jointly by several persons, any
one of them may vote at any meeting in person or by proxy in respect of such
Share, but if more than one of them shall be present at such meeting in person
or by proxy, and such joint owners or their proxies disagree as to any vote to
be cast such vote shall not be received in respect to such Share. 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
<PAGE>
challenger. If the holder of any such Share is a minor or a person of unsound
mind, and subject to guardianship or to the legal control of any other person as
regards the charge or management of such Share, he may vote by his guardian or
such other person appointed or having such control, and such vote may be given
in person or by proxy.
Section 5. Inspection of Records. The records, accounts and books of the
Trust shall be open to inspection by shareholders to the same extent as is
permitted shareholders of a Massachusetts business corporation.
Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if all shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meeting of Shareholders. Such consents shall be
treated for all purposes as a vote taken at a meeting of shareholders.
ARTICLE II
TRUSTEES
Section 1. The Trustees. The Trust shall have six (6) Trustees, unless
and until such number be changed by amendment of the By-Laws or by resolution of
the Trustees. The term of office of each Trustee shall expire upon the election
of a Successor Trustee at a meeting of Shareholders.
Section 2. Meeting of Trustees. The Trustees may in their discretion
provide for regular or stated meetings of the Trustees. Notice of regular or
stated meetings need not be given. Meetings of the Trustees other than regular
or stated meetings shall be held whenever called by the president, or by one of
the Trustees, at the time being in office. Notice of the time and place of each
meeting other than regular or stated meetings shall be given by the Secretary or
Assistant Secretary or by the officer or Trustee calling the meeting and shall
be mailed to each Trustee at least two days before the meeting, or shall be
telegraphed, cabled, or personally delivered to him at least one day before the
meeting. Notice by telephone shall constitute personal delivery for these
purposes. Notice may, however, be waived by any Trustee before or after any
meeting. Neither the business to be transacted at, nor the purpose of any
meeting of the Trustees need to be stated in the notice or waiver of notice of
such meeting, and no notice need be given of action proposed to be taken by
unanimous written consent. The attendance of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where a Trustee attends a
meeting for the express purpose of objecting to the transaction of any business
on the ground that the meeting has not been lawfully called or convened. The
Trustees may meet by means of a telephone conference circuit or similar
communications equipment, by means of which all persons participating in the
meeting can hear each other, which telephone conference meeting shall be deemed
to have been held at a place designated by the Trustees at the meeting.
Participation in a telephone conference meeting shall constitute presence in
person at such
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meeting. Any action required or permitted to be taken at any meeting of the
Trustees may be taken by the Trustees without a meeting if all the Trustees
consent to the action in writing and the written consents are filed with the
records of the Trustees' meetings. Such consents shall be treated as a vote for
all purposes.
Section 3. Quorum and Vote. A majority of the Trustees shall be present
in person at any regular or special meeting of the Trustees in order to
constitute a quorum for the transaction of business at such meeting and (except
as otherwise required by law, the Declaration of Trust or these By-Laws) the act
of a majority of the Trustees present at any meeting at which the quorum is
present shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time-to-time until
a quorum shall be present. Notice of any adjourned meeting need not be given.
Section 4. Compensation of Trustees. The compensation of the Trustees
shall be fixed from time to time by the Trustees. No Trustee shall be precluded
from serving the Trust in any other capacity, as an officer, agent or otherwise,
and receiving compensation therefor.
ARTICLE III
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee, to consist of not less than two (2) members to hold office at the
pleasure of the Trustees, which shall have the power to conduct the current and
ordinary business of the Trust while the Trustees are not in session and such
other powers of the Trustees as the Trustees may, from time-to-time, delegate to
them except those powers which by law, the Declaration of Trust, or these By-
Laws they are prohibited from delegating. The Trustees may also elect from
their own number other Committees from time-to-time, the number composing such
Committees, the powers conferred upon the same (subject to the same limitations
as the Executive Committee) and the term of membership of such Committees to be
determined by the Trustees. The Trustees may designate a Chairman of any such
Committee; in the absence of such a designation, the Committee may elect its own
Chairman.
Section 2. Meeting, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committees, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (4) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (5) authorize the members of a Committee to meet by means
of a telephone conference circuit.
All Committees shall keep regular minutes of their meetings and records of
decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept
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in the office of the Trust. All action by Committees shall be reported to the
Trustees at their meeting next succeeding such action.
Section 3. Compensation. The members of any duly appointmented Committee
shall receive such compensation and/or fees as, from time-to-time, may be fixed
by the Trustees.
ARTICLE V
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President and a Secretary who shall be elected by the Trustees. The Trustees
may elect or appoint such other officers or agents as the business of the Trust
may require, including a Chairman, a Treasurer, one or more Vice Presidents, one
or more Assistant Secretaries, and one or more Assistant Treasurers. The
Trustees may delegate to any officer or Committee the power to appoint any
subordinate officers or agents.
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration of Trust or these By-Laws, the President and
the Secretary shall each hold office until his successor shall have been duly
elected and qualified, and all other officers shall hold office at the pleasure
of the Trustees. Any two or more of the officers may be held by the same
person, except that the same person may not be both President and Secretary.
The Chairman, if there be such an officer, and the President shall be Trustees,
but no other officer of the Trust need be a Trustee.
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause by a vote of the
majority of the Trustees. Any officer or agent appointed by any officer or
Committee may be removed with or without cause by such appointing officer or
Committee.
Section 4. Bonds and Surety. Any officer may be required by the Trustees
to be bonded for the faithful performance of his duties in such amount and with
such sureties as the Trustees may determine.
Section 5. Chairman, President, and Vice Presidents. The Chairman, if
there be such an officer, shall, if present, preside at all meetings of the
Shareholders and of the Trustees and shall exercise and perform such other
powers and duties as may be from time to time assigned to him by the Trustees.
Subject to such supervisory powers, if any, as may be given by the Trustees to
the Chairman, the President shall be the chief executive officer of the Trust
and, subject to the control of the Trustees, shall have general supervision,
direction and control of the business of the Trust and of its employees and
shall exercise such general powers of management as are usually vested in the
office of President of a corporation. In the absence of the Chairman, the
President shall preside at all meetings of the Shareholders and of the Trustees.
The President shall have the
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power in the name and on behalf of the Trust to grant, issue, execute or sign
any and all documents, contracts, agreements, deeds, mortgages, proxies,
powers of attorney or other instruments as may be deemed advisable or necessary
in furtherance of the interests of the Trust. The President shall have the power
to employ attorneys and counsel for the Trust and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust. The President shall have such further powers and duties
as, from time-to-time, may be conferred upon him or assigned to him by the
Trustees. In the absence or disability of the President, the Vice-President or,
if there be more than one Vice-President, and Vice-President designated by the
Trustees shall perform all of the duties of the President, and when so acting
shall have all the powers of the President, subject to the direction of the
Trustees. Each Vice-President shall perform such other duties as may be
assigned to him from time-to-time by the Trustees or the President.
Section 6. Secretary. The Secretary shall keep the minutes of all
meetings of, and record all votes of, the Shareholders, the Trustees and
Committees, if any, in proper books provided for that purpose. He shall be
custodian of the seal of the Trust; he shall have charge of the Share transfer
books, lists and records unless the same are in the charge of a transfer agent.
He shall attend to the giving and serving of all notices by the Trust in
accordance with the provisions of these By-Laws and as required by law; and
subject to these By-Laws, he shall in general perform all duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him by the Trustees. The Secretary may delegate any of his power, authority
or duties to any Assistant Secretary of the Trust.
Section 7. Treasurer. The Treasurer, if there be such an officer, shall
be the principal financial and accounting officer of the Trust. He shall
deliver all funds of the Trust which may come into his hands to such Custodian,
subcustodian, or special depository as the Trustees shall employ pursuant to
Article IX of the Declaration of Trust. He shall render a statement of
condition of the finances of the Trust to the Trustees as often as they shall
require the same, and he shall in general perform all the duties incident to the
office of Treasurer and such other duties as from time-to-time may be assigned
to him by the Trustees. The Treasurer may delegate any of his power, authority
or duties to any Assistant Treasurer of the Trust.
Section 8. Other Officers and Duties. The Trustees may elect such other
officers and assistant officers as they shall from time-to-time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence or disability of the officer whom
they assist and shall assist that officer in the duties of his office. Each
officer, employee, agent of the Trust shall have such other duties and authority
as may be assigned him by the President.
Section 9. Evidence of Authority. Anyone dealing with the Trust shall be
fully justified in relying on a copy of a resolution of the Trustees or of any
committee thereof empowered to act in the premises which is certified as true by
the Secretary or an Assistant Secretary under the seal of the Trust.
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Section 10. Compensation. The compensation of the officers shall be fixed
from time-to-time by the Trustees or by any Committee or officer upon whom such
power may be conferred by the Trustees. No officer shall be prevented from
receiving such compensation by reason of the fact that he is also a Trustee.
ARTICLE V
FISCAL YEAR
The fiscal year of the Trust shall begin on the first day of December in
each year and shall end on the last day of November in each year, provided,
however, that the Trustees may from time-to-time change the fiscal year.
ARTICLE VI
SEAL
The Trustees may adopt a seal which shall be in such form and shall have
such inscription thereon as the Trustees may from time-to-time prescribe.
ARTICLE VII
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration of Trust or these By-Laws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto. A notice shall be deemed to
have been given if telegraphed, cabled, or sent by wireless at the time when it
has been delivered to a representative of any telegraph, cable or wireless
company with instructions that it be telegraphed, cabled or sent by wireless.
Any notice shall be deemed to have been given if mailed at the time when it has
been deposited in the mail.
ARTICLE VIII
SHARES OF BENEFICIAL INTEREST
Section 1. Beneficial Interest. The beneficial interest in the Trust
shall at all times be divided into an unlimited number of Shares without par
value which the Trustees may from time-to-time issue and sell or cause to be
issued and sold.
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Section 2. Book Entry Shares. No certificates need be issued to represent
Shares in the Trust. The Trust shall maintain adequate records to determine the
holdings of each Shareholder of record, and such records shall be deemed the
equivalent of a certificate representing the Shares for all purposes.
Section 3. Certificates. All certificates for Shares shall be signed by
the Chairman, President or any Vice-President and by the Treasurer, Secretary or
Assistant Treasurer or Assistant Secretary and sealed with the seal of the
Trust. The signatures may be either manual or facsimile signatures, and the
seal may be either facsimile or any other form of seal. Certificates for Shares
for which the Trust has appointed a transfer agent shall not be valid unless
countersigned by such Transfer Agent.
Section 4. Transfer of Shares. The Shares of the Trust shall be
transferable, so as to affect the rights of the Trust, only by transfer recorded
in the books of the Trust, in person or by attorney.
Section 5. Equitable Interest not Recognized. The Trust shall be entitled
to treat the holder of record of any Share as the absolute owner thereof and
shall not be bound to recognize any equitable or other claim or interest in such
Share on the part of any other person except as may be otherwise expressly
provided by law.
Section 6. Lost, Destroyed or Mutilated Certificates. In case any
certificate for Shares is lost, mutilated or destroyed, the Trustees may issue a
new certificate in place thereof upon such indemnity to the Trust against loss
and upon such other terms and conditions as the Trustees may deem advisable.
ARTICLE IX
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or new
By-Laws may be adopted by (a) vote of a majority of the Shares outstanding and
entitled to vote or (b) by the Trustees, provided, however, that no By-Laws may
be amended, adopted or repealed by the Trustees if such amendment, adoption or
repeal requires, pursuant to law, the Declaration of Trust or these By-Laws, a
vote of the Shareholders.
ARTICLE X
BOOKS AND RECORDS
7
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The books, accounts and records of the Trusts, including the stock ledger
or ledgers, may be kept in or outside the Commonwealth of Massachusetts at such
offices or agencies of the Trust as may from time-to-time be determined by the
Trustees.
8
<PAGE>
Exhibit 5a
MANAGEMENT AGREEMENT
MANAGEMENT AGREEMENT, made this 1st day of February, 1995, by and between
ARIEL CAPITAL MANAGEMENT, INC., an Illinois corporation (the "Adviser/Manager"),
and ARIEL GROWTH FUND, a Massachusetts business trust, d/b/a ARIEL INVESTMENT
TRUST (the "Trust").
In consideration of the mutual covenants hereinafter set forth, IT IS
HEREBY AGREED between the parties as follows:
1. Employment of the Adviser/Manager. The Trust hereby employs the
Adviser/Manager to manage the investment and reinvestment of the assets of each
of the series of the Trust identified in a currently effective addendum to the
Agreement pursuant to Section 12 of this Agreement (the Funds") and to perform
certain administrative services, subject to the supervision of the Trust's Board
of Trustees on the terms hereinafter set forth. The Adviser/Manager hereby
accepts such employment and agrees during such period to render the services and
to assume the obligations herein set forth for the compensation herein provided.
The Adviser/Manager 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 Trust in any way or
otherwise be deemed an agent of the Trust. The Adviser/Manager may contract
with any other person or persons to provide any of the services contemplated in
this sub-paragraph, at the expense of the Adviser/Manager, and shall have the
authority to direct the activities of such other person or persons in the manner
it deems appropriate.
2. Obligations of and Services to be Provided by the Adviser/Manager. The
Adviser/Manager undertakes to provide the following services and to assume the
following obligations:
a. The Adviser/Manager shall manage the investment and reinvestment
of the assets of the Funds, subject to and in accordance with the investment
objectives and policies of the Funds and any directions which the Trust's Board
of Trustees may issue from time to time. In pursuance of the foregoing, the
Adviser/Manager shall make all determinations with respect to the investment of
the assets of the Funds and the purchase and sale of portfolio securities and
shall take such action necessary to implement the same.
b. The Adviser/Manager shall, in the name of the Trust, place orders
for the execution of the Trust's portfolio transactions in accordance with the
policies with respect thereto set forth in the Trust's registration statements
under the Investment Company Act of 1940 ("1940 Act") and the Securities Act of
1933, as such registration statements may be amended from time-to-time.
<PAGE>
c. The Adviser/Manager shall determine the manner in which voting
rights, rights to consent to corporate action, and any other rights pertaining
to the Trust's portfolio securities shall be exercised.
d. The Adviser/Manager shall be responsible for providing certain
administrative services to the Trust that are necessary to the conduct of the
Trust's affairs. Such services shall consist of: maintaining the Trust's
organizational existence; providing office space; preparing reports to
regulatory bodies and shareholders; determining the daily net asset value of
each Fund's shares; determining the amount of each Fund's dividends per share;
maintaining portfolio and general accounting records; and such other incidental
administrative services as are necessary to the conduct of the Trust's affairs.
e. In connection with the services to be rendered hereunder, the
Adviser/Manager shall see to the maintenance of all necessary records of the
Trust and of the Funds.
f. The Adviser/Manager shall render regular reports to the Trust's
Board of Trustees concerning the Trust's investment activities.
g. The Adviser/Manager shall bear its expenses of providing services
to the Trust pursuant to this Agreement except any such expenses as are
undertaken by the Trust. In addition, the Adviser/Manager shall pay the
salaries and fees of all Trustees, executive officers and employees of the Trust
who are affiliated persons, as defined in Section 2(a)(3) of the 1940 Act, of
the Adviser/Manager.
