As filed with the Securities and Exchange Commission on January 30, 1996
1933 Act File No. 33-17022
1940 Act File No. 811-5321
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
o REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
o Pre-Effective Amendment No. ___
|X| Post-Effective Amendment No. 9
and/or
o REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|X|Amendment No.10
-------------------------
LEAHI INVESTMENT TRUST
---------------------------------------------
(Exact Name of Registrant as Specified in Charter)
210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814
---------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (808) 522-7777
DIANNE J. QUALTROUGH
Leahi Investment Trust
210 Ward Avenue, Suite 129
Honolulu, Hawaii 96814
(Name and Address of Agent for Service)
-------------------------
Approximate Date of Proposed Public Offering:
As soon as practicable following effective date.
-------------------------
It is proposed that this filing become effective:
o Immediately upon filing pursuant to paragraph (b),|X| On February 1, 1996
pursuant to paragraph (b), o 60 days after filing pursuant to paragraph (o On
(date) pursuant to paragraph (a)(1). o 75 days after filing pursuant to
paragraph (a)(2) o On (date) pursuant to paragraph (a)(2), of Rule 485
o This post-effective amendment designates a new effective date for a previously
filed post-effective amendment.
-------------------------
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has registered under the Securities Act of 1933 an indefinite number
of shares of beneficial interest. Registrant filed a Notice under such Rule for
its fiscal year ended September 30, 1995 on or about November 7, 1995.
<PAGE>
LEAHI INVESTMENT TRUST
CROSS-REFERENCE SHEET
FORM N-1A
Part A: Information Required in Prospectus
N-1A Location in the
Item No. Item Prospectus by Heading
1. Cover Page Cover Page
2. Synopsis "Leahi Tax-Free Income Trust,"
" Expense Table"
3. Condensed Financial "Financial Highlights"
Information
4. General Description "Leahi Tax-Free Income
of Registrant Trust," "Objective and Investment
Approach of the Fund," "General
Information"
5. Management of the Fund "Management of the Fund"
5.A. Management Discussion "Discussion of Fund Performance"
of Fund Performance
6. Capital Stock and "Leahi Tax-Free Income Trust,"
Other Securities "Distributions and Tax Information,"
"General Information"
7. Purchase of Securities "How to Invest in the Fund,"
Being Offered "How the Fund's Per Share Value Is
Determined," "General Information"
8. Redemption or Repurchase "How to Sell or Redeem an Investment
in the Fund"
9. Pending Legal Not Applicable
Proceedings
-i-
<PAGE>
Part B: Information Required in
Statement of Additional Information
N-1A Location in the SAI
Item No. Item by Heading
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. General Information "The Trust"
and History
13. Investment Objectives "Investment Objective and
and Policies Policies," "Investment Restrictions,"
Prospectus - "Objective and Investment
Approach of the Fund"
14. Management of the "Trustees and Officers"
Registrant
15. Control Persons and "General Information"
Principal Holders of
Securities
16. Investment Advisory "Promotion and Marketing of
and Other Services Fund Shares," Prospectus -
"Management of the Fund"
17. Brokerage Allocation "Execution of Portfolio Transactions"
18. Capital Stock and "The Trust," "General Information,"
Other Securities Prospectus - "General Information"
19. Purchase, Redemption "Additional Purchase and Redemption
and Pricing of Information," "Determination of Share
Securities Being Offered Price," Prospectus - "How To Invest
in the Fund"
20. Tax Status "Distributions and Tax Information"
21. Underwriters "Promotion and Marketing of Fund Shares"
22. Calculations of Not Applicable
Performance Data
23. Financial Statements Financial Statements
-ii-
<PAGE>
Ward Plaza
210 Ward Avenue
Suite 129
Honolulu, Hawaii 96814
(808) 522-7777
PROSPECTUS
FEBRUARY 1, 1996
LEAHI TAX-FREE INCOME TRUST (the "Fund") is a mutual fund whose
investment objective is to provide investors with the maximum level of income
exempt from federal and Hawaii income taxes, consistent with preservation of
capital. The Fund seeks to achieve its objective by investing primarily in
municipal securities which pay interest exempt from federal and Hawaii income
taxes.
This prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. A Statement of Additional Information dated
February 1, 1996, as may be amended from time to time, has been filed with the
Securities and Exchange Commission and is incorporated herein by reference. The
Statement of Additional Information is available without charge upon written
request to the Fund at the address given above.
Page
Expense Table...................................................3
Financial Highlights............................................4
Leahi Tax-free Income Trust.....................................5
Discussion of Fund Performance..................................5
Objective and Investment Approach of the Fund...................6
Management of the Fund.........................................10
How to Invest in the Fund......................................11
How to Sell or Redeem an Investment in the Fund................12
How the Fund's per Share Value Is Determined...................14
Distributions and Tax Information..............................14
General Information............................................15
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
* 1 moved from here; text not shown
EXPENSE TABLE
The following table of fees and expenses is provided to assist
investors in understanding the various costs and expenses which may be borne
directly by an investor in the Fund. The percentages shown below are based on
actual expenses incurred by the Fund for the fiscal year ended September 30,
1995. Actual expenses in future years may be more or less than those shown
below. For a complete discussion of the fees connected with an investment in the
Fund and the services provided to the Fund, see "How to Invest in the Fund" and
"Management of the Fund".