3. Expenses of the Trust. The Trust shall pay all of its expenses other
than those expressly assumed by the Adviser/Manager herein, which expenses
payable by the Trust shall include, but are not limited to:
a. Fees to the Adviser/Manager as providedherein;
b. Legal and audit expenses;
c. Fees and expenses related to the registration and qualification of
the Trust and its shares for distribution under federal and state securities
laws;
d. Expenses of transfer agent, registrar, custodian, dividend
disbursing agent and shareholder servicing agent;
e. Salaries, fees and expenses of Trustees and executive officers of
the Trust who are not "affiliated persons" of the Adviser/Manager within the
meaning of the 1940 Act;
f. Taxes and corporate fees levied against the Trust;
2
<PAGE>
g. Brokerage commissions and other expenses associated with the
purchase and sale of portfolio securities;
h. Expenses, including interest, of borrowing money;
i. Expenses incidental to meetings of the Trust's shareholders and
the maintenance of the Trust's organizational existence;
j. Expenses of printing stock certificates representing shares of
each of the Funds and expenses of preparing, printing and mailing notices, proxy
material, reports and other communications to regulatory bodies and reports to
shareholders;
k. Expenses of preparing and typesetting each Fund's prospectuses and
statements of additional information;
l. Expenses of printing and distributing each Fund's prospectuses and
statements of additional information to shareholders;
m. Association membership dues;
n. Insurance premiums for fidelity, trustee and officer and other
coverage; and
o. Distribution plan expenses, as permitted by Rule 12b-1 under the
1940 Act.
4. Compensation of Adviser/Manager.
a. As compensation for the services rendered and obligations assumed
hereunder by the Adviser/Manager, the Trust shall pay to the Adviser/Manager out
of the assets of the respective Funds within ten (10) days after the last day of
each calendar month a fee calculated on the basis of average daily net assets at
the annual rates for the respective Funds set forth in one or more written
addenda to this Agreement executed by both parties.
Such fee shall be computed and accrued daily. Upon termination of this
Agreement as to any Fund before the end of any calendar month, the fee of that
Fund for such period shall be prorated. For purposes of calculating the fee of
the Adviser/Manager, the daily value of each Fund's net assets shall be computed
by the same method as the Trust uses to compute the value of net assets in
connection with the determination of the net asset value of each Fund's shares.
b. The Adviser/Manager reserves the right (i) to waive all or a part
of its fee and (ii) to make payments to brokers and dealers from the resources
of the Adviser/Manager in consideration of their promotional or administrative
services.
3
<PAGE>
5. Expense Guarantee. The Adviser/Manager hereby agrees to reimburse the
Trust if and to the extent that the aggregate operating expenses of any Fund in
any given fiscal year, including the fee paid to the Adviser/Manager, but
excluding distribution plan expenses, brokerage, taxes, interest, and
extraordinary expenses, are in excess of 1.5% of the first $30 million of such
Fund's average daily net assets and 1% of such assets in excess of $30 million.
If for any month a Fund's expenses are in excess of such limitation, then the
Adviser/Manager shall promptly and fully reimburse the Trust for such excess,
either by waiving the management fee or by direct cash payment or both. If for
any month a Fund's actual expenses are less than the applicable percentage
limitations and the Adviser/Manager has for previous months during the current
fiscal year reimbursed the Trust for excess expenses, then, to the extent
maximum permissible expenses for the current month exceed actual expenses for
that month, the Adviser/Manager shall at the end of such month recoup from the
Trust all such previous reimbursements.
6. Activities of the Adviser/Manager. The services of the Adviser/Manager
hereunder are not to be deemed exclusive, and the Adviser/Manager shall be free
to render similar services to others. It is understood that Trustees and
officers of the Trust are or may become interested in the Adviser/Manager as
stockholders, officers or otherwise, and that stockholders and officers of the
Adviser/Manager are or may become similarly interested in the Trust, and that
the Adviser/Manager may become interested in the Trust as a shareholder or
otherwise.
7. Use of Names. The Trust shall not use the name "Ariel" or the name of
the Adviser/Manager in any prospectus, sales literature or other material
relating to the Trust or to any Fund in any manner not approved prior thereto by
the Adviser/Manager; provided, however, that the Adviser/Manager shall approve
all uses of its name which merely refer in accurate terms to its appointment
hereunder or which are required by the SEC or a State Securities Commission;
and, provided, further, that in no event shall such approval be unreasonably
withheld. The Adviser/Manager shall not use the name of the Trust or of any Fund
in any material relating to the Adviser/Manager in any manner not approved prior
thereto by the Trust; provided, however, that the Trust shall approve all uses
of its name and of the name of any Fund which merely refer in accurate terms to
the appointment of the Adviser/Manager hereunder or which are required by the
SEC or a State Securities Commission; and, provided further, that in no event
shall such approval be unreasonably withheld.
8. Liability of the Adviser/Manager. Absent willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Adviser/Manager, the Adviser/Manager shall not be
subject to liability to the Trust or to any shareholder of the Trust 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.
9. Limitation of Trust's Liability. The Adviser/Manager acknowledges that
it has received notice of and accepts the limitations upon the Trust's liability
set forth in Article XI of its
4
<PAGE>
Declaration of Trust. The Adviser/Manager agrees that the Trust's obligations
hereunder in any case shall be limited to the Trust and to its assets and that
the Adviser/Manager shall not seek satisfaction of any such obligation from the
shareholders of the Trust nor from any Trustee, officer, employee or agent of
the Trust.
10. Force Majeure. The Adviser/Manager shall not be liable for delays or
errors occurring by reason of circumstances beyond its control, including but
not limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Adviser/Manager shall take reasonable steps to minimize
service interruptions but shall have no liability with respect thereto.
11. Renewal, Termination and Amendment. This Agreement shall be effective
as to a Fund on the date of initial effectiveness stated in the addendum with
respect to that Fund and continue with respect to the Fund for an initial term
specified in such addendum unless sooner terminated as hereinafter provided.
Upon effectiveness the Agreement shall supersede all prior agreements between
the parties providing for investment advisory and administrative services for
the Fund. It shall continue from year to year thereafter as long as its
continuance with respect to the Fund is approved annually in accordance with the
1940 Act. This Agreement may be terminated as to any Fund at any time, without
payment of any penalty, by the Trust's Board of Trustees, or by a vote of the
majority of the outstanding voting securities of such Fund upon 60 days' prior
written notice to the Adviser/Manager and by the Adviser/Manager upon 60 days'
prior written notice to the Trust. This Agreement may be amended as to a Fund at
any time by the parties, subject to approval by the Trust's Board of Trustees
and, if required by law or applicable SEC regulations, a vote of a majority of
the outstanding voting securities of such Fund. This Agreement shall terminate
automatically in the event of its assignment. The terms "assignment" and "vote
of a majority of the outstanding voting securities" shall have the meaning set
forth in the 1940 Act.
12. Funds. As of the date of this Agreement, the Trust has two series of
shares, the Growth Fund and Appreciation Fund. This Agreement shall apply to and
be effective as to each such series and any series hereafter created by the
Trust for which this Agreement has been approved in the manner required by the
1940 Act, provided that there is a written addendum to this Agreement executed
by both parties which identifies such series as a Fund to be managed pursuant to
this Agreement, specifies the fee payable to the Adviser/Manager with respect to
such series, and states the initial effective and termination dates of this
Agreement with respect to each Fund.
13. 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.
5
<PAGE>
14. Miscellaneous. Each party agrees to perform such further actions and
execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Illinois. The captions in this Agreement
are included for convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
ARIEL GROWTH FUND
By: _________________________
Title: ______________________
ARIEL CAPITAL MANAGEMENT, INC.
By: _________________________
Title: ______________________
6
<PAGE>
ADDENDUM TO MANAGEMENT AGREEMENT
DATED FEBRUARY 1, 1995 BETWEEN ARIEL
CAPITAL MANAGEMENT, INC. AND ARIEL
GROWTH FUND d/b/a ARIEL INVESTMENT TRUST
----------------------------------------
The series of Ariel Investment Trust (the "Trust") designated Ariel Growth
Fund (the "Fund") shall be managed by Ariel Capital Management, Inc. (the
"Adviser/Manager) pursuant to the Management Agreement between the
Adviser/Manager and the Trust dated February 1, 1995 with an initial effective
date of February 1, 1995 and an initial term ending January 31, 1997 unless
sooner terminated as provided in the Agreement. The compensation payable out of
the assets of the Fund pursuant to Section 4(a) of the Agreement shall be at the
following annual rates:
Annual Rate Value of Average Daily Net Assets
----------- ---------------------------------
0.65% First $500 Million
0.60% Next $500 Million
0.55% Over One Billion dollars
Dated February 1, 1995
ARIEL CAPITAL MANAGEMENT, INC.
By: _________________________
Title: ______________________
ARIEL GROWTH FUND
By: _________________________
Title: ______________________
7
<PAGE>
ADDENDUM TO MANAGEMENT AGREEMENT
DATED FEBRUARY 1, 1995 BETWEEN ARIEL
CAPITAL MANAGEMENT, INC. AND ARIEL
GROWTH FUND d/b/a ARIEL INVESTMENT TRUST
----------------------------------------
The series of Ariel Investment Trust (the "Trust") designated Ariel
Appreciation Fund (the "Fund") shall be managed by Ariel Capital Management,
Inc. (the "Adviser/Manager) pursuant to the Management Agreement between the
Adviser/Manager and the Trust dated February 1, 1995 with an initial effective
date of February 1, 1995 and an initial term ending January 31, 1997 unless
sooner terminated as provided in the Agreement. The compensation payable out of
the assets of the Fund pursuant to Section 4(a) of the Agreement shall be at the
following annual rates:
Annual Rate Value of Average Daily Net Assets
----------- ---------------------------------
0.75% First $500 Million
0.70% Next $500 Million
0.65% Over One Billion dollars
Dated February 1, 1995
ARIEL CAPITAL MANAGEMENT, INC.
By: _________________________
Title: ______________________
ARIEL APPRECIATION FUND
By: _________________________
Title: ______________________
8
<PAGE>
Exhibit 6
UNDERWRITING AGREEMENT
UNDERWRITING AGREEMENT, made as of the sixteenth day of May, 1995, by and
between ARIEL DISTRIBUTORS, INC., an Illinois corporation (the "Distributor"),
and ARIEL GROWTH FUND, d/b/a ARIEL INVESTMENT TRUST, a Massachusetts business
trust (the "Trust").
WHEREAS, the Trust is an open-end, diversified investment company
registered under the Investment Company Act of 1940 (the "1940 Act") and has
registered its shares for sale to the public under the Securities Act of 1933
(the "1933 Act") and various state securities laws;
WHEREAS, the Trust wishes to retain the Distributor as the principal
underwriter in connection with the offering and sale of shares of the Trust (the
"Shares") and to furnish certain other services to the Trust as specified in
this Agreement;
WHEREAS, this Agreement has been approved by a vote of the Trust's Board of
Trustees and certain trustees who are not interested persons of the Trust, in
conformity with the 1940 Act and the regulations thereunder; and
WHEREAS, the Distributor is willing to act as principal underwriter and to
furnish such services on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed as follows:
1. The Trust hereby appoints the Distributor as principal underwriter in
connection with the offering and sale of the Shares in jurisdictions wherein the
Shares may legally be sold, for the period and on the terms hereinafter set
forth. The Distributor shall, as agent for the Trust, subject to applicable
federal and state law and the Trust's Declaration of Trust and By-laws, and in
accordance with the representations in each Fund's Prospectus and Statement of
Additional Information, as such documents may be amended from time to time: (a)
promote the Trust and the Funds; (b) enter into appropriate dealer agreements
with other registered broker-dealers and other persons or organizations
("Firms") to further distribution of the Shares; (c) solicit orders for the
purchase of the Shares subject to such terms and conditions as the Trust may
specify; (d) transmit promptly orders and payments for the purchase of Shares
and orders for the redemption of Shares to the Trust's transfer agent; and (e)
provide services to shareholders as agreed upon by the Trust. The Distributor
shall comply with all applicable federal and state laws and offer the Shares on
an agency or "best efforts" basis under which the Trust shall only issue such
Shares as are actually sold.
2. (a) The Distributor may sell shares of the Trust directly to
investors. In addition, the Distributor may sell shares of the Trust to or
through Firms in such manner, not inconsistent with the
<PAGE>
provisions hereof and the then effective Registration Statement of the Trust (as
hereinafter defined) under the 1933 Act, as the Distributor may determine from
time to time, provided that no Firm or other person shall be appointed or
authorized to act as agent of the Trust without the prior consent of the Trust,
and further provided that the Distributor, and not the Trust, will be
responsible for the payment of compensation to such Firms for such services.
(b) Shares of the Trust offered for sale or sold by the Distributor shall
be offered or sold at a price per share determined in accordance with the then
current Prospectus and Statement of Additional Information relating to the sale
of such Shares except as departure from such prices shall be permitted by the
rules and regulations of the Securities and Exchange Commission ("SEC").
(c) The Distributor will conform and will require each Firm to conform to
the provisions hereof and the Registration Statement under the 1933 Act with
respect to the public offering price, manner of sales and payment terms of the
Trust's shares, and neither the Distributor nor any such Firms shall withhold
the placing of purchase orders so as to make a profit thereby.
3. The compensation to be paid for the services performed and the
obligations assumed by the Distributor under this Agreement, if any, shall be
set forth in one or more written addenda to this Agreement executed by both
parties.
4. As used in this Agreement, the term "Registration Statement" shall mean
the registration statement most recently filed by the Trust with the Securities
and Exchange Commission and effective under the 1933 Act (including the related
Prospectus and Statement of Additional Information), as such Registration
Statement is amended by any amendments thereto at the time in effect, and the
terms "Prospectus" and "Statement of Additional Information" shall mean the form
of prospectus and Statement of Additional Information filed with respect to each
Fund as part of the Registration Statement.
5. The Distributor shall print and distribute to prospective investors
Prospectuses and Statements of Additional Information, and may print and
distribute such other sales literature, reports, forms, and advertisements in
connection with the sale of the Shares as comply with the applicable provisions
of federal and state law. In connection with such sales and offers of sale, the
Distributor shall give only such information and make only such statements or
representations, and require any Firms with whom it enters into dealer
agreements to give only such information and make only such statements or
representations, as are contained in the Prospectus or Statement of Additional
Information of a Fund or in information furnished in writing to the Distributor
by the Trust. The Trust shall not be responsible in any way for any other
information, statements or representations given or made by the Distributor or
by any Firms or other persons acting as representatives or agents of the
Distributor or of any such Firms or other persons.
6. The Trust shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by the
Distributor under this Agreement. The Trust will pay or cause to be paid
expenses (including the fees and disbursements of its own counsel) and all taxes
and fees payable to the federal, state or other governmental agencies on account
of the
2
<PAGE>
registration or qualification of securities issued by the Trust or otherwise.
The Trust will also pay or cause to be paid expenses incident to the issuance of
shares of beneficial interest, such as the cost of share certificates, issue
taxes, and fees of the transfer agent. The Distributor will pay all expenses
(other than expenses which one or more Firms may bear pursuant to any agreement
with the Distributor) incident to the sale and distribution of the shares issued
or sold hereunder including, without limiting the generality of the foregoing,
all expenses of printing and distributing any Prospectus or Statement of
Additional Information and of preparing, printing and distributing or
disseminating any other literature, advertising and selling aids in connection
with the offering of the shares for sale (except that such expenses shall not
include expenses incurred by the Trust in connection with the preparation,
typesetting, printing and distribution of any Registration Statement, Prospectus
and Statement of Additional Information or report or other communication to
shareholders in their capacity as such), expenses of advertising in connection
with such offering, compensation to the Firms referred to herein and sales
compensation to Distributor's registered representatives.
7. The Trust agrees to indemnify, defend and hold the Distributor, its
several officers and directors, and any person who controls the Distributor
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) which the Distributor, its
officers or directors, or any such controlling person may incur, under the 1933
Act or under common law or otherwise, arising out of or based upon any alleged
untrue statement of a material fact contained in the Registration Statement,
Prospectus or Statement of Additional Information of a Fund or arising out of or
based upon any alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, provided
that in no event shall anything contained in this Agreement be construed so as
to protect the Distributor against any liability to the Trust or its
shareholders to which the Distributor would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence, in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement.
8. The Distributor agrees to indemnify, defend and hold the Trust, its
several officers and directors, and any person who controls the Trust within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Trust, its officers or
directors, or any such controlling person may incur, under the 1933 Act or under
common law or otherwise, arising out of or based upon any alleged untrue
statement or a material fact contained in information furnished in writing by
the Distributor to the Trust for use in the Registration Statement, Prospectus
or Statement of Additional Information of a Fund or arising out of or based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement, Prospectus or
Statement of Additional Information or necessary to make such information not
misleading.
9. The Trust reserves the right at any time to withdraw any or all
offerings of the Shares by written notice to the Distributor at its principal
office.
3
<PAGE>
10. The Distributor is an independent contractor and shall be agent for
the Trust only in respect to the offer, sale and redemption of the Shares.
11. The services of the Distributor to the Trust under this Agreement are
not to be deemed exclusive, and the Distributor shall be free to render similar
services or other services to others so long as its services hereunder are not
impaired thereby.
12. The Distributor acknowledges that it has received notice of and
accepts the limitations upon the Trust's liability set forth in Article XI of
its Declaration of Trust. The Distributor agrees that the Trust's obligations
hereunder in any case shall be limited to the Trust and to its assets (or the
assets of the applicable Fund) and that the Distributor shall not seek
satisfaction of any such obligation from the shareholders of the Trust nor from
any Trustee, officer, employee or agent of the Trust.
13. The Trust shall not use the name of the Distributor in any Prospectus,
Statement of Additional Information, sales literature or other material relating
to the Trust in any manner not approved prior thereto by the Distributor;
provided, however, that the Distributor shall approve all uses of its name which
merely refer in accurate terms to its appointment hereunder or which are
required by the SEC or applicable state securities commissions; and, provided
further, that in no event shall such approval be unreasonably withheld. The
Distributor shall not use the name of the Trust or of any Fund in any material
relating to the Distributor in any manner not approved prior thereto by the
Trust; provided, however that the Trust shall approve all uses of its name and
the name of any Fund which merely refer in accurate terms to the appointment of
the Distributor hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
14. The Distributor shall prepare written reports for the Board of
Trustees of the Trust on a quarterly basis showing information concerning
services provided and expenses incurred which are related to this Agreement and
such other information as from time to time shall be reasonably requested by the
Trust's Board of Trustees.
15. This Agreement shall be effective on May 16, 1995 and continue for an
initial term ending January 31, 1997 unless sooner terminated as hereinafter
provided. It shall continue from year to year thereafter as long as its
continuance is approved annually in accordance with the 1940 Act and the
regulations thereunder. This Agreement may be terminated at any time by either
party upon 60 or more days prior written notice to the other party. This
Agreement may be amended as to a Fund at any time by the parties, subject to
approval by the Trust's Board of Trustees and, if required by law or applicable
SEC regulations, a vote of a "majority of the outstanding voting securities" of
such Fund, as defined in the 1940 Act and any regulations thereunder. This
Agreement shall be binding on the successors and assigns of each party,
provided, however, that this Agreement shall terminate automatically in the
event of its "assignment", as defined in the 1940 Act and any regulations
thereunder.
4
<PAGE>
16. Each party agrees to perform such further actions and execute such
further documents as are necessary to effectuate the purposes hereof. This
Agreement shall be construed and enforced in accordance with and governed by the
laws of the State of Illinois.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first above written by their officers thereunto duly
authorized.
ARIEL GROWTH FUND
By: ____________________________________
Title: ____________________________
ARIEL DISTRIBUTORS, INC.
By: ____________________________________
Title: ____________________________
6
<PAGE>
ADDENDUM TO UNDERWRITING AGREEMENT
DATED MAY 16, 1995 BETWEEN
ARIEL DISTRIBUTORS, INC. AND
ARIEL GROWTH FUND d/b/a ARIEL INVESTMENT TRUST
----------------------------------------------
For the services performed and the obligations assumed by Ariel Distributors,
Inc. in respect to the series designated Ariel Growth Fund, Ariel Appreciation
Fund and the Class B shares of the series designated Ariel Premier Bond Fund,
Ariel Distributors, Inc. shall be paid no more often than weekly a distribution
service fee at the annual rate of 0.25% of the respective average daily assets
of each such series and Class.
Dated May 16, 1995
ARIEL DISTRIBUTORS, INC.
By: _________________________
Title: ______________________
ARIEL GROWTH FUND
By: _________________________
Title: ______________________
7
<PAGE>
Exhibit 8
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT made the 19th day of August, 1994, by and between INVESTORS
FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of the state
of Missouri, having its trust office located at 127 West 10th Street, Kansas
City, Missouri 64105 ("Custodian"), and ARIEL GROWTH FUND, a business trust
organized and existing under the laws of the State of Massachusetts, having its
principal office and place of business at 307 North Michigan Avenue, Suite 500,
Chicago, Illinois 60601 ("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint Investors Fiduciary Trust Company as
custodian of the securities and monies of Fund's investment portfolio; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
1. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian
as custodian of the securities and monies at any time owned by the Fund.
2. REPRESENTATIONS AND WARRANTIES.
A. Fund hereby represents, warrants and acknowledges to Custodian:
1. That it is a business trust duly organized and existing and in
good standing under the laws of its state of organization, and
that it is registered under the Investment Company Act of 1940
(the "1940 Act"); and
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2. That it has the requisite power and authority under applicable
law, its Trust Agreement and its Bylaws to enter into this
Agreement; that it has taken all requisite action necessary to
appoint Custodian as custodian for the Fund; that this Agreement
has been duly executed and delivered by Fund; and that this
Agreement constitutes a legal, valid and binding obligation of
Fund, enforceable in accordance with its terms.
B. Custodian hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in good
standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its Charter and its Bylaws to enter into and perform this
Agreement; that this Agreement has been duly executed and
delivered by Custodian; and that this Agreement constitutes a
legal, valid and binding obligation of Custodian, enforceable in
accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Except as permitted by the 1940 Act, Fund will deliver or cause to be
delivered to Custodian on the effective date of this Agreement, or as
soon thereafter as practicable, and from time to time thereafter, all
portfolio securities acquired by it and monies then owned by it or
from time to time coming into its possession during the time this
Agreement shall continue in effect. Custodian shall have no
responsibility or liability whatsoever for or on account of securities
or monies not so delivered.
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B. Delivery of Accounts and Records
Fund shall turn over or cause to be turned over to Custodian all of
the Fund's relevant accounts and records previously maintained.
Custodian shall be entitled to rely conclusively on the completeness
and correctness of the accounts and records turned over to it, and
Fund shall indemnify and hold Custodian harmless of and from any and
all expenses, damages and losses whatsoever arising out of or in
connection with any error, omission, inaccuracy or other deficiency of
such accounts and records or in the failure of Fund to provide, or to
provide in a timely manner, any accounts, records or information
needed by the Custodian to perform its functions hereunder.
C. Delivery of Assets to Third Parties
Custodian will receive delivery of and keep safely the assets of Fund
delivered to it from time to time segregated in a separate account,
and if Fund is comprised of more than one portfolio of investment
securities (each a "Portfolio") Custodian shall keep the assets of
each Portfolio segregated in a separate account. Custodian will not
deliver, assign, pledge or hypothecate any such assets to any person
except as permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of Section 3.S. of
this Agreement. Upon delivery of any such assets to a subcustodian
pursuant to Section 3.S. of this Agreement, Custodian will create and
maintain records identifying those assets which have been delivered to
the subcustodian as belonging to the Fund, by Portfolio if applicable.
The Custodian is responsible for the safekeeping of the securities and
monies of Fund only until they have been transmitted to and received
by other persons as permitted under the terms
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of this Agreement, except for securities and monies transmitted to
subcustodians appointed under Section 3.S. of this Agreement, for
which Custodian remains responsible to the extent provided in Section
3.S. hereof. Custodian may participate directly or indirectly through
a subcustodian in the Depository Trust Company (DTC), Treasury/Federal
Reserve Book Entry System (Fed System), Participant Trust Company
(PTC) or other depository approved by the Fund (as such entities are
defined at 17 CFR Section 270.17f-4(b)) (each a "Depository" and
collectively, the "Depositories").
D. Registration of Securities
The Custodian shall at all times hold registered securities of the
Fund in the name of the Custodian, the Fund, or a nominee of either of
them, unless specifically directed by instructions to hold such
registered securities in so-called "street name," provided that, in
any event, all such securities and other assets shall be held in an
account of the Custodian containing only assets of the Fund, or only
assets held by the Custodian as a fiduciary or custodian for
customers, and provided further, that the records of the Custodian at
all times shall indicate the Fund or other customer for which such
securities and other assets are held in such account and the
respective interests therein. If, however, the Fund directs the
Custodian to maintain securities in "street name," notwithstanding
anything contained herein to the contrary, the Custodian shall be
obligated only to utilize its best efforts to timely collect income
due the Fund on such securities and to notify the Fund of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers. All securities, and
4
<PAGE>
the ownership thereof by Fund, which are held by Custodian hereunder,
however, shall at all times be identifiable on the records of the
Custodian. The Fund agrees to hold Custodian and its nominee harmless
for any liability as a shareholder of record of securities held in
custody.
E. Exchange of Securities
Upon receipt of instructions as defined herein in Section 4.A,
Custodian will exchange, or cause to be exchanged, portfolio
securities held by it for the account of Fund for other securities or
cash issued or paid in connection with any reorganization
recapitalization, merger, consolidation, split-up of shares, change of
par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or
protective plan. Without instructions, Custodian is authorized to
exchange securities held by it in temporary form for securities in
definitive form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefor, to
surrender bonds or other securities held by it at maturity or when
advised of earlier call for redemption, except that Custodian shall
receive instructions prior to surrendering any convertible security.
F. Purchases of Investments of the Fund - Other Than Options and Futures
Fund will, on each business day on which a purchase of securities
(other than options and futures) shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase:
1. If applicable, the name of the Portfolio making such purchase;
2. The name of the issuer and description of the security;
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<PAGE>
3. The number of shares and the principal amount purchased, and
accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission, taxes
and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or dealer through
whom the purchase was made; and
9. Whether the security is to be received in certificated form or
via a specified Depository.
In accordance with such instructions, Custodian will pay for out of monies
held for the account of Fund, but only insofar as such monies are available
for such purpose, and receive the portfolio securities so purchased by or
for the account of Fund, except that Custodian may in its sole discretion
advance funds to the Fund which may result in an overdraft because the
monies held by the Custodian on behalf of the Fund are insufficient to pay
the total amount payable upon such purchase. Except as otherwise instructed
by Fund, such payment shall be made by the Custodian only upon receipt of
securities: (a) by the Custodian; (b) by a clearing corporation of a
national exchange of which the Custodian is a member; or (c) by a
Depository. Notwithstanding the foregoing, (i) in the case of a repurchase
agreement, the Custodian may release funds to a Depository prior to the
receipt of advice from the
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<PAGE>
Depository that the securities underlying such repurchase agreement have
been transferred by book-entry into the account maintained with such
Depository by the Custodian, on behalf of its customers, provided that the
Custodian's instructions to the Depository require that the Depository make
payment of such funds only upon transfer by book-entry of the securities
underlying the repurchase agreement in such account; (ii) in the case of
time deposits, call account deposits, currency deposits and other deposits,
foreign exchange transactions, futures contracts or options. the Custodian
may make payment therefor before receipt of an advice or confirmation
evidencing deposit or entry into such transaction; and (iii) in the case of
the purchase of securities, the settlement of which occurs outside of the
United States of America, the Custodian may make, or cause a subcustodian
appointed pursuant to Section 3.S.2. of this Agreement to make, payment
therefor in accordance with generally accepted local custom and market
practice.
G. Sales and Deliveries of Investments of the Fund - Other than Options
and Futures.
Fund will, on each business day on which a sale of investment
securities (other than options and futures) of Fund has been made,
deliver to Custodian instructions specifying with respect to each such
sale:
1. If applicable. the name of the Portfolio making such sale;
2. The name of the issuer and description of the securities;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
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<PAGE>
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
8. The total amount to be received by Fund upon such sale; and
9. The name and address of the broker or dealer through whom or
person to whom the sale was made.
In accordance with such instructions, Custodian will deliver or cause
to be delivered the securities thus designated as sold for the account
of Fund to the broker or other person specified in the instructions
relating to such sale. Except as otherwise instructed by Fund, such
delivery shall be made upon receipt of payment therefor: (a) in such
form as is satisfactory to the Custodian; (b) credit to the account of
the Custodian with a clearing corporation of a national securities
exchange of which the Custodian is a member; or (c) credit to the
account of the Custodian, on behalf of its customers, with a
Depository. Notwithstanding the foregoing: (i) in the case of
securities held in physical form, such securities shall be delivered
in accordance with "street delivery custom" to a broker or its
clearing agent; or (ii) in the case of the sale of securities, the
settlement of which occurs outside of the United States of America,
the Custodian may make, or cause a subcustodian appointed pursuant to
Section 3.S.2. of this Agreement to make, payment therefor in
accordance with generally accepted local custom and market practice.