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases........................ NONE
Maximum Sales Charge Imposed on Reinvested Dividends............. NONE
Deferred Sales Charge............................................ NONE
Redemption Fees.................................................. NONE
Exchange Fee..................................................... NONE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees (after waiver and reimbursement)................ 0.50%
12b-1 Fees...................................................... 0.01%
Other Expenses.................................................. 0.31%
Total Fund Operating Expenses................................... 0.82%
Example
The following example illustrates the total transaction and operating
expenses that an investor in the Fund will have paid over various time periods
on a hypothetical investment of $1,000 in the Fund, assuming (1) a 5% annual
rate of return and (2) redemption at the end of each time period. As noted in
the table above, the Fund charges no sales charges or redemption fees of any
kind:
1 year 3 years 5 years 10 years
------ ------- ------- --------
$8 $26 $45 $101
This example is based on the annual operating expenses shown above and
should not be considered a representation of future expenses or performance. The
operating expenses are borne by the Fund, and only indirectly by shareholders as
a result of their investment in the Fund. Actual expenses may be greater or
lesser than those shown, and the annual rate of return may be more or less than
5%.
- --------
*12b-1 fees were paid by the Fund during this period for $2,538 reimbursing
expenses incurred in fiscal year 1993 and $2,672 reimbursing expenses incurred
in fiscal year 1994. The maximum amount which could have been paid by the Fund
was 0.25% of average net assets.
-2-
<PAGE>
FINANCIAL HIGHLIGHTS
The following information has been selected from the Fund's financial
statements, which have been audited by Tait, Weller & Baker, independent
certified public accountants, whose unqualified report thereon appears in the
Fund's Annual Report to Shareholders for the year ended September 30, 1995, and
is incorporated by reference into this Prospectus.
<TABLE>
<CAPTION>
10/26/87*
Fiscal Year Ended September 30, to
-------------------------------
1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 13.24 $ 14.42 $ 13.43 $ 12.97 $ 12.27 $ 12.40 $ 12.34 $12.00
------- ------- ------- ------- ------- ------- ------- ------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.71 0.69 0.71 0.74 0.74 0.79 0.66 0.49
Net gain loss) on securities (both
realized and unrealized) 0.50 (1.08) 1.03 0.50 0.70 (0.13) 0.06 0.34
---- ------ ---- ---- ---- ------ ---- ----
Total from investment operations 1.21 (0.39) 1.74 1.24 1.44 0.66 0.72 0.83
LESS DISTRIBUTIONS
Dividends from net
investment income (0.71) (0.69) (0.71) (0.74) (0.74) (0.79) (0.66) (0.49)
Distributions from capital gains --- (0.10) (0.04) (0.04) --- --- --- ---
------ ------ ------ ------ ------- ------- ------- -----
Total distributions (0.71) (0.79) (0.75) (0.78) (0.74) (0.79) (0.66) (0.49)
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $ 13.74 $ 13.24 $ 14.42 $ 13.43 $ 12.97 $ 12.27 $ 12.40 $ 12.34
======= ======= ======= ======= ======= ======= ======= =======
Total Return 9.40% (2.76%) 13.34% 9.83% 12.12% 5.40% 6.74% 9.07% **
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in 000's) $45,537 $43,928 $44,628 $30,950 $20,173 $12,576 $7,104 $5,200
Ratio of expenses to average net
assets 0.82% 0.85% 0.98% 1.06% 1.09%(a) 0.89%(a) 1.19% 1.07% **
Ratio of net investment income to
average net assets 5.03% 5.04% 5.13% 5.60% 5.86%(a) 6.35%(a) 6.06% 6.23% **
Portfolio turnover 20.16% 22.05% 12.56% 8.04% 36.78% 31.12% 11.49% 28.16% **
</TABLE>
(a) Prior to reimbursement from manager, ratio of expenses to average net
assets was 1.39% and 1.90% for 1991 and 1990, respectively, and ratio of
net investment income to average net assets was 5.56% and 5.34% for 1991
and 1990, respectively.
* Commencement of operations.
** Annualized
-3-
<PAGE>
DISCUSSION OF FUND PERFORMANCE
Below are line graphs comparing the Fund and the broad based national
(state taxable) Lehman Muni Index through the Fund's fiscal year end September
30, 1995. The objective of the graph is to permit you to compare the performance
of the Fund with the current market, and to give perspective to market
conditions and investment strategies and techniques pursued by the Investment
Manager that materially affected the performance of the Funds. The Investment
Management's strategy of retaining bonds with longer maturities during a time of
falling interest rates, has increased the Fund's total return during its most
recent fiscal year. In a falling interest rate environment the market value has
risen on higher coupon bonds . Also, below are Leahi's average annual total
returns for the one-year, five-year and inception through September 30, 1995
periods.
The graph below compares the increase in value of a $10,000 investment
in Leahi Tax-Free Income Trust with the performance of the Lehman Muni Bond
Index. The values are as of September 30th for each of the last seven years and
include reinvested dividends. The Lehman Brothers Index reflects investment of
"dividends," but not the expenses of the Fund.
[GRAPHIC OMITTED]
Plot points for mountain chart showing the information contained in the
following table. The exact dollar amounts at 9/95 are specified in the body of
the chart.