H. Purchases or Sales of Options and Futures
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Fund will, on each business day on which a purchase or sale of the
following options and/or futures shall be made by it, deliver to
Custodian instructions which shall specify with respect to each such
purchase or sale:
1. If applicable, the name of the Portfolio making such purchase or
sale;
2. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising, expiring
or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom the sale
or purchase was made.
3. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d. The premium;
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<PAGE>
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising, expiring or
closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through whom the
sale or purchase was made, or other applicable settlement
instructions.
4. Security Index Futures Contracts
a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into this
Custody Agreement); and
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions.
10
<PAGE>
5. Options on Index Future Contracts
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Securities Pledged or Loaned
If specifically allowed for in the prospectus of Fund, and subject to
such additional terms and conditions as Custodian may require:
1. Upon receipt of instructions, Custodian will release or cause to
be released securities held in custody to the pledgee designated
in such instructions by way of pledge or hypothecation to secure
any loan incurred by Fund; provided, however, that the securities
shall be released only upon payment to Custodian of the monies
borrowed, except that in cases where additional collateral is
required to secure a borrowing already made, further securities
may be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions, Custodian
will pay, but only from
11
<PAGE>
funds available for such purpose, any such loan upon redelivery to
it of the securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions;
provided, however, that the securities will be released only upon
deposit with Custodian of full cash collateral as specified in
such instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned securities.
Upon receipt of instructions and the loaned securities, Custodian
will release the cash collateral to the borrower.
J. Routine Matters
Custodian will, in general, attend to all routine and mechanical
matters in connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with securities or other property of Fund
except as may be otherwise provided in this Agreement or directed from
time to time by the Fund in writing.
K. Deposit Accounts
Custodian will open and maintain one or more special purpose deposit
accounts in the name of Custodian ("Accounts"), subject only to draft
or order by Custodian upon receipt of instructions. All monies
received by Custodian from or for the account of Fund shall be
deposited in said Accounts. Barring events not in the control of the
Custodian such as strikes, lockouts or labor disputes, lockouts or
labor disputes, riots, war or equipment or transmission failure or
damage, fire, flood, earthquake or other
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natural disaster, action or inaction of governmental authority or
other causes beyond its control, at 9:00 a.m., Kansas City time, on
the second business day after deposit of any check into an Account,
Custodian agrees to make Fed Funds available to the Fund in the amount
of the check. Deposits made by Federal Reserve wire will be available
to the Fund immediately and ACH wires will be available to the Fund on
the next business day. Income earned on the portfolio securities will
be credited to the Fund based on the schedule attached as Exhibit A.
The Custodian will be entitled to reverse any credited amounts where
credits have been made and monies are not finally collected. If monies
are collected after such reversal, the Custodian will credit the Fund
in that amount. Custodian may open and maintain Accounts in its own
banking department. or in such other banks or trust companies as may
be designated by it or by Fund in writing, all such Accounts, however,
to be in the name of Custodian and subject only to its draft or order.
Funds received and held for the account of different Portfolios shall
be maintained in separate Accounts established for each Portfolio.
L. Income and other Payments to Fund
Custodian will:
1. Collect, claim and receive and deposit for the account of Fund all
income and other payments which become due and payable on or after
the effective date of this Agreement with respect to the
securities deposited under this Agreement, and credit the account
of Fund in accordance with the schedule attached hereto as Exhibit
A. If, for any reason, the Fund is credited with
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<PAGE>
income that is not subsequently collected. Custodian may reverse
that credited amount.
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take Such other action as may be necessary or proper in connection
with:
a. The collection, receipt and deposit of such income and offer
payments, including but not limited to the presentation for
payment of:
1. all coupons and other income items requiring presentation;
and
2. all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
should reasonably be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund, of all
checks, drafts or other negotiable instruments.
Custodian, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon receipt
of instructions and upon being indemnified to its satisfaction against
the costs and expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends. rights and other
similar items and will deal with the same pursuant to instructions.
Unless prior instructions have been received to the company, Custodian
will, without further
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<PAGE>
instructions, sell any rights held for the account of Fund on the last
trade date prior to the date of expiration of such rights.
M. Payment of Dividends and other Distributions
On the declaration of any dividend or other distribution on the share
of capital stock of Fund ("Fund Shares") by the Board of Directors of
Fund, Fund shall deliver to Custodian instructions with respect
thereto. On the date specified in such instructions for the payment of
such dividend or other distribution: Custodian will pay out of the
monies held for the account of Fund, insofar as the same shall be
available for such purposes, and credit to the account of the Dividend
Disbursing Agent for Fund, such amount as may be necessary to pay the
amount per share payable in cash on Fund Shares issued and outstanding
on the record date established by such resolution.
N. Shares of Fund Purchased by Fund
Whenever any Fund Shares are repurchased or redeemed by Fund, Fund or
its agent shall advise Custodian of the aggregate dollar amount to be
paid for such shares and shall confirm such advice in writing. Upon
receipt of such advice. Custodian shall charge such aggregate dollar
amount to the account of Fund and either deposit the same in the
account maintained for the purpose of paying for the repurchase or
redemption of Fund Shares or deliver the same in accordance with such
advice. Custodian shall not have any duty or responsibility to
determine that Fund Shares have been removed from the proper
shareholder account or accounts or that the proper number of Fund
Shares have been canceled and removed from the shareholder records.
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<PAGE>
O. Shares of Fund Purchased from Fund
Whenever Fund Shares are purchased from Fund, Fund will deposit or
cause to be deposited with Custodian the amount received for such
shares. Custodian shall not have any duty or responsibility to
determine that Fund Shares purchased from Fund have been added to the
proper shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.
P. Proxies and Notices
Custodian will promptly deliver or mail or have delivered or mailed to
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices requests or announcements affecting or
relating to securities held by Custodian for Fund and will, upon
receipt of instructions, execute and deliver or cause its nominee to
execute and deliver or mad or have delivered or mailed such proxies or
other authorizations as may be required. Except as provided by this
Agreement or pursuant to instructions hereafter received by Custodian,
neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any
proxy, power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver with respect
thereto, or take any other similar action.
Q. Disbursements
Custodian will pay or cause to be paid, insofar as funds are available
for the purpose, bills, statements and other obligations of Fund
(including but not limited to obligations in connection with the
conversion, exchange or surrender of securities owned by
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Fund, interest charges, dividend disbursements, taxes, management
fees, custodian fees, legal fees, auditors' fees, transfer agents'
fees, brokerage commissions, compensation to personnel, and other
operating expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made, the amount
of the payment, and the purpose of the payment.
R. Daily Statement of Accounts
Custodian will, within a reasonable time, render to Fund a detailed
statement of the amounts received or paid and of securities received
or delivered for the account of Fund during each business day.
Custodian will, from time to time, upon request by Fund, render a
detailed statement of the securities and monies held for Fund under
this Agreement, and Custodian will maintain such books and records as
are necessary to enable it to do so. Custodian will permit such
persons as are authorized by Fund, including Fund's independent public
accountants, reasonable access to such records or will provide
reasonable confirmation of the contents of such records, and if
demanded, Custodian will permit federal and state regulatory agencies
to examine the securities, books and records. Upon the written
instructions of Fund or as demanded by federal or state regulatory
agencies, Custodian will instruct any subcustodian to permit such
persons as are authorized by Fund, including Fund's independent public
accountants, reasonable access to such records or to provide
reasonable confirmation of the contents of such records, and to permit
such agencies to examine the books, records and securities held by
such subcustodian which relate to Fund.
S. Appointment of Subcustodians
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<PAGE>
1. Notwithstanding any other provisions of this Agreement, all or any
of the monies or securities of Fund may be held in Custodian's own
custody or in the custody of one or more other banks or trust
companies acting as subcustodians as may be selected by Custodian.
Any such subcustodian selected by the Custodian must have the
qualifications required for a custodian under the 1940 Act, as
amended. It is understood that Custodian initially intends to
appoint United Missouri Bank, N.A. ("UMB") and United Missouri
Trust Company of New York ("UMTCNY") as subcustodians. Custodian
shall be responsible to the Fund for any loss, damage or expense
suffered or incurred by the Fund resulting from the actions or
omissions of UMB, UMTCNY and any other subcustodians selected and
appointed by Custodian (except subcustodians appointed at the
request of Fund and Subsection below) to the same extent Custodian
would be as provided in Subsection 2 below) to the same extent
Custodian would be responsible to the Fund under Section 5 of this
Agreement if it committed the act or omission itself. Upon request
of the Fund, Custodian shall be willing to contract with other
subcustodians reasonably acceptable to the Custodian for purposes
of (i) effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a common
custodian or subcustodian, or (ii) providing depository and
clearing agency services with respect to certain variable rate
demand note securities, or (iii) for other reasonable purposes
specified by Fund; provided, however, that the Custodian shall be
responsible
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<PAGE>
to the Fund for any loss, damage or expense suffered or incurred
by the Fund resulting from the actions or omissions of any such
subcustodian only to the same extent such subcustodian is
responsible to the Custodian. The Fund shall be entitled to review
the Custodian's contracts with any such subcustodians appointed at
the request of Fund. Custodian shall be responsible to the Fund
for any loss, damage or expense suffered or incurred by the Fund
resulting from the actions or omissions of any Depository only to
the same extent such Depository is responsible to Custodian.
2. Notwithstanding any other provisions of this Agreement, Fund's
foreign securities (as defined in Rule 17f-5(c)(1) under the 1940
Act) and Fund's cash or cash equivalents, in amounts deemed by the
Fund to be reasonably necessary to effect Fund's foreign
securities transactions, may be held in the custody of one or more
banks or trust companies acting as subcustodians, and thereafter,
pursuant to a written contract or contracts as approved by Fund's
Board of Directors, may be transferred to accounts maintained by
any such subcustodian with eligible foreign custodians, as defined
in Rule 17f-5(c)(2). Custodian shall be responsible to the Fund
for any loss, damage or expense suffered or incurred by the Fund
resulting from the actions or omissions of any foreign
subcustodians or a domestic subcustodian contracting with such
foreign subcustodians only to the same extent such domestic
subcustodian is responsible to the Custodian.
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T. Accounts and Records Property of Fund
Custodian acknowledges that all of the accounts and records maintained
by Custodian pursuant to this Agreement are the property of Fund, and
will be made available to Fund for inspection or reproduction within a
reasonable period of time upon demand. Custodian will assist Fund's
independent auditors, or upon approval of Fund, or upon demand, any
regulatory body, in any requested review of Fund's accounts and
records but shall be reimbursed by Fund for all expenses and employee
time invested in any such review outside of routine and normal
periodic reviews. Upon receipt from Fund of the necessary information
or instructions, Custodian will supply information from the books and
records it maintains for Fund that Fund needs for tax returns,
questionnaires, periodic reports to shareholders and such other
reports and information requests as Fund and Custodian shall agree
upon from time to time.
U. Adoption of Procedures
Custodian and Fund may from time to time adopt procedures as they
agree upon, and Custodian may conclusively assume that no procedure
approved or directed by Fund or its accountants or other advisors
conflicts with or violates any requirement of its prospectus, Trust
Agreement, Bylaws, any applicable law, rule or regulation, or any
order, decree or agreement by which Fund may be bound. Fund will be
responsible to notify Custodian of any changes in statutes,
regulations, rules, requirements or policies which might necessitate
changes in Custodian's responsibilities or procedures.
V. Overdrafts
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<PAGE>
If Custodian shall in its sole discretion advance funds to the account
of the fund which results in an overdraft in any Account because the
monies held therein by Custodian on behalf of the Fund are
insufficient to pay the total amount payable upon a purchase of
securities as specified in Fund's instructions or for some other
reason, the amount of the overdraft shall be payable by the Fund to
Custodian upon demand together with the overdraft charge set forth on
the then-current Fee Schedule from the date advanced until the date of
payment. Fund hereby grants Custodian a lien on and security interest
in the assets of the Fund to secure the full amount of any outstanding
overdraft and related overdraft charges.
W. Exercise of Rights; Tender Offers
Upon receipt of instructions, the Custodian shall: (a) deliver
warrants, puts, calls, rights or similar securities to the issuer or
trustee thereof, or to the agent of such issuer or trustee, for the
purpose of exercise or sale, provided that the new securities, cash or
other assets, if any, are to be delivered to the Custodian; and (b)
deposit securities upon invitations for tenders thereof, provided that
the consideration for such securities is to be paid or delivered to
the Custodian or the tendered securities are to be returned to the
Custodian.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means written (including
telecopied or telexed) or oral instructions which Custodian reasonably
believes were given by a designated representative of Fund. Fund shall
deliver to Custodian, prior to delivery of any assets to Custodian and
thereafter from time to time as changes therein are
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<PAGE>
necessary, written instructions naming one or more designated
representatives to give instructions in the name and on behalf of
Fund, which instructions may be received and accepted by Custodian as
conclusive evidence of the authority of any designated representative
to act for Fund and may be considered to be in full force and effect
(and Custodian will be fully protected in acting in reliance thereon)
until receipt by Custodian of notice to the contrary. Unless such
written instructions delegating authority to any person to give
instructions specifically limit such authority to specific matters or
require that the approval of anyone else will first have been
obtained, Custodian will be under no obligation to inquire into the
right of such person, acting alone, to give any instructions
whatsoever which Custodian may receive from such person. If Fund fails
to provide Custodian any such instructions naming designated
representatives, any instructions received by Custodian from a person
reasonably believed to be an appropriate representative of Fund shall
constitute valid and proper instructions hereunder.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such
oral instruction. At Custodian's sole discretion, Custodian may record
on tape, or otherwise, any oral instruction whether given in person or
via telephone, each such recording identifying the parties, the date
and the time of the beginning and ending of such oral instruction.
5. LIMITATION OF LIABILITY OF CUSTODIAN.
A. Custodian shall at all times use reasonable care and due diligence
and act in good faith in performing its duties under this Agreement.
Custodian shall not
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be responsible for, and the Fund shall indemnify and hold Custodian
harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability which may be
asserted against Custodian, incurred by Custodian or for which
Custodian may be held to be liable, arising out of or attributable to:
1. All actions taken by Custodian pursuant to this Agreement or any
instructions provided to it hereunder, provided that Custodian has
acted in good faith and with due diligence and reasonable care;
and
2. The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to pay
or reimburse Custodian under this Indemnification provision), the
Fund's negligence or willful misconduct, or the failure of any
representation or warranty of the Fund hereunder to be and remain
true and correct in all respects at all times.
B. Custodian may request and obtain at the expense of Fund the advice
and opinion of counsel for Fund or of its own counsel with respect to
questions or matters of law, and it shall be without liability to Fund
for any action taken or omitted by it in good faith, in conformity
with such advice or opinion. If Custodian reasonably believes that it
could not prudently act according to the instructions of the Fund or
the Fund's accountants or counsel, it may in its discretion, with
notice to the Fund, not act according to such instructions.
23
<PAGE>
C. Custodian may rely upon the advice and statements of Fund, Fund's
accountants and officers or other authorized individuals, and other
persons believed by it in good faith to be expert in matters upon
which they are consulted, and Custodian shall not be liable for any
actions taken, in good faith, upon such advice and statements.