<TABLE>
<CAPTION>
9/88 9/89 9/90 9/91 9/92 9/93 9/94 9/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leahi Tax-Free Income Trust 10,848 11,579 12,204 13,684 15,029 17,033 16,562 18,120
Lehman Muni Bond Index 11,237 12,182 12,988 14,604 15,930 17,855 17,553 19,323
</TABLE>
Average Annual Total Return
1 Year 5 Year Inception
9.40% 8.23% 7.78%
Past performance is not a prediction of future performance.
-4-
<PAGE>
LEAHI TAX-FREE INCOME TRUST
** 1 The LEAHI TAX-FREE INCOME TRUST (the "Fund") is a series of the
Leahi Investment Trust (the "Trust"), a Massachusetts business trust organized
as an open-end, non-diversified management investment company offering
redeemable shares of beneficial interest. Shares of the Fund may be purchased at
their current net asset value with no sales charge by mailing a completed
Account Application, together with a check payable to Leahi Tax-Free Income
Trust, as indicated in the Account Application. The minimum initial investment
is $1,000, with subsequent investments of $50 or more. See "How to Invest in the
Fund".
OBJECTIVE AND INVESTMENT APPROACH OF THE FUND
The investment objective of the Fund is to provide investors with the
maximum level of income exempt from federal and Hawaii income taxes, consistent
with preservation of capital. The Fund seeks to achieve its objective by
investing primarily in municipal securities which pay interest that is exempt
from federal and Hawaii income taxes ("Hawaii Municipal Securities"). Hawaii
Municipal Securities include general obligation and revenue bonds and notes of
issuers located in Hawaii, as well as obligations issued by or under the
authority of Guam, Puerto Rico, and the Virgin Islands. The Fund expects that at
least a majority of its assets will be invested in municipal securities of
issuers located in Hawaii. There are no limitations on the maturities of the
securities which the Fund may purchase.
There is, of course, no assurance that the Fund's objective will be
achieved, and the Fund's net asset value per share will fluctuate with changes
in the market value of its investment portfolio.
Investment Grade Securities. The Fund will invest solely in securities
which, at the time of purchase, are either rated within the four highest grades
assigned by Moody's Investors Service, Inc. ("Moody's) or Standard & Poor's
Corporation ("S&P") or, if unrated, are judged by Leahi Management Company,
Inc., the Fund's investment manager ("Investment Manager"), to be of comparable
quality to such rated securities. Municipal obligations rated in the fourth
highest grade are considered by such rating agencies to have some speculative
characteristics and thus may present investment risks not present in more highly
rated obligations. An Appendix to the Statement of Additional Information
contains a complete description of the municipal securities ratings of Moody's
and S&P.
Characteristics of Municipal Securities. Municipal securities include
debt obligations issued to obtain funds for various public purposes, including
construction of a wide range of public facilities such as bridges, highways,
housing, hospitals, mass transportation, schools, streets, and water and sewer
works. Other public purposes for which municipal securities or bonds may be
issued include the refunding of outstanding obligations, the obtaining of funds
for general operating expenses and the obtaining of funds to loan to other
public institutions and facilities. In addition, certain types of industrial
development bonds are or have been issued by or on behalf of public authorities
to obtain funds to be provided to privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit, port or
parking facilities, air or water pollution control facilities and certain local
facilities for water supply, gas, electricity or sewage or solid waste disposal.
Bonds issued after the effective date of the Tax Reform Act of 1986 for some of
these purposes, such as sports, convention or trade show, and parking
facilities, do not pay interest that is excludable from gross income for federal
income tax purposes. The Fund will limit its purchase of industrial development
bonds, however, to those the interest on which is exempt from regular federal
income tax, although the interest on certain of such bonds may be subject to the
alternative minimum tax. See "Distributions and Tax Information."
-5-
<PAGE>
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
pledge of the credit and taxing power of the issuing municipality for the
payment of principal and interest. Revenue bonds are payable only from the
revenues derived from a particular facility or class of facilities or, in some
cases, from the proceeds of a special excise or specific revenue source.
Industrial development bonds are a form of revenue bond and do not generally
constitute the pledge of the credit of the issuer of such bonds.
Other types of municipal securities include tax anticipation notes,
revenue anticipation notes, bond anticipation notes, and variable rate demand
notes. Specific information concerning these and other forms of municipal
securities is described in the Statement of Additional Information section
entitled, "Investment Objective and Policies - Municipal Securities."
It is possible that the Fund from time to time will invest more than
25% of its assets in a particular segment of the municipal securities market,
such as hospital revenue bonds, housing agency bonds, industrial development
bonds or airport bonds, or in securities the interest on which is paid from
revenues of a similar type of project. In such circumstances, economic,
business, political or other changes affecting one bond (such as proposed
legislation affecting the financing of a project, shortages or price increases
of materials, or declining markets or needs for the project) might also affect
other bonds, thereby potentially increasing market risk.
The Fund may purchase floating rate and variable rate obligations.