D. If Fund requests Custodian in any capacity to take any action which
involves the payment of money by Custodian, or which might make it or
its nominee liable for payment of monies or in any other way,
Custodian shall be indemnified and held harmless by Fund against any
liability on account of such action; provided, however, that nothing
herein shall obligate Custodian to take any such action except in its
sole discretion.
E. Custodian shall be protected in acting as custodian hereunder upon any
instructions, advice, notice, request, consent, certificate or other
instrument or paper appearing to it to be genuine and to have been
properly executed and shall be entitled to receive upon request as
conclusive proof of any fact or matter required to be ascertained from
Fund hereunder a certificate signed by an officer or designated
representative of Fund.
F. Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any securities purchased by or for
Fund, the legality of the purchase of any securities or foreign
currency positions or evidence of ownership required by Fund to be
received by
24
<PAGE>
Custodian, or the propriety of the decision to purchase or amount
paid therefor;
2. The legality of the sale of any securities or foreign currency
positions by or for Fund, or the propriety of the amount for which
the same are sold;
3. The legality of the issue or sale of any Fund Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the repurchase or redemption of any Fund Shares,
or the propriety of the amount to be paid therefor; or
5. The legality of the declaration of any dividend by Fund, or the
legality of the issue of any Fund Shares in payment of any stock
dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by it on behalf of Fund until Custodian
actually receives such money; provided, however, that it shall advise
Fund promptly if it fails to receive any such money in the ordinary
course of business and shall cooperate with Fund toward the end that
such money shall be received.
H. Except as provided in Section 3-S., Custodian shall not be responsible
for loss occasioned by the acts, neglects, defaults or insolvency of
any broker, bank, trust company, or any other person with whom
Custodian may deal.
25
<PAGE>
I. Custodian shall not be responsible or liable for the failure or delay
in performance of its obligations under this Agreement, or those of
any entity for which it is responsible hereunder, arising out of or
caused, directly or indirectly, by circumstances beyond the affected
entity's reasonable control, including, without limitation: any
interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance, rulings,
regulations or direction; war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes,
freezes, floods, fires, tornadoes, acts of God or public enemy,
revolutions, or insurrections.
J. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL EITHER PARTY TO THIS
AGREEMENT BE LIABLE TO ANYONE, INCLUDING, WITHOUT LIMITATION TO THE
OTHER PARTY, FOR CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES FOR ANY
ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN IF
ADVISED OF THIS POSSIBILITY THEREOF.
6. COMPENSATION. In consideration for its services hereunder, Fund will pay
to Custodian such compensation as shall be set forth in a separate fee
schedule to be agreed to by Fund and Custodian from time to time. A copy of
the initial fee schedule is attached hereto and incorporated herein by
reference. Custodian shall also be
26
<PAGE>
entitled to receive, and Fund agrees to pay to Custodian, on demand,
reimbursement for Custodian's cash disbursements and reasonable out-of-
pocket costs and expenses, including attorney's fees, incurred by Custodian
in connection with the performance of services hereunder. Custodian may
charge such compensation against monies held by it for the account of Fund.
Custodian will also be entitled to charge against any monies held by it for
the account of Fund the amount of any loss damage, liability, advance,
overdraft or expense for which it shall be entitled to reimbursement from
Fund, including but not limited to fees and expenses due to Custodian for
other services provided to the Fund by Custodian. Custodian will be
entitled to reimbursement by the Fund for the losses, damages, liabilities,
advances, overdrafts and expenses of subcustodians only to the extent that
(i) Custodian would have been entitled to reimbursement hereunder if it had
incurred the same itself directly, and (ii) Custodian is obligated to
reimburse the subcustodian therefor.
7. TERM AND TERMINATION. The initial term of this Agreement shall be for a
period of one (1) year. Thereafter, either party to this Agreement may
terminate the same by notice in writing, delivered or mailed, postage
prepaid, to the other party hereto and received not less than sixty (60)
days prior to the date upon which such termination will take effect. Upon
termination of this Agreement, Fund will pay Custodian its fees and
compensation due hereunder and its reimbursable disbursements, costs and
expenses paid or incurred to such date and Fund shall designate a successor
custodian by notice in writing to Custodian by the termination date. In the
event no written order designating a successor custodian has been
27
<PAGE>
delivered to Custodian on or before the date when such termination becomes
effective, then Custodian may, at its option, deliver the securities, funds
and properties of Fund to a bank or trust company at the selection of
Custodian, and meeting the qualifications for custodian set forth in the
1940 Act and having not less than Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its last
published report, or apply to a court of competent jurisdiction for the
appointment of a successor custodian or other proper relief, or take any
other lawful action under the circumstances; provided, however, that Fund
shall reimburse Custodian for its costs and expenses, including reasonable
attorney's fees, incurred in connection therewith. Custodian will, upon
termination of this Agreement and payment of all sums due to Custodian from
Fund hereunder or otherwise, deliver to the successor custodian so
specified or appointed, or as specified by the court, at Custodian's
office, all securities then held by Custodian hereunder, duly endorsed and
in form for transfer, and all funds and other properties of Fund deposited
with or held by Custodian hereunder, and Custodian will co-operate in
effecting changes in book-entries at all Depositories. Upon delivery to a
successor custodian or as specified by the court, Custodian will have no
further obligations or liabilities under this Agreement. Thereafter such
successor will be the successor custodian under this Agreement and will be
entitled to reasonable compensation for its services. In the event that
securities, funds and other properties remain in the possession of the
Custodian after the date of termination hereof owing to failure of the Fund
to appoint a successor custodian, the Custodian shall be entitled to
28
<PAGE>
compensation as provided in the then-current fee schedule hereunder for its
services during such period as the Custodian retains possession of such
securities, funds and other properties, and the provisions of this
Agreement relating to the duties and obligations of the Custodian shall
remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed to
Fund at 307 North Michigan Avenue, Suite 500, Chicago, Illinois 60601 or at
such other address as Fund may have designated to Custodian in writing,
will be deemed to have been properly given to Fund hereunder; and notices,
requests, instructions and other writings addressed to Custodian at its
offices at 127 West 10th Street, Kansas City, Missouri 64105, Attention:
Custody Department, or to such other address as it may have designated to
Fund in writing, will be deemed to have been properly given to Custodian
hereunder.
9. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio:
A. Each Portfolio shall be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered by this
Agreement, every reference herein to the Fund shall be deemed to
relate solely to the particular Portfolio to which such transaction
relates. Under no circumstances shall the rights, obligations or
remedies with respect to a particular Portfolio constitute a right,
obligation or remedy applicable to any other Portfolio. The use of
this single document to memorialize the separate agreement of each
Portfolio is
29
<PAGE>
understood to be for clerical convenience only and shall not
constitute any basis for joining the Portfolios for any reason.
B. Additional Portfolios may be added to this Agreement, provided that
Custodian consents to such addition. Rates or charges for each
additional Portfolio shall be as agreed upon by Custodian and Fund in
writing.
10. LIMITATION OF LIABILITY. Notice is hereby given that a copy of the Fund's
Trust Agreement and all amendments thereto is on file with the Secretary of
State of the state of its organization; that this Agreement has been
executed on behalf of the Fund by the undersigned duly authorized
representative of Fund in his/her capacity as such and not individually;
and that the obligations of this Agreement shall only be binding upon the
assets and property of Fund and shall not be binding upon any trustee,
officer or shareholder of Fund individually.
11. MISCELLANEOUS.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of laws
principles thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
C. The representations and warranties, the indemnifications extended
hereunder are intended to and shall continue after and survive the
expiration, termination or cancellation of this Agreement.
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<PAGE>
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by each party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred. No
waiver, release or discharge of any party's rights hereunder shall be
effective unless contained in a written instrument signed by the party
sought to be charged.
F. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
H. If any part, term or provision of this Agreement is determined by the
courts or any regulatory authority to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed
31
<PAGE>
and enforced as if the Agreement did not contain the particular part,
term or provision held to be illegal or invalid.
I. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
J. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between
Custodian and Fund.
K. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by either party hereunder shall not
affect any rights or obligations of the other party hereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/Frank Hunter
------------------------------
Title: Vice President
---------------------------
ARIEL GROWTH FUND
By: /s/John S. Guffey, Jr.
------------------------------
Title: Chairman
---------------------------
32
<PAGE>
Exhibit 9
AGENCY AGREEMENT
THIS AGREEMENT made as of the _______ day of ______________, 19___, by and
between ARIEL GROWTH FUND, a business trust existing under the laws of the
Commonwealth of Massachusetts, having its principal place of business at 307 N.
Michigan Ave., Suite 500, Chicago, Illinois 60601 ("Fund"), and INVESTORS
FIDUCIARY TRUST COMPANY, a state chartered trust company organized and existing
under the laws of the State of Missouri, having its principal place of business
at 127 West 10th Street, Kansas City, Missouri 64105 ("IFTC"):
WITNESSETH:
WHEREAS, Fund desires to appoint IFTC as Transfer Agent and Paying Agent,
and IFTC desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of IFTC as Transfer Agent and Paying
Agent for Fund, there will be filed with IFTC the following documents:
A. A certified copy of the resolutions of the Board of Directors of Fund
appointing IFTC as Transfer Agent and Paying Agent, approving the form
of this Agreement, and designating certain persons to sign stock
certificates, if any, and give written instructions and requests on
behalf of Fund;
B. A certified copy of the Articles of Incorporation of Fund and all
amendments thereto;
C. A certified copy of the Bylaws of Fund;
D. Copies of Registration Statements and amendments thereto, filed with
the Securities and Exchange Commission.
E. Specimens of all forms of outstanding stock certificates, in the forms
approved by the Board of Directors of Fund, with a certificate of the
Secretary of Fund, as to such approval;
F. Specimens of the signatures of the officers of the Fund authorized to
sign stock certificates and individuals authorized to sign written
instructions and requests;
G. An opinion of counsel for Fund with respect to:
(1) Fund's organization and existence under the laws of its state
of organization;
<PAGE>
(2) The status of all shares of stock of Fund covered by the
appointment under the Securities Act of 1933, as amended, and
any other applicable federal or state statute; and
(3) That all issued shares are, and all unissued shares will be,
when issued, validly issued, fully paid and nonassessable.
2. Certain Representations and Warranties of IFTC.
IFTC represents and warrants to Fund that:
A. It is a trust company duly organized and existing and in good standing
under the laws of Missouri.
B. It is duly qualified to carry on its business in the State of
Missouri.
C. It is empowered under applicable laws and by its Articles of
Incorporation and bylaws to enter into and perform the services
contemplated in this Agreement.
D. It is registered as a transfer agent to the extent required under the
Securities Exchange Act of 1934.
E. All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3. Certain Representations and Warranties of Fund.
Fund represents and warrants to IFTC that:
A. It is a business trust duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
B. It is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended.
C. A registration statement under the Securities Act of 1933 has been
filed and will be effective with respect to all shares of Fund being
offered for sale.
D. All requisite steps have been and will continue to be taken to
register Fund's shares for sale in all applicable states and such
registration will be effective at all times shares are offered for
sale in such state.
E. Fund is empowered under applicable laws and by its charter and bylaws
to enter into and perform this Agreement.
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<PAGE>
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement, Fund hereby
appoints IFTC as Transfer Agent and Paying Agent.
B. IFTC hereby accepts such appointment and agrees that it will act as
Fund's Transfer Agent and Paying Agent. IFTC agrees that it will also
act as agent in connection with Fund's periodic withdrawal payment
accounts and other open accounts or similar plans for shareholders, if
any.
C. Fund agrees to deliver or to cause to be delivered to IFTC in Kansas
City, Missouri, all of its shareholder account records.
D. IFTC, utilizing TA2000/TM/, a computerized data processing
recordkeeping system for securityholder accounting, shall perform the
following services as transfer, paying and shareholders' servicing
agent for the Fund, and as agent of the Fund for shareholder accounts
thereof, in a timely manner: issuing (including countersigning),
transferring and canceling share certificates; answering and
responding to telephone inquiries from shareholders and broker-
dealers; maintaining all shareholder accounts; providing transaction
journals; preparing shareholder meeting lists, mailing proxies and
proxy materials, receiving and tabulating proxies, and certifying the
shareholder votes in the Fund; mailing shareholder reports and
prospectuses; withholding, as required by Federal law, taxes on
shareholder accounts, disbursing income dividends and capital gains
distributions to shareholders, preparing, filing and mailing U.S.
Treasury Department Forms 1099, 1042S and backup withholding as
instructed by the Fund and as required for all shareholders; preparing
and mailing confirmation forms to shareholders and dealers, as
instructed, for all purchases and liquidations of shares of the Fund
and other confirmable transactions in shareholders' accounts;
recording reinvestment of dividends and distributions in shares of the
Fund; providing or making available on-line daily and monthly reports
as provided by the mutual fund processing system utilized by IFTC (the
"TA2000/TM/ System") and as requested by the Fund or its management
company; maintaining those records necessary to carry out IFTC's
duties hereunder, including all information reasonably required by the
Fund to account
3
<PAGE>
for all transactions in Fund shares, calculating the appropriate sales
charge with respect to each purchase of Fund shares as set forth in
the prospectus for the Fund, determining the portion of each sales
charge payable to the dealer participating in a sale in accordance
with schedules delivered to IFTC by the Fund's principal underwriter
or distributor (hereinafter "principal underwriter") from time to
time, disbursing dealer commissions collected to such dealers,
determining the portion of each sales charge payable to such principal
underwriter and disbursing such commissions to the principal
underwriter; receiving correspondence pertaining to any former,
existing or new shareholder account, processing such correspondence
for proper recordkeeping, and responding promptly to shareholder
correspondence; mailing to dealers confirmations of wire order trades;
mailing copies of shareholder statements to shareholders and
registered representatives of dealers in accordance with the
shareholders' or the Fund's instructions; processing, generally on the
date of receipt, purchases or redemptions or instructions to settle
any mail or wire order purchases or redemptions received in proper
order as set forth in the prospectus, rejecting promptly any requests
not received in proper order (as defined by the Fund or its agents);
causing exchanges of shares to be executed in accordance with
shareholders' and the Fund's instructions, the prospectus and the
exchange privilege as set forth in the applicable application;
transferring monies to and receiving monies from the Fund's Custodian,
as appropriate; and interfacing with and receiving, providing and
processing information as appropriate in connection with programs
offered by the National Securities Clearing Corporation ("NSCC") to
the extent the Fund has elected and executed the appropriate
agreements with NSCC.