These obligations bear interest at rates that are not fixed, but that vary with
changes in specified market rates or indices on a predetermined schedule. These
obligations generally carry a demand feature that permits the Fund to tender
them back to the issuer or a third party at par value prior to maturity plus
accrued interest, which amount may be more or less than the amount the Fund paid
for them. The Fund will limit its purchase of municipal securities that are
floating rate and variable rate obligations to those meeting the quality
standards set forth above. Frequently such obligations are secured by letters of
credit or by other credit enhancement arrangements provided by banks. The
quality of the underlying creditor or of the bank, as the case may be, must be
equivalent to the quality standards set forth above as determined by the Fund's
Investment Manager under the supervision of the Trust's Board of Trustees. In
addition, the Investment Manager monitors the earning power, cash flow and other
liquidity ratios of the issuers of such obligations, as well as the credit
worthiness of the institution responsible for paying the principal amount of the
obligation under the demand feature.
-6-
<PAGE>
The Fund may also invest more than 25% of its assets in participation
interests purchased from banks in floating or variable rate municipal securities
(such as industrial development bonds) owned by banks. Participation interests
carry a demand feature permitting the Fund to tender them back to the bank. Each
participation generally is backed by an irrevocable letter of credit or
guarantee of a bank which the Investment Manager, acting under the supervision
of the Trust's Board of Trustees, has determined meets the prescribed quality
standards for the Fund. The Fund will only invest in such participation
interests to the extent that an opinion of counsel supports the characterization
of interest of such securities as tax-exempt. Only participation interests
issued by Federal Deposit Insurance Corporation ("FDIC") insured banks or
savings institutions having at least $1 billion in assets may be purchased by
the Fund. See the Statement of Additional Information section entitled
"Investment Objectives and Policies - Other Municipal Securities" for more
information.
For the purpose of providing greater liquidity in its portfolio, the
Fund may purchase municipal securities from banks, brokers or dealers, and other
financial institutions (such as insurance or other investment companies),
together with puts to sell the municipal security within an specified period of
time and at a specified exercise price. Because of the put feature on such
municipal securities, the prices of the securities may be higher and the yields
lower than they otherwise would be. With respect to 75% of the total value of
the Fund's assets, no more than 5% of such value may be in securities underlying
puts issued by the same institution, except that the Fund may invest up to 10%
of its asset value in unconditional puts (exercisable even in the event of a
default in the payment of principal or interest on the underlying security) and
other securities issued by the same institution.
General Policies. The Fund, under normal market conditions, will attempt to
invest 100% and, as a matter of fundamental policy, will invest at least 80% of
the value of its net assets in securities the interest on which is exempt from
regular federal and Hawaii income taxes and is not subject to the federal
alternative minimum tax. Thus, it is possible that under normal market
conditions up to 20% of the Fund's net assets could be invested in municipal
securities from other states (which would generate income not exempt from Hawaii
income taxes), Hawaiian or other municipal securities the interest on which is a
tax preference item under the federal alternative tax, U.S. Treasury
obligations, high quality commercial paper, obligations of U.S. banks (including
commercial banks and savings institutions insured by the FDIC) with assets of $1
billion or more, and repurchase agreements secured by U.S. Government
securities. (Some of the foregoing investments generate income that would be
subject to both federal and Hawaii income taxes when distributed to the Fund's
shareholders).
For temporary defensive purposes only, the Fund may invest up to 100%
of its assets in (i) obligations issued or guaranteed by the full faith and
credit of the U.S. Government, its agencies, instrumentalities or authorities,
highest rated commercial paper, certificates of deposit of domestic banks with
assets of $1 billion or more, and repurchase agreements (subject to the
limitations described below), the interest on which is subject to federal and
may be subject to Hawaii income taxes; and (ii) securities the interest on which
is exempt from regular federal income taxes but not Hawaii's income taxes, such
as municipal securities issued by other states and their agencies and
instrumentalities.
-7-
<PAGE>
Repurchase Agreements. The Fund may enter into repurchase agreements in
order to earn additional income on available cash or as a temporary defensive
investment. Under such agreements, the Fund invests in eligible U.S. Government
securities and the seller agrees to repurchase them at a mutually agreed time
and price. Income from repurchase agreements is taxable. It is anticipated that
the Fund will invest less than 5% of its net assets at any given time in
repurchase agreements.
When-Issued and Delayed Delivery Securities. The Fund may purchase
securities on a whenissued or delayed delivery basis, for payment and delivery
at a later date. The price and yield are generally fixed on the date of
commitment to purchase, and the value of the security is thereafter reflected in
the Fund's net asset value. During the period between purchase and settlement,
the market value of the security may be more or less than the purchase price.
The Fund may forego other investment opportunities pending consummation of such
transactions and is subject to the risk of the other party failing to consummate
a transaction. When the Fund purchases securities on a when-issued or delayed
delivery basis, it maintains a segregated account with its custodian bank in an
amount equal to the purchase price as long as the obligation to purchase
continues.
Portfolio Turnover. The annual rate of portfolio turnover is generally
anticipated to be less than 100%. See the Statement of Additional Information
section entitled "Execution of Portfolio Transactions" for more information.
The Fund has adopted certain investment restrictions, which are
described fully in the Statement of Additional Information. One of these
restrictions states that the Fund may borrow money from banks only for
extraordinary or emergency purposes in amounts not to exceed 25% of the Fund's
assets, and that additional investments may not be made while any such
borrowings are in excess of 5% of the Fund's assets. Like the Fund's investment
objective, this restriction is fundamental and may be changed only by a majority
vote of the Fund's outstanding shares.
Special Considerations. An investment in shares of the Fund may not be
considered appropriate for all investors and should not be considered a complete
investment program. Each prospective investor should take into account his or
her own investment objectives as well as the investor's other investments when
considering the purchase of shares of the Fund.
While the Fund is a non-diversified investment company under the
Investment Company Act of 1940 (the "1940 Act"), the Fund intends to comply with
the diversification standards applicable to regulated investment companies under
the Internal Revenue Code of 1986, as amended (the "Code").
As of the last day of each fiscal quarter, the Fund intends that its
investments in the securities of any one issuer (other than the U.S.
Government) will be limited to 25% of its total assets, and, with respect to at
least 50% of its total assets, the Fund may not have more than 5% of its assets
invested in the securities of any one issuer or hold more than 10% of the
outstanding voting securities of any one issuer. To the extent the Fund is not
diversified for purposes of the 1940 Act, it may be more susceptible to adverse
developments affecting a single issuer. Each political subdivision, agency, or
instrumentality and each multistate agency of which Hawaii (or a territory) is a
member, and each public authority which issues industrial development bonds on
behalf of a private entity, will be regarded as a separate issuer for
determining the diversification of the Fund's portfolio.
-8-
<PAGE>
The Fund is subject to the risk of price fluctuation of the municipal
securities held in its portfolio which is generally a function of the underlying
credit rating of an issuer, the maturity length of the securities, the
securities' yield, and general economic and interest rate conditions. Yields on
municipal securities vary depending on a variety of factors, including the
general condition of the financial markets and of the municipal securities
market, the size of a particular offering, the maturity of the obligation and
the credit rating of the issue. Generally, municipal securities of longer
maturities produce higher current yields but are subject to greater price
fluctuation due to changes in interest rates, tax laws, and other general market
factors than are municipal securities with shorter maturities. Similarly, lower
rated municipal securities generally produce a higher yield with shorter
maturities than better rated municipal securities due to the perception of a
greater degree of risk as to the ability of the issuer to pay principal and
interest obligations.
The values of outstanding municipal securities will change in response
to changes in the interest rates payable on new issues of municipal securities.
Should such interest rates rise, the value of the outstanding securities,
including those held in the Fund's portfolio, will likely decline and would sell
at a discount from face amount, and if such interest rates fall, the value of
outstanding securities will likely increase and would sell at a premium from
face amount. Changes in the value of municipal securities held in the Fund's
portfolio arising from these or other factors will cause changes in the net
asset value per share of the Fund.
Certain restrictions exist on the use of tax-exempt bond financing for
various non-governmental activities. These restrictions may limit the supply of
tax-exempt obligations available for investment.
State of Hawaii. The ability of the Fund to meet its objective is affected
by the ability of the issuers of the Fund's portfolio securities to meet their
payment obligations. There are additional risks associated with an investment
which concentrates in issues of one state. Since the Fund invests primarily in
obligations of issuers located in Hawaii, the marketability and market value of
these obligations may be affected by certain Hawaiian constitutional provisions,
legislative measures, executive orders, administrative regulations, voter
initiatives, and other political and economic developments. If any such problems
arise, they could adversely affect the ability of various Hawaiian issuers to
meet their financial obligation.
-9-
<PAGE>
The Hawaiian economy is concentrated in tourism, agriculture, construction
and military operations. Tourism is Hawaii's largest economic sector. In 1992,
due largely to the recession in the U.S., total visitor arrivals to the State
fell 5.2% from 1991. This trend continued in 1993, with a drop in total visitor
arrivals of 6.1% from 1992 figures. Signs of recovery in this key economic
sector appeared in 1994, however, with four solid quarters of growth in visitor
arrivals. While growth in visitor arrivals slowed some in the first part of
1995, total arrivals increased approximately 3% for the first seven months of
calendar 1995. Supply constraints presented by the airline industry's cutback in
scheduled air seats to Hawaii pose an increasingly large risk for the
tourism-based economy. Agriculture is dominated by pineapple and sugar
production, and has experienced increased domestic and foreign competition
resulting in down sizing of the industries. Agricultural production has become
somewhat more diversified and now includes cattle, poultry, vegetables, coffee,
flowers and other nursery products, but the agriculture sector continues to
decline. Other economic diversification projects are underway, including
expansion of containerized port facilities and aquaculture (both experimental
and limited commercial production).
Construction commitments in the State have been stable in recent quarters.
Proposed budget cuts in U.S. military construction spending may, however,
adversely impact the State's construction industry , and in fact, government
construction contracts began to taper off in the first quarter of 1995.
Construction activity is expected to decline in 1995. Unemployment in Hawaii was
approximately 5.6% at June 30, 1995.
Governmental activities, including activities usually administered on a
municipal or county level such as public education, are the responsibility of
the state. This concentration aggravates an otherwise high level of state debt
obligations. Revenue is derived primarily from excise taxes and individual and
corporate income tax. The constitution limits tax-supported debt service to
18.5% of expenditures. After many years of operating either within planned
deficits or with ending fund balances , the State faced a budget shortfall of up
to $750 million or more, much larger than originally anticipated. This has been
aggravated by lower forecasted tax revenues. The State's historically strong
financial position weakened in 1992 as the recession reduced growth in sales and
income taxes. Continued sluggish tax receipts led to a continued decline in the
state's unreserved general fund position. General fund revenues fell
approximately 1.1% for the fiscal year ended June 30, 1995. Real gross state
product increased by 2.5% in 1994, and the latest data available suggest similar
growth in 1995.