E. IFTC shall use reasonable efforts to provide, reasonably promptly
under the circumstances, services with respect to any new, additional
Fund functions or features or any changes or improvements to existing
Fund functions or features provided for in Fund's instructions or
prospectus, as amended from time to time, provided (i) IFTC is
advised, a reasonable time in advance, by the Fund of any changes
therein and (ii) the TA2000/TM/ System and mode of operations utilized
by IFTC as then constituted
4
<PAGE>
supports such additional functions and features. If any addition to,
improvement of or change in the Fund features and functions currently
provided or the operations as requested by the Fund requires an
enhancement or modification to the TA2000/TM/ System or to operations
as then conducted by IFTC, IFTC shall not be liable therefor until
such modification or enhancement is installed on the TA2000/TM/ System
or new mode of operation is instituted. If any new or additional Fund
function or feature, change or improvement to existing Fund functions
or features, or new service or change in mode of operation required by
the Fund increases IFTC's cost of performing the services required
hereunder at the then current level of service, IFTC shall advise the
Fund of the amount of such increase and if the Fund elects to utilize
such function, feature or changed method of service, IFTC shall be
entitled to increase its fees by the amount of the increase in costs.
F. To the extent that the Fund requests IFTC to perform any of the
foregoing services in a manner not consistent with utilization of
TA2000/TM/ or IFTC's usual processing procedures or to the extent the
Fund requests performance of additional services not enumerated above,
IFTC and the Fund shall mutually agree as to the services to be
accomplished, the manner of accomplishment and the compensation to
which IFTC shall be entitled with respect thereto.
5. Compensation and Expenses.
A. In consideration for its services hereunder as Transfer Agent and
Paying Agent, Fund will pay to IFTC such compensation as shall be set
forth in a separate fee schedule to be agreed to by Fund and IFTC from
time to time. A copy of the initial fee schedule is attached hereto
and incorporated herein by reference. IFTC may charge against any
monies held by it for the Fund, the amount of any compensation and/or
loss, damage, liability, advance, overdraft or expense for which it
shall be entitled to payment or reimbursement from the Fund.
B. The Fund also agrees promptly to reimburse IFTC for all reasonable
out-of-pocket expenses or disbursements incurred by IFTC in connection
with the performance of services under this Agreement including, but
not limited to, expenses for postage,
5
<PAGE>
express delivery services, freight charges, envelopes, checks, drafts,
forms (continuous or otherwise), specially requested reports and
statements, telephone calls, telegraphs, stationary supplies, counsel
fees, outside printing and mailing firms (including Output Technology,
Inc. and Support Resources, Inc.), magnetic tapes, reels or cartridges
(if sent to a Fund or to third party at the Fund's request) and
magnetic tape handling charges, off-site record storage, media for
storage of records (e.g., microfilm, microfiche, optical platters,
computer tapes), computer equipment installed at the Fund's request at
the Fund's or a third party's premises, telecommunications equipment,
telephone/telecommunication lines between Fund and its agents, on one
hand, and IFTC on the other, proxy soliciting, processing and/or
tabulating costs, second-site backup computer facility, transmission
of statement data for remote printing or processing, and NSCC
transaction fees to the extent any of the foregoing are paid by IFTC.
The Fund agrees to pay postage expenses at least one day in advance if
so requested. In addition, any other expenses incurred by IFTC at the
request or with the consent of the Fund will be promptly reimbursed by
the Fund.
C. Amounts due hereunder shall be due and paid by the Fund on or before
the thirtieth (30th) day after the date of the statement therefor (the
"Due Date"). The Fund is aware that its failure to pay all amounts in
a timely fashion so that they will be received by IFTC on or before
the Due Date will give rise to costs to IFTC not contemplated by this
Agreement, including but not limited to carrying, processing and
accounting charges. Accordingly, subject to Section 5.D. hereof, in
the event that any amounts due hereunder are not received by IFTC by
the Due Date, the Fund shall pay a late charge equal to the rate set
forth in the Fee Schedule. The parties hereby agree that such late
charge represents a fair and reasonable computation of the costs
incurred by reason of late payment or payment of amounts not properly
due. Acceptance of such late charge shall in no event constitute a
waiver of the Fund's or IFTC's default or prevent the non-defaulting
party from exercising any other rights and remedies available to it.
6
<PAGE>
D. In the event that any charges are disputed, the Fund shall, on or
before the Due Date, pay all undisputed amounts due hereunder and
notify IFTC in writing of any disputed charges for out-of-pocket
expenses which it is disputing in good faith. Payment for such
disputed charges shall be due on or before the close of the fifth
(5th) business day after the day on which IFTC provides to the Fund
documentation which an objective observer would agree reasonably
supports the disputed charges (the "Revised Due Date"). Late charges
shall not begin to accrue as to charges disputed in good faith until
the first day after the Revised Due Date.
6. Operation of IFTC System.
In connection with the performance of its services under this Agreement,
IFTC is responsible for such items as:
A. That entries in IFTC's records and in the Fund's records on the
TA2000/TM/ System created by IFTC reflect the orders, instructions,
and other information received by IFTC from broker-dealers,
shareholders, the Fund, the Fund's principal underwriter or Fund's
investment adviser;
B. That shareholder lists, shareholder account verifications,
confirmations and other shareholder account information to be produced
from its records or data be available and accurately reflect the data
in the Fund's records on the TA2000/TM/ System;
C. The accurate and timely issuance of dividend and distribution checks
in accordance with instructions received from the Fund and the data
in the Fund's records on the TA2000/TM/ System;
D. That redemption transactions and payments be effected timely and
accurately in accordance with redemption instructions received by IFTC
from dealers, shareholders, the Fund or the Fund's principal
underwriter and the data in the Fund's records on the TA2000/TM/
System;
E. The deposit daily in the Fund's appropriate special bank account of
all checks and payments received by IFTC from NSCC, broker-dealers or
shareholders for investment in shares;
7
<PAGE>
F. Notwithstanding anything herein to the contrary, with respect to "as
of" adjustments, IFTC will not assume one hundred percent (100%)
responsibility for losses resulting from "as of's" due to clerical
errors or misinterpretations of shareholder instructions, but IFTC
will discuss with the Fund IFTC's accepting liability for an "as of"
on a case-by-case basis and may accept financial responsibility for a
particular situation resulting in a financial loss to the Fund where
IFTC in its discretion deems that to be appropriate;
G. The requiring of proper forms of instructions, signatures and
signature guarantees and any necessary documents supporting the
opening of shareholder accounts transfers, redemptions and other
shareholder account transactions, all in conformance with IFTC's
present procedures as set forth in its Legal Manual, Third Party Check
Procedures, Checkwriting Draft Procedures, and Signature Guarantee
Procedures with such changes or deviations therefrom as may be from
time to time required or approved by the Fund, its investment adviser
or principal underwriter, or their or IFTC's counsel (the
"Procedures") and the rejection of orders or instructions not in good
order in accordance with the applicable prospectus or the Procedures;
H. The maintenance of customary records in connection with its agency,
and particularly those records required to be maintained pursuant to
subparagraph (2) (iv) of paragraph (b) of Rule 31a-1 under the
Investment Company Act of 1940, if any; and
I. The maintenance of a current, duplicate set of the Fund's essential
records at a secure separate location, in a form available and usable
forthwith in the event of any breakdown or disaster disrupting its
main operation.
7. Indemnification.
A. IFTC shall at all times use reasonable care, due diligence and act in
good faith in performing its duties under this Agreement. IFTC shall
be presumed to have used reasonable care, due diligence and acted in
good faith (i) if it has acted in accordance with the Procedures,
copies of which have been provided to the Fund and have been reviewed
and approved by Fund counsel, or (ii) if any deviation from such
Procedures was approved by the Fund, Fund's counsel or IFTC's counsel.
The Procedures may
8
<PAGE>
be amended from time to time with approval of IFTC's counsel or the
Fund. IFTC shall not be responsible for, and the Fund shall indemnify
and hold IFTC harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability which
may be asserted against IFTC, incurred by IFTC or for which IFTC may
be held to be liable, arising out of or attributable to:
(1) All actions of IFTC required to be taken by IFTC pursuant to
this Agreement, provided that IFTC has acted in good faith and
with due diligence and reasonable care;
(2) The Fund's refusal or failure to comply with the terms of this
Agreement (including without limitation the Fund's failure to
pay or reimburse IFTC under this indemnification provision), the
Fund's negligence or willful misconduct, or the breach of any
representation or warranty of the Fund hereunder;
(3) The good faith reliance on, or the carrying out of, any written
or recorded oral instructions or requests of persons designated
by the Fund in writing from time to time as authorized to give
instructions on its behalf or representatives of the Fund's
investment adviser, sponsor or principal underwriter or IFTC's
good faith reliance on, or use of, information, data, records
and documents received from, or which have been prepared and/or
maintained by the Fund, its investment adviser, its sponsor or
its principal underwriter;
(4) Defaults by dealers or shareowners with respect to payment for
share orders previously entered;
(5) The offer or sale of the Fund's shares in violation of any
requirement under federal or state securities laws or
regulations or in violation of any stop order or other
determination or ruling by any federal or state agency with
respect to the offer or sale of such shares (unless such
violation results from IFTC's failure to comply with written
instructions of the Fund or of any officer of the Fund that no
offers or sales to residents of such state be input into the
Funds securityholder records);
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(6) The Fund's errors and mistakes in the use of the TA2000/TM/
System, the data center, computer and related equipment used to
access the TA2000/TM/ System (the "TA2000/TM/ Facilities"), and
control procedures relating thereto in the verification of
output and in the remote input of data;
(7) Errors, inaccuracies, out-of-balance conditions and omissions
in, or errors, inaccuracies or omissions of IFTC arising out of
or resulting from such errors, inaccuracies, out-of-balance
conditions and omissions in, the Fund's records, shareholder and
other records, delivered to IFTC hereunder by the Fund or its
prior agent(s); and
(8) Actions or omissions to act by the Fund or agents designated by
the Fund with respect to duties assumed thereby as provided for
in Section 20 hereof.
B. Except where IFTC is entitled to indemnification under Section 7.A.
hereof, IFTC shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of IFTC's failure to
comply with the terms of this Agreement or arising out of or
attributable to IFTC's negligence or willful misconduct or breach of
any representation or warranty of IFTC hereunder. Notwithstanding
anything herein to the contrary, IFTC will not indemnify or hold the
Fund harmless as to losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or resulting from "as
of's" due to clerical errors or misinterpretations of shareholder
instructions, but IFTC will discuss with the Fund on a case-by-case
basis the possibility of IFTC's accepting liability for a particular
"as of" and may accept financial responsibility for a particular
situation resulting in a financial loss to the Fund where IFTC in its
discretion deems that to be appropriate.
C. EXCEPT FOR VIOLATIONS OF SECTION 22, IN NO EVENT AND UNDER NO
CIRCUMSTANCES SHALL EITHER PARTY TO THIS AGREEMENT BE LIABLE TO
ANYONE, INCLUDING, WITHOUT LIMITATION TO THE OTHER PARTY, FOR
CONSEQUENTIAL OR PUNITIVE DAMAGES FOR
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<PAGE>
ANY ACT OR FAILURE TO ACT UNDER ANY PROVISION OF THIS AGREEMENT EVEN
IF ADVISED OF THE POSSIBILITY THEREOF.
8. Certain Covenants of IFTC and Fund.
A. All requisite steps will be taken by Fund from time to time when and
as necessary to register the Fund's shares for sale in all states in
which Fund's shares shall at the time be offered for sale and require
registration. If at any time Fund will receive notice of any stop
order or other proceeding in any such state affecting such
registration or the sale of Fund's shares, or of any stop order or
other proceeding under the federal securities laws affecting the sale
of Fund's shares, Fund will give prompt notice thereof to IFTC.
B. IFTC hereby agrees to perform such transfer agency functions as are
set forth in section 4.D. above and establish and maintain facilities
and procedures for safekeeping of stock certificates, check forms, and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates,
forms and devices, and to carry such insurance as it considers
adequate and reasonably available.
C. To the extent required by Section 31 of the Investment Company Act of
1940 (the "1940 Act") as amended and Rules thereunder, IFTC agrees
that all records maintained by IFTC relating to the services to be
performed by IFTC under this Agreement are the property of Fund and
will be preserved for the period required by the 1940 Act or such
longer period as the Fund may require in writing and will be
surrendered promptly to Fund on request.
D. IFTC will permit Fund and its authorized accountants, upon the
execution of IFTC's Confidentiality Agreement, to make periodic
inspections and audits of its operations as such would involve the
Fund at reasonable times during business hours.
9. Recapitalization or Readjustment.
In case of any recapitalization, readjustment or other change in the
capital structure of Fund requiring a change in the form of stock
certificates, IFTC will issue or register certificates in
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the new form in exchange for, or in transfer of, the outstanding
certificates in the old form, upon receiving:
A. Written instructions from an officer of Fund; and
B. Specimens and a sufficient working supply of the new certificates in
the form approved by the Board of Directors of Fund, with a
certificate of the Secretary of Fund as to such approval.
10. Stock Certificates.
Fund will furnish IFTC with a sufficient supply of blank stock certificates
and from time to time will renew such supply upon the request of IFTC. Such
certificates will be signed manually or by facsimile signatures of the
officers of Fund authorized by law and by bylaws to sign stock
certificates, and if required, will bear the corporate seal or facsimile
thereof.
11. Death, Resignation or Removal of Signing Officer.
Fund will file promptly with IFTC written notice of any change in the
officers authorized to sign stock certificates, written instructions or
requests, together with two signature cards bearing the specimen signature
of each newly authorized officer. In case any officer of Fund who will have
signed manually or whose facsimile signature will have been affixed to
blank stock certificates will die, resign, or be removed prior to the
issuance of such certificates, IFTC may issue or register such stock
certificates as the stock certificates of Fund notwithstanding such death,
resignation, or removal, until specifically directed to the contrary by
Fund in writing. In the absence of such direction, Fund will file promptly
with IFTC such approval, adoption, or ratification as may be required by
law.
12. Future Amendments of Charter and Bylaws.
Fund will promptly file with IFTC copies of all material amendments to its
Articles of Incorporation or bylaws made after the date of this Agreement.
13. Instructions, Opinion of Counsel and Signatures.
At any time IFTC may apply to any person authorized by the Fund to give
instructions to IFTC, or, at the expense of the Fund, may consult with
legal counsel for Fund or, at the expense of the Fund and with the approval
of a Fund officer, may consult with its own legal counsel with respect to
any matter arising in connection with the agency and it will not be
12
<PAGE>
liable for any action taken or omitted by it in good faith in reliance upon
such instructions or upon the opinion of such counsel. IFTC will be
protected in acting upon any paper or document reasonably believed by it to
be genuine and to have been signed by the proper person or persons and will
not be held to have notice of any change of authority of any person until
receipt of written notice thereof from Fund. It will also be protected in
recognizing stock certificates which it reasonably believes to bear the
proper manual or facsimile signatures of the officers of Fund, and the
proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
14. Papers Subject to Approval of Counsel.
The acceptance by IFTC of its appointment as transfer agent, agent and
depository and all documents filed in connection with such appointment and
thereafter in connection with the agencies, will be subject to the approval
of legal counsel for IFTC (which approval will be not unreasonably
withheld).