Hawaii's general obligation bonds are rated Aa by Moody's and AA by
S&P. Fitch does not currently rate the State's general obligations.
Commonwealth of Puerto Rico. Subject to the Fund's investment policies,
the Fund may invest in the obligations of the government of Puerto Rico.
Accordingly, the Fund may be adversely affected by local political and economic
conditions and developments within Puerto Rico affecting the issuers of such
obligations.
-10-
<PAGE>
Puerto Rico has a diversified economy dominated by the manufacturing and
service sectors. Puerto Rico's gross domestic product ("GDP") expanded by 3.3%
in fiscal year 1995 compared to growth of 2.9% during the previous fiscal year.
GDP growth is expected to fall to 3% for fiscal year 1996. Manufacturing is the
largest sector in terms of gross domestic product and is more diversified than
during earlier phases of Puerto Rico's industrial development. The three largest
sectors of the economy (as a percentage of employment) are services, government
and manufacturing. The North American Free Trade Agreement (NAFTA), which became
effective January 1, 1994, could lead to the loss of Puerto Rico's lower
salaried or labor intensive jobs to Mexico. Puerto Rico's unemployment rate of
approximately 14% in November 1995, is double the national average.
The Commonwealth of Puerto Rico exercises virtually the same control
over its internal affairs as do the fifty states; however, it differs from the
states in its relationship with the federal government. Most federal taxes,
except those such as social security taxes that are imposed by mutual consent,
are not levied in Puerto Rico. However, in conjunction with the 1993 U.S. budget
plan, Section 936 of the Code was amended and provided for two alternative
limitations to the Section 936 credit The first option will limit the credit
against such income to 40% of the credit allowable under current law, with a
five year phase-in wage and depreciation based credit. The reduction of the tax
benefits to those U.S. companies with operations in Puerto Rico may lead to
slower growth in the future. Congress has proposed the abolition of Section 936
tax incentives in connection with balanced budget proposals. There can be no
assurance that the modifications discussed above or the eventual abolition of
Section 936 benefits, will not lead to a weakened economy, a lower rating on
Puerto Rico's debt or lower prices for Puerto Rican bonds that may be held by
the Fund.
Puerto Rico's financial reporting was first conformed to generally
accepted accounting principles in fiscal 1990. Nonrecurring revenues have been
used frequently to balance recent years' budgets. In November 1993 Puerto Ricans
voted on whether they wished to retain their Commonwealth status, become a state
or establish an independent nation. The measure was defeated, with 48.5% voting
to remain a Commonwealth, 46% voting for statehood and 4% voting for
independence. Retaining Commonwealth status leaves intact the current
relationship with the federal government. There can be no assurance that the
statehood issue will not be brought to a vote in the future. A successful
statehood vote in Puerto Rico would then require the U.S. Congress to ratify the
election.
S&P affirmed its A rating for the Commonwealth of Puerto Rico in
November 1995 but lowered its outlook from "stable" to "negative." Puerto Rico
is rated Baa1 by Moody's. Fitch does not currently rate Puerto Rico obligations.
MANAGEMENT OF THE FUND
The Trust has a Board of Trustees which establishes the Fund's policies
and supervises and reviews the management of the Fund. The day-to-day operations
of the Fund are administered by officers elected by the Board of Trustees. The
Board of Trustees consists of the following individuals:
-11-
<PAGE>
Ronald E. Kent Chairman of the Board of Leahi Management Company,
Inc. and the Trust, and Registered Representative of
Linsco/Private Ledger Corp.
Ernest W. Albrecht Retired; formerly Director of Traffic and Special
Projects for Pan American World Airways; former
Personal Representative and Official Greeter for the
City of Honolulu.
Gail A. Chew Vice President for Visitor Services/Community
Relations, Hawaii Visitors Bureau. Formerly with
Estate of James Campbell.
Karen T. Nakamura President, Wallpaper Hawaii, Ltd. and its subsidiary
Remodeling Specialists.
Dianne J. Qualtrough Vice President of Leahi Management Company, Inc. and
President of the Trust, and Branch Manager and
Registered Principal of Linsco/Private Ledger Corp.
Kim F. Scoggins Leasing Agent, Monroe & Friedlander, Inc. Formerly,
Vice President and Chief Operating Officer, Ralston
Enterprises, Inc.
David M. Walker Retired; former Vice President, Fireman's Fund
Insurance Companies, Honolulu, Hawaii.
Investment Manager. Leahi Management Company, Inc., 210 Ward Avenue, Suite
129, Honolulu, Hawaii 96814, serves as the Fund's Investment Manager (the
"Investment Manager"). Under the Management Agreement with the Fund, the
Investment Manager has the overall responsibility for making determinations as
to the investment of the assets of the Fund and implementing the same, including
determining which brokers or dealers to use in the execution of portfolio
transactions, and for administering all operations of the Fund. Dianne J.
Qualtrough, President and a Trustee of the Trust, is the portfolio manager for
the Fund and is primarily responsible for all investment decisions on behalf of
the Fund. The Investment Manager's responsibilities include, but are not limited
to, providing office facilities, executive, administrative and clerical services
to the Fund, as well as coordinating with various entities which deal with the
Trust, such as the accountants, attorneys, custodian, transfer agent and
distributor. The Investment Manager is also responsible for monitoring legal and
regulatory compliance, including preparation of reports and filings with
securities administrators and informing the Trustees of all information
necessary for their periodic review as required by securities laws and
otherwise.
Ronald E. Kent, the principal shareholder and President of the
Investment Manager, is the Chairman of the Board and a Trustee of the Trust. The
Investment Manager was organized on August 20, 1987, in order to provide
management services to the Fund. The principals of the Investment Manager have
been in the general securities business for over 25 years; however, the Fund is
the only mutual fund for which the Investment Manager or its principals
currently provide management or administrative services. The Fund has agreed to
pay the Investment Manager a monthly fee at the annual rate of 1/2 of 1% of the
value of the average net assets of the Fund. For the fiscal year ended September
30, 1995, the Investment Manager received fees of $214,800.
-12-
<PAGE>
Since most of the portfolio transactions of the Fund will be on a principal
or net basis, the Fund will incur few if any brokerage commissions. The
Investment Manager considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions, with the goal of obtaining
prompt execution at the most favorable net price. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions and spreads on net trades,
the quality of services and execution, and the availability of research which
the Investment Manager may lawfully and appropriately use in its investment
advisory capacities. Provided the Fund receives prompt execution at competitive
prices, the Investment Manager may also consider the sale of Fund shares as a
factor in selecting broker-dealers for the Fund's portfolio transactions. The
Fund may, from time to time, effect portfolio transactions with, and pay
commissions to, Linsco/Private Ledger Corp., a broker-dealer which is affiliated
with the Investment Manager.
The Fund has adopted a Code of Ethics incorporating policies on
personal securities trading as recommended by the Investment Company Institute.
Expenses. All expenses incurred in the operation of the Fund are borne by
the Fund, except to the extent specifically assumed by the Investment Manager
and the Distributor. Expenses borne by the Fund include fees of the Investment
Manager; accounting, legal, transfer agent, custodian and disbursing agent fees;
investor servicing costs; taxes, if any; brokerage fees and commissions; fees
and expenses of Trustees who are not interested persons of or affiliated with
the Investment Manager or Distributor; salaries of certain personnel; costs and
expenses of calculating its daily net asset value; accounting, bookkeeping and
recordkeeping required under the 1940 Act; insurance premiums; trade association
dues; fees and expenses of registering and maintaining registration of its
shares for sale under federal and applicable state securities laws; payments
under the Promotion and Marketing Plan (discussed below); printing and other
expenses relating to the Fund's operations; amortization of its organization
expenses; and any extraordinary and non-recurring expenses which are not
expressly assumed by the Investment Manager or the Distributor.
Expense Limitation. The Investment Manager has agreed with the Fund
that if, in any fiscal year, the operating expenses of the Fund exceed 1% of its
average annual net assets, the following reduction in fees will occur.
Initially, the Investment Manager will reduce its fees to the extent necessary
to meet the expense limitation, if possible. This obligation is limited to the
extent of the management fees owed by the Fund and therefore net Fund expenses
may exceed 1% per annum.
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<PAGE>
HOW TO INVEST IN THE FUND
The principal distributor for the shares of the Fund is Linsco/Private
Ledger Corp., 210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814, (808) 522-7000
(the "Distributor"). Shares may be purchased directly from the Fund or through
securities firms that have dealer agreements with the Distributor. The
Distributor does not participate in the management of the Fund.
The minimum initial investment is $1,000. Subsequent investments must
be at least $50. The Fund may, at its discretion, waive the minimum investment
requirements for purchases in conjunction with certain group or periodic plans.
All shares are purchased at the current net asset value with no sales
charge.
To purchase shares of the Fund, investors should follow these
instructions:
Initial Investment
- Complete the Fund's Account Application found at the back of
this Prospectus.
- Make your check payable to "Leahi Tax-Free Income Trust".
- Mail or deliver the completed Account Application and your check
to the Fund at the address shown on the Account Application.
Subsequent Investments
- Detach and complete the reinvestment form attached to your
monthly account statement or order confirmation.
- Make your check payable to "Leahi Tax-Free Income Trust".
- Write your shareholder account number on the check.
- Mail or deliver the check and reinvestment form to the Fund at
the address indicated on such form.
All investments must be made in U.S. dollars and, to avoid fees and
delays, checks should be drawn only on U.S. banks. Investments should not be
made by third party check. A charge may be imposed if any check used for
investment does not clear. The Fund reserves the right to reject any purchase
order in whole or in part.
If an order, together with payment in proper form, is received by the
Fund by the close of trading on the New York Stock Exchange ("NYSE"), Fund
shares will be purchased at the net asset value determined as of the close of
trading on the NYSE on that day. Orders received after the close of trading on
the NYSE will be purchased at the net asset value determined as of the close of
trading on the next business day. It is the responsibility of any securities
firm to transmit orders so that they will be received by the Distributor on a
timely basis.
-14-
<PAGE>
Automatic Investment Program. Through an automatic investment program you
can invest a fixed dollar amount each month in the Fund. This results in more
shares being purchased when the Fund's net asset value is relatively low and
fewer shares being purchased when the fund's net asset value is relatively high
and may result in a lower average cost per share than a less systematic
investment approach.
Prior to participating in the program, you must establish an account
with the Fund and complete the Authorization Agreement for the program. You
should designate on the Authorization Agreement the dollar amount of each
monthly investment (minimum $50) you wish to make. Thereafter, on the designated
day of each month, an amount equal to the specified monthly investment will
automatically be withdrawn from your bank account and invested in shares of the
Fund.
General. Federal tax regulations require that non-exempt investors
provide a certified Taxpayer Identification Number and certain other required
certifications upon opening or reopening an account in order to avoid
withholding of taxes on taxable distributions and proceeds of redemptions. The
Fund may also be required to withhold tax upon such distributions and proceeds
if it is notified by the Internal Revenue Service or a broker that the number
furnished by the shareholder is incorrect or that the shareholder is subject to
withholding due to a failure to report all interest and dividend income. See the
Fund's Account Application for further information concerning this requirement.
Share certificates are issued only upon written request. No
certificates are issued for fractional shares.
HOW TO SELL OR REDEEM AN INVESTMENT IN THE FUND
A shareholder has the right to have the Fund redeem all or any portion
of his or her outstanding shares at such shares' current net asset value on each
day the NYSE is open for trading. The redemption price is the net asset value
next determined after the shares are validly tendered for redemption.
Direct Redemption. A written request for redemption, together with an
endorsed share certificate where one has been issued, must be received by the
Fund's Transfer Agent in order to constitute a valid tender for redemption. The
Transfer Agent requires that the signature(s) on the written request or endorsed
certificate be guaranteed by a commercial bank or trust company or a member firm
of a domestic stock exchange or the National Association of Securities Dealers,
Inc.
Telephone Redemption. Shareholders who complete the Telephone
Redemption Authorization portion of the Account Application may redeem shares on
any business day the NYSE is open by calling the Fund at (808) 522-7777 before
the close of trading on the NYSE. Redemption proceeds will be mailed or wired at
the shareholder's direction the next business day to the predesignated account.
The minimum amount that may be wired is $1,000 (wire charges, if any, may be
deducted from redemption proceeds). During periods of drastic economic or market
changes, the telephone redemption privilege may be difficult to implement. In
this event, shareholders should follow the other redemption procedures discussed
above.
-15-
<PAGE>
By establishing the telephone redemption service, a shareholder
authorizes the Fund and its Transfer Agent to act upon the instructions of any
person by telephone to redeem from the account for which such service has been
authorized and transfer the proceeds to the bank account designated in the
Authorization. The Fund will employ procedures designed to provide reasonable
assurance that telephone instructions are genuine and, if it does not do so, it
may be liable for any losses due to unauthorized or fraudulent instructions. The
procedures employed by the Fund include requiring personal identification by
account number and social security or tax identification number, and providing
written confirmation of transactions. The shareholder agrees that neither the
Fund nor the Transfer Agent will be liable for any loss, expense, or cost
arising out of any telephone redemption request by a person reasonably believed
to be a shareholder, including any fraudulent or unauthorized requests.
The Fund may change, modify, or terminate this service at any time.
Shareholders may request telephone redemption privileges after an account is
opened; however, the Authorization form will require a separate signature
guarantee.
Systematic Withdrawal. As another convenience, the Fund offers a
Systematic Withdrawal Program whereby a shareholder may request that a check
drawn in a predetermined amount be sent to that shareholder each month or
calendar quarter. A shareholder's account must have Fund shares with a value of
at least $10,000 in order to start a Systematic Withdrawal Program, and the
minimum amount that may be withdrawn periodically under the Systematic
Withdrawal Program is $100. This Program may be terminated or modified by a
shareholder or the Fund at any time without charge or penalty.
Withdrawals made concurrently with purchases of additional shares may
be inadvisable because of tax consequences, and accordingly no additional
purchases may be made while this Program is in effect unless they exceed the
lesser of $5,000 or three times the annual withdrawals. In addition, if the
amount withdrawn exceeds the dividends credited to the shareholder's account,
the account ultimately may be depleted.
General. No charge is made by the Fund on sales or redemptions, but
shares tendered through investment brokers or dealers (other than the
Distributor) may be subject to a service charge by such dealers. Payment of the
redemption proceeds will be made promptly, but not later than seven days after
the receipt of all documents in proper form, including any share certificate(s)
or a written redemption order with appropriate signature guarantee. Redemption
checks will be drawn on the Bank of Hawaii. The Fund may suspend the right of
redemption under certain extraordinary circumstances in accordance with the
rules of the Securities and Exchange Commission ("SEC"). The Fund will not mail
redemption proceeds until checks used for the purchase of shares have cleared,
which may take up to 15 days. Redemptions are taxable transactions upon which
shareholders may recognize a gain or a loss for federal and state tax purposes.
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<PAGE>
Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to redeem shares in any account if at any time, due to
redemptions by the shareholder, the total value of a shareholder account is less
than $750. Such redemptions are involuntary on the part of the shareholder;
however, a shareholder will be notified