15. Certification of Documents.
The required copy of the articles of incorporation of Fund and copies of
all amendments thereto will be certified by the Secretary of State (or
other appropriate official) of the state of incorporation, and if such
articles of incorporation and amendments are required by law to be also
filed with a county, city or other officer of official body, a certificate
of such filing will appear on the certified copy submitted to IFTC. A copy
of the order or consent of each governmental or regulatory authority
required by law to the issuance of the stock will be certified by the
Secretary or Clerk of such governmental or regulatory authority, under
proper seal of such authority. The copy of the bylaws and copies of all
amendments thereto, and copies of resolutions of the Board of Directors of
Fund, will be certified by the secretary or an assistant secretary of Fund
under the Fund's seal.
16. Records.
IFTC will maintain customary records in connection with its agency, and
particularly will maintain those records required to be maintained pursuant
to subparagraph (2) (iv) of paragraph (b) of Rule 31a-1 under the
Investment Company Act of 1940, if any.
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<PAGE>
17. Disposition of Books, Records and Canceled Certificates.
IFTC may send periodically to Fund, or to where designated by the Fund, all
books, documents, and all records no longer deemed needed for current
purposes and stock certificates which have been canceled in transfer or in
exchange, upon the understanding that such books, documents, records, and
stock certificates will be maintained by the Fund under and in accordance
with the requirements of Section 17Ad-7 adopted under the Securities
Exchange Act of 1934. Such materials will not be destroyed by Fund without
the consent of IFTC (which consent will not be unreasonably withheld), but
will be safely stored for possible future reference.
18. Provisions Relating to IFTC as Transfer Agent.
A. IFTC will make original issues of stock certificates upon written
request of an officer of Fund and upon being furnished with a
certified copy of a resolution of the Board of Directors authorizing
such original issue, an opinion of counsel and other documents as
outlined in paragraph 1. of this Agreement, a sufficient supply of
blank stock certificates and necessary funds for the payment of any
original issue tax.
B. Before making any original issue of certificates Fund will furnish
IFTC with sufficient funds to pay all required taxes on the original
issue of the stock, if any. Fund will furnish IFTC such evidence as
may be required by IFTC to show the actual value of the stock. Fund
shall be responsible for ascertaining if any taxes are required to be
paid and, if so, for paying such taxes.
C. Shares of stock will be transferred and new certificates issued in
transfer, or shares of stock accepted for redemption and funds
remitted therefor, upon surrender of the old certificates in form
deemed by IFTC properly endorsed for transfer or redemption
accompanied by such documents as IFTC may deem necessary to evidence
that authority of the person making the transfer or redemption, and
bearing satisfactory evidence of the payment of any applicable stock
transfer taxes. IFTC reserves the right to refuse to transfer or
redeem shares until it is satisfied that the endorsement or signature
on the certificate or any other document is valid and genuine, and for
that purpose it may require a guaranty of signature by an eligible
guarantor institution, as
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<PAGE>
that term is defined in Rule 17Ad-15, adopted under the Securities
Exchange Act of 1934, and as implemented by IFTC's Signature Guarantee
Procedures. IFTC also reserves the right to refuse to transfer or
redeem shares until it is satisfied that the requested transfer or
redemption is legally authorized, and it will incur no liability for
the refusal in good faith to make transfers or redemptions which, in
its judgment, are improper or unauthorized. IFTC may, in effecting
transfers or redemptions, rely upon Simplification Acts or other
statutes which protect it and Fund in not requiring complete fiduciary
documentation. In cases in which IFTC is not directed or otherwise
required to maintain the consolidated records of shareholder's
accounts, IFTC will not be liable for any loss which may arise by
reason of not having such records.
D. When mail is used for delivery of stock certificates, IFTC will
forward stock certificates in "nonnegotiable" form by first class or
registered mail and stock certificates in "negotiable" form by
registered mail, all such mail deliveries to be covered while in
transit to the addressee by insurance arranged for by IFTC.
E. IFTC will issue and mail subscription warrants, certificates
representing stock dividends, exchanges or split ups, or act as
conversion agent upon receiving written instructions from any officer
of Fund and such other documents as IFTC deems necessary.
F. IFTC will issue, transfer, and split up certificates and will issue
certificates of stock representing full shares upon surrender of scrip
certificates aggregating one full share or more when presented to IFTC
for that purpose upon receiving written instructions from an officer
of Fund and such other documents as IFTC may deem necessary.
G. IFTC may issue new certificates in place of certificates represented
to have been lost, destroyed, stolen or otherwise wrongfully taken
upon receiving instructions from Fund and indemnity satisfactory to
IFTC and Fund, and may issue new certificates in exchange for, and
upon surrender of, mutilated certificates.
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<PAGE>
H. IFTC will supply a shareholder's list to Fund for its annual meeting
upon receiving a request from an officer of Fund. It will also
supply lists at such other times as may be requested by an officer of
Fund.
I. Upon receipt of written instructions of an officer of Fund, IFTC will
address and mail notices to shareholders.
J. In case of any request or demand for the inspection of the stock books
of Fund or any other books in the possession of IFTC, IFTC will
endeavor to notify Fund and to secure instructions as to permitting or
refusing such inspection. IFTC reserves the right, however, to exhibit
the stock books or other books to any person in case it is advised by
its counsel that it may be held responsible for the failure to exhibit
the stock books or other books to such person.
19. Provisions Relating to Paying Agency.
A. IFTC will, at the expense of Fund, provide a special form of check
containing the imprint of any device or other matter desired by Fund.
Said checks must, however, be of a form and size convenient for use by
IFTC.
B. If Fund desires to include additional printed matter, financial
statements, etc., with the dividend checks, the same will be furnished
to IFTC within a reasonable time prior to the date of mailing of the
dividend checks, at the expense of Fund.
C. If Fund desires its distributions mailed in any special form of
envelopes, sufficient supply of the same will be furnished to IFTC but
the size and form of said envelopes will be subject to the approval of
IFTC. If stamped envelopes are used, they must be furnished by Fund;
or if postage stamps are to be affixed to the envelopes, the stamps or
the cash necessary for such stamps must be furnished by Fund.
D. IFTC will open and maintain in its banking department one or more
non-interest bearing deposit accounts as agent for Fund, into which
the moneys received for the account of the Fund for payment of
dividends, distributions, redemptions or other disbursements provided
for hereunder will be deposited, and against which checks will be
drawn. If IFTC shall in its sole discretion advance funds to or for
the account of Fund which results in an overdraft in any such account
because the monies held
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<PAGE>
therein by IFTC on behalf of Fund are insufficient to pay the total
amount payable from such account for any reason, the amount of the
overdraft shall be payable by Fund to IFTC upon demand together with
the overdraft charge set forth in the then-current fee schedule from
the date advanced until the date final payment is received.
E. IFTC is authorized and directed to stop payment of checks theretofore
issued hereunder, but not presented for payment, when the payees
thereof allege either that they have not received the checks or that
such checks have been mislaid, lost, stolen, destroyed or through no
fault of theirs, are otherwise beyond their control, and cannot be
produced by them for presentation and collection, and, to issue and
deliver duplicate checks in replacement thereof.
20. Assumption of Duties By the Fund or Agents Designated By the Fund.
A. The Fund, its designated agents other than IFTC or any subcontractor
employed by the Fund or IFTC at the direction or request of the Fund
may assume certain duties and responsibilities of IFTC or those
services of Transfer Agent and Paying Agent as those terms are
referred to in Section 4.D. of this Agreement including but not
limited to: answering and responding to telephone inquiries from
shareholders and broker-dealers; accepting shareholder and broker
instructions (both oral and written) and transmitting orders or
directions based on such instructions to IFTC; preparing and mailing
confirmations; obtaining certified TIN numbers; establishing
shareholder accounts on the TA2000/TM/ System, classifying the status
of shareholders and shareholder accounts under applicable tax law and
assigning social codes and Taxpayer Identification Number codes
thereto; and disbursing monies of the Fund. Any assumption of duties
and responsibilities and any amendments thereto must be embodied in
writing and signed by both parties.
B. To the extent the Fund or its agent or affiliate assumes such duties
and responsibilities, IFTC shall be relieved from all responsibility
and liability therefor and is hereby indemnified and held harmless
against any liability therefrom and in the same manner and degree as
provided for in Section 7 hereof.
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<PAGE>
21. Termination of Agreement.
A. This Agreement shall remain in full force and effect for a period of
two (2) years, the initial term of this Agreement, and thereafter
shall automatically extend for additional, successive twelve (12)
month terms upon the expiration of any term hereof, unless terminated
at any time after the initial term by either party by delivery of six
(6) months prior written notice of termination to the other party.
B. Each party, in addition to any other rights and remedies, shall have
the right to terminate this Agreement forthwith upon the occurrence
at any time of any of the following events with respect to the other
party:
(1) Any interruption or cessation of operations by the other party
or its assigns which materially interferes with the business
operation of the first party;
(2) The bankruptcy of the other party or its assigns or the
appointment of a receiver for the other party or its assigns;
(3) Any merger, consolidation or sale of substantially all the
assets of the other party or its assigns; or
(4) Failure by the other party or its assigns to perform its duties
in accordance with the Agreement, which failure materially
adversely affects the business operations of the first party and
which failure continues for thirty (30) days after receipt of
written notice from the first party.
C. In the event of termination, Fund will promptly pay IFTC all amounts
due to IFTC hereunder.
D. In the event of termination, IFTC will use its best efforts to
transfer the books and records of the Fund to the designated successor
transfer agent and to provide other information relating to its
service provided hereunder for reasonable compensation therefore.
22. Confidentiality.
A. IFTC agrees that, except as provided in the last sentence of Section
19.J hereof, or as otherwise required by law, IFTC will keep
confidential all records of and information in its possession relating
to Fund or its shareholders or shareholder
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<PAGE>
accounts and will not disclose the same to any person except at the
request or with the consent of Fund.
B. Fund agrees to keep confidential all financial statements and other
financial records and all manuals, systems and other technical
information and data, not publicly disclosed, relating to IFTC's
operations and programs furnished to it by IFTC pursuant to this
Agreement and will not disclose the same to any person except at the
request or with the consent of IFTC.
C. The Fund acknowledges that IFTC and DST Systems, Inc. (DST) have
proprietary rights in and to the TA2000/TM/ System, including, without
limitation any changes or modifications thereto and any other IFTC or
DST programs, code, techniques, know-how, data bases, supporting
documentation, data formats, or procedures ("collectively IFTC
Protected Information") which the Fund's access to the TA2000/TM/
System or TA2000/TM/ Facilities may permit the Fund or its employees
or agents to become aware of or to access and that the IFTC Protected
Information constitutes confidential material and trade secrets of
IFTC. The Fund agrees to maintain the confidentiality of the IFTC
Protected Information. The Fund acknowledges that any unauthorized
use, misuse, disclosure or taking of IFTC Protected Information which
is confidential as provided by law, or which is a trade secret,
residing or existing internal or external to a computer, computer
system, or computer network, or the knowing and unauthorized accessing
or causing to be accessed of any computer, computer system, or
computer network, may be subject to civil liabilities and criminal
penalties under applicable law. The Fund will advise all of its
employees and agents who have access to any IFTC Protected Information
or to any computer equipment capable of accessing IFTC or DST hardware
or software of the foregoing. DST is intended to be, and shall be, a
third party beneficiary of the Fund's obligations and undertakings
contained in this Section.
23. Changes and Modifications.
A. During the term of this Agreement IFTC will use on behalf of the Fund
without additional cost all modifications, enhancements, or changes
which DST or IFTC may
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<PAGE>
make to its shareholder/transfer agent processing system in the normal
course of its business and which are applicable to functions and
features offered by the Fund, unless substantially all DST or IFTC
clients are charged separately for such modifications, enhancements or
changes, including, without limitation, substantial system revisions
or modifications necessitated by changes in existing laws, rules or
regulations. The Fund agrees to pay IFTC promptly for modifications
and improvements which are charged for separately at the rate provided
for in DST's or IFTC's standard pricing schedule which shall be
identical for substantially all clients, if a standard pricing
schedule shall exist. If there is no standard pricing schedule, the
parties shall mutually agree upon the rates to be charged.
B. IFTC shall have the right, at any time and from time to time, to alter
and modify any systems, programs, procedures or facilities used or
employed in performing its duties and obligations hereunder; provided
that the Fund will be notified as promptly as possible prior to
implementation of such alterations and modifications and that no such
alteration or modification or deletion shall materially adversely
change or affect the operations and procedures of the Fund in using or
employing the TA2000/TM/ System or the TA2000/TM/ Facilities hereunder
or the reports to be generated by such system and facilities
hereunder, unless the Fund is given thirty (30) days prior notice to
allow the Fund to change its procedures and IFTC provides the Fund
with revised operating procedures and controls.
C. All enhancements, improvements, changes, modifications or new features
added to the TA2000/TM/ System or otherwise made available by IFTC for
use in connection with the business of the Fund however developed or
paid for shall be, and shall remain, the confidential and exclusive
property of, and proprietary to, DST Systems, Inc. and IFTC.
24. Subcontractors.
The Fund acknowledges that IFTC intends to subcontract certain obligations
hereunder to affiliated entities and consents to such subcontracting on
condition that IFTC shall remain fully responsible and liable for the
complete and proper performance of IFTC's obligations
20
<PAGE>
hereunder, that all acts and omissions of any such subcontractor hereunder
shall for all purposes hereof be considered and deemed to be acts or
omissions of IFTC and that the Fund shall be fully responsible and liable
hereunder to IFTC as if no subcontract had occurred and such obligations
had been performed by IFTC itself. Nothing herein shall impose any duty
upon IFTC in connection with or make IFTC liable for the actions or
omissions to act of unaffiliated third parties such as, by way of example
and not limitation, courier or next day delivery services, shipping
companies, the U.S. mails or telecommunication companies, provided that, if
IFTC selected such company, IFTC shall have exercised due care in selecting
the same.
25. Force Majeure.
IFTC shall not be responsible or liable for its failure or delay in
performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation: any interruption, loss or
malfunction of any utility, transportation, computer (hardware or software)
or communication service; inability to obtain labor, material, equipment or
transportation, or a delay in mails; governmental or exchange action,
statute, ordinance, rulings, regulations or direction; war, strike, riot,
emergency, civil disturbance, terrorism, vandalism, explosions, labor
disputes, freezes, floods, fires, tornados, acts of God or public enemy,
revolutions, or insurrection; or any other cause, contingency, circumstance
or delay not subject to IFTC's control which prevents or hinders IFTC's
performance hereunder.
26. Limitations on Liability.
A. If Fund is comprised of more than one Portfolio, each Portfolio shall
be regarded for all purposes hereunder as a separate party apart from
each other Portfolio. Unless the context otherwise requires, with
respect to every transaction covered by this Agreement, every
reference herein to the Fund shall be deemed to relate solely to the
particular Portfolio to which such transaction relates. Under no
circumstances shall the rights, obligations or remedies with respect
to a particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single document to
memorialize the separate agreement of each Portfolio is understood to
21
<PAGE>
be for clerical convenience only and shall not constitute any basis
for joining the Portfolios for any reason.
B. Notice is hereby given that a copy of Fund's Trust Agreement and all
amendments thereto is on file with the Secretary of State of the state
of its organization; that this Agreement has been executed on behalf
of Fund by the undersigned duly authorized representative of Fund in
his/her capacity as such and not individually; and that the
obligations of this Agreement shall only be binding upon the assets
and property of Fund and shall not be binding upon any trustee,
officer or shareholder of Fund individually.
27. Miscellaneous.
A. This Agreement shall be construed according to, and the rights and
liabilities of the parties hereto shall be governed by, the laws of
the State of Missouri, without reference to the choice of law
provisions thereof.
B. All terms and provisions of this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns.
C. The representations and warranties, the indemnification extended
hereunder, and the provisions of Sections 22 and 26 are intended to
and shall continue after and survive the expiration, termination or
cancellation of this Agreement.
D. No provisions of the Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
each party hereto.
E. The captions in the Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
F. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall
constitute one and the same instrument.
G. If any part, term or provision of this Agreement is determined by the
courts or any regulatory authority having jurisdiction over the issue
to be illegal, in conflict with any
22
<PAGE>
law or otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held
to be illegal or invalid.
H. This Agreement may not be assigned by either party hereto without the
prior written consent of the other party.
I. Neither the execution nor performance of this Agreement shall be
deemed to create a partnership or joint venture by and between Fund
and IFTC. It is understood and agreed that all services performed
hereunder by IFTC shall be as an independent contractor and not as an
employee of the Fund. This Agreement is between IFTC and the Fund and,
except with respect to DST Systems, Inc. under Section 22 C hereof,
neither this Agreement nor the performance of services under it shall
create any rights in any third parties. There are no third party
beneficiaries hereto.
J. Except as specifically provided herein, this Agreement does not in any
way affect any other agreements entered into among the parties hereto
and any actions taken or omitted by any party hereunder shall not
affect any rights or obligations of any other party hereunder.
K. The failure of either party to insist upon the performance of any
terms or conditions of this Agreement or to enforce any rights
resulting from any breach of any of the terms or conditions of this
Agreement, including the payment of damages, shall not be construed as
a continuing or permanent waiver of any such terms, conditions, rights
or privileges, but the same shall continue and remain in full force
and effect as if no such forbearance or waiver had occurred.
L. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement, draft or agreement or
proposal with respect to the subject matter hereof, whether oral or
written, and this Agreement may not be modified except by written
instrument executed by both parties.
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<PAGE>
WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST COMPANY
By: __________________________________
Title: _______________________________
ARIEL GROWTH FUND
By: __________________________________
Title: _______________________________
24
<PAGE>
Exhibit 10
August 1, 1986
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Exhibit 10, Form N-1A
Ariel Growth Fund
Ladies and Gentlemen:
As Secretary of, and counsel to, Ariel Growth Fund (the "Trust"), it is my
opinion, based upon an examination of the Trust's Declaration of Trust and By-
Laws and such other original or photostatic copies of Trust records,
certificates of public officials, documents, papers, statutes, and authorities
as I deemed necessary to form the basis of this opinion, that the securities
being registered by this Registration Statement of the Trust will, when sold, be
legally issued, fully paid and non-assessable.
Consent is hereby given to file this opinion of counsel with the Securities
and Exchange Commission as an Exhibit to the Trust's Registration Statement.
Sincerely,
/s/Catherine S. Bardsley
------------------------
Catherine S. Bardsley,
Secretary
<PAGE>
Exhibit 11a
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders of
Ariel Mutual Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Ariel Growth Fund and Ariel Appreciation Fund,
comprising Ariel Investment Trust ("Ariel Mutual Funds"), as of September 30,
1995, the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the fiscal periods since 1986. These
financial statements and financial highlights are the responsibility of the
Ariel Mutual Funds' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ariel
Mutual Funds at September 30, 1995, the results of their operations for the year
then ended, the changes in their net assets for each of the two years in the
period then ended and the financial highlights for each of the fiscal periods
since 1986, in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
October 20, 1995
<PAGE>
Exhibit 11b
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the use of our report dated
October 20, 1995 in the Registration Statement (Form N-1A) and its incorporation
by reference in the related Prospectus of Ariel Appreciation Fund and Ariel
Growth Fund, filed with the Securities and Exchange Commission in the Post-
Effective Amendment No. 17 to the Registration Statement under the Securities
Act of 1933 (File No. 33-7699) and in this Amendment No. 17 to the Registration
Statement under the Investment Company Act of 1940 (File No. 811-4786).
/s/Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
January 22, 1996
<PAGE>
Exhibit 15
ARIEL GROWTH FUND
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
As permitted by Rule 12b-1 under the Investment Company Act of 1940 and in
accordance with the terms and conditions of this Distribution Plan ("Plan"), as
hereinafter set forth, Ariel Growth Fund (the "Fund") may incur certain
expenditures to promote the Fund and further the distribution of Fund shares.
1. Payment of Distribution Service fee.
(a) As compensation for certain services performed and expenses assumed by
the Funds' Distributor and principal underwriter, the Fund may pay the
Distributor a distribution service fee of up to 0.30% per annum of the average
daily net assets of the Fund. Such distribution service fee may be in addition
to any sales charges the Distributor receives from the Fund with respect to
sales of Fund shares. The Fund may also pay the Advisor up to 0.05% per annum
for expenses incurred by the Advisor in marketing the Fund. All agreements with
any person relating to the implementation of this Plan shall be in writing, and
such agreements shall be subject to termination, without penalty, pursuant to
the provisions of paragraph 2(c) of this Plan.
(b) Nothing in this Plan shall operate or be construed to limit the extent
to which the Fund's Investment Advisor or any other person, other than the Fund,
at its expense apart from the
<PAGE>
Plan, may incur costs and pay expenses associated with the distribution of Fund
shares.
2. Effective Date and Term.
(a) This Plan shall become effective upon approval by majority votes of (i)
the Board of Trustees of the Fund and the trustees who are not interested
persons within the meaning of Section 2(a)(19) of the Investment Company Act of
1940 and have no direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Plan ("Qualified Trustees"), cast in
person at a meeting called for the purpose of voting on this Plan, and (ii) the
outstanding voting securities of the Fund.
(b) This Plan shall remain in effect for one year from its adoption date
and may continue in effect thereafter if this Plan is approved at least annually
by a majority vote of the trustees of the Fund, including a majority of the
Qualified Trustees, cast in person at a meeting called for the purpose of voting
on the Plan.
(c) This Plan may be terminated at any time by a majority vote of the
Qualified Trustees or by vote of a majority of the outstanding voting securities
of the Fund.
3. Reports.
The person authorized to direct the disposition of monies paid or payable
by the Fund pursuant to the Plan shall provide, on at least a quarterly basis, a
written report to the Fund Board of Trustees of the amounts expended pursuant to
this
2
<PAGE>
Plan or any related agreements and the purposes for which such expenditures were
made.
4. Selection of Disinterested Trustees.
While this Plan is in effect, the selection and nomination of those
trustees who are not interested persons of the Fund within the meaning of
Section 1(a)(19) of the Investment Company Act of 1940 shall be committed to the
discretion of the trustees then in office who are not interested persons of the
Fund.
5. Effect of Plan.
This Plan shall not obligate the Fund or any other party to enter into an
agreement with any particular person.
6. Amendment.
This Plan may not be amended to increase materially the amount authorized
in paragraph 1(a) hereof to be spent for distribution without approval by a vote
of the majority of the outstanding shares of the Fund. All material amendments
to this Plan must be approved by a majority vote of the Board of Trustees of the
Fund, and of the Qualified Trustees, cast in person at a meeting called for the
purpose of voting thereon.
3
<PAGE>
Exhibit 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE EQUATION
(UNAUDITED)
Computation of the total return of Calvert-Ariel Growth Fund, based on
a computer analysis of the Fund's net asset value and dividend history, for the
one-year period ended November 30, 1987, and for the period from inception
(November 6, 1986) to November 30, 1987.
1 Year
P(1 + T)/n/ = ERV
P = $1000
T = ___________
ERV = $938.30 from 12/1/86 to 11/30/87
(on a $1000 investment minus sales load)
T = ($938.30/$1000) - 1 - 0.0617 = - 6.17%
From Inception
P(1 + T)/n/ = ERV
P = $1000
T = ______
n = 1.066 years (from inception)
ERV = $964.20 from 11/6/86 to 11/30/87
(on a $1000 investment minus sales load)
T = ________ - 1 = - 0.03362 = - 3.36%
<PAGE>
Non-Standard Computations
Calculation of overall return, on the same basis as total return for the
time periods above, without taking into account the maximum sales charge:
1 Year
P(1 + T)/n/ = ERV
P = $1000
T = _____
ERV = $982.10 from 12/1/86 to 11/30/87
(on a $1000 investment, no sales load)
T = ($982.10/$1000) - 1 - 0.0179 = - 1.79%
From Inception
P(1 + T)/n/ = ERV
P = $1000
T = ______
n = 1.066 years (from inception)
ERV = $1009.20 from 11/6/86 to 11/30/87
(on a $1000 investment minus sales load)
T = ________ - 1 = - 0.0086 = - 0.86%
<PAGE>
Computation of total return for the periods ended March 31, 1988, as
indicated below:
3 Months
P(1 + T)/n/ = ERV
P = $1000
T = _____
ERV = $1149.39 from 1/1/88 to 3/31/88
(on a $1000 investment minus sales load)
T = ($1149.39/$1000) - 1 - 0.1494 = - 14.949%
1 Year
P(1 + T)/n/ = ERV
P = $1000
T = _____
ERV = $1108.9 from 4/1/87 to 3/31/88
(on a $1000 investment minus sales load)
T = ($1108.9/$1000) - 1 - 0.1089 = - 10.89%
From Inception
P(1 + T)/n/ = ERV
P = $1000
T = ______
n = 1.3989 years (from inception)
ERV = $1306.60 from 11/6/86 to 3/31/88
(on a $1000 investment minus sales load)
T = ________ - 1 = - 0.2106658 = - 21.07%
<PAGE>
Computation of overall return, on the same basis as total return for
the above time periods ended March 31, 1988, without taking into account the
maximum sales charge:
3 Months
P(1 + T)/n/ = ERV
P = $1000
T = _____
ERV = $1203.03 from 1/1/88 to 3/31/88
(on a $1000 investment minus sales load)
T = ($1203.03/$1000) - 1 - 0.2030 = - 20.30%
1 Year
P(1 + T)/n/ = ERV
P = $1000
T = _____
ERV = $1162.00 from 4/1/87 to 3/31/88
(on a $1000 investment, no sales load)
T = ($1162.00/$1000) - 1 - 0.1620 = - 16.20%
From Inception
P(1 + T)/n/ = ERV
P = $1000
T = ______
n = 1.3989 years (from inception)
ERV = $1367.50 from 11/6/86 to 3/31/88
(on a $1000 investment, no sales load)
T = ________ - 1 = - 0.2507407 = - 25.07%
<PAGE>
Exhibit 18a
ARIEL GROWTH FUND
POWER OF ATTORNEY
KNOW ALL PEOPLE BY THESE PRESENTS, that each of the undersigned constitutes
and appoints Sheldon R. Stein, Arthur Don, John W. Rogers, Jr., Mellody L.
Hobson and Roger P. Schmitt, and each of them, his or her attorneys-in fact,
each with the power of substitution, for him or her in any and all capacities,
to sign any post-effective amendments to the registration statement under the
Securities Act of 1933 (Registration No. 33-7699) and/or the Investment Company
Act of 1940 (Registration No. 811-4786), whether on Form N-1A or any successor
forms thereof, and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission and all
appropriate state or federal regulatory authorities. Each of the undersigned
hereby ratifies and confirms all that each of the aforenamed attorneys-in-fact,
or his or her substitute or substitutes, may do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney as
of the 10th day of June, 1995.
/s/Mario L. Baeza /s/Bert N. Mitchell
- ----------------- -------------------
Mario L. Baeza, Bert N. Mitchell,
Trustee Trustee
/s/William C. Dietrich /s/Mellody L. Hobson
- ---------------------- --------------------
William C. Dietrich, Mellody L. Hobson,
Trustee Trustee
/s/Royce N. Flippen, Jr. /s/Eric T. McKissack
- ------------------------ --------------------
Royce N. Flippen, Jr., Eric T. McKissack,
Trustee Trustee and Chief Executive Officer
/s/John G. Guffey, Jr. /s/Christopher G. Kennedy
- ---------------------- -------------------------
John G. Guffey, Jr., Christopher G. Kennedy,
Trustee Trustee
/s/Edward O. Singleton
- ----------------------
Edward O. Singleton,
Treasurer and Chief
Financial Officer
<TABLE> <S> <C>
<PAGE>
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<NAME> ARIEL GROWTH FUND
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<ACCUMULATED-NET-GAINS> 7,684,824
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28,205,275
<NET-ASSETS> 143,311,947
<DIVIDEND-INCOME> 2,519,904
<INTEREST-INCOME> 239,125
<OTHER-INCOME> 0
<EXPENSES-NET> 1,901,614
<NET-INVESTMENT-INCOME> 857,415
<REALIZED-GAINS-CURRENT> 9,407,780
<APPREC-INCREASE-CURRENT> 5,951,567
<NET-CHANGE-FROM-OPS> 16,216,762
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 412,918
<DISTRIBUTIONS-OF-GAINS> 9,198,828
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<NUMBER-OF-SHARES-SOLD> 11,384,217
<NUMBER-OF-SHARES-REDEEMED> 12,995,996
<SHARES-REINVESTED> 470,028
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<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,050,040
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,205,409
<AVERAGE-NET-ASSETS> 141,127,427
<PER-SHARE-NAV-BEGIN> 21.82
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> 2.26
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<TABLE> <S> <C>
<PAGE>
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<NAME> ARIEL GROWTH FUND
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<NUMBER> 01
<NAME> ARIEL GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 93,010,656
<INVESTMENTS-AT-VALUE> 120,268,608
<RECEIVABLES> 861,536
<ASSETS-OTHER> 15,280
<OTHER-ITEMS-ASSETS> 12,623
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<OTHER-ITEMS-LIABILITIES> 205,133
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<OVERDISTRIBUTION-GAINS> 0
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<NET-INVESTMENT-INCOME> 1,569,187
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<NET-CHANGE-FROM-OPS> 17,044,252
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<DISTRIBUTIONS-OF-INCOME> 1,134,168
<DISTRIBUTIONS-OF-GAINS> 8,249,215
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<NUMBER-OF-SHARES-SOLD> 6,811,402
<NUMBER-OF-SHARES-REDEEMED> 8,399,958
<SHARES-REINVESTED> 333,352
<NET-CHANGE-IN-ASSETS> (28,558,324)
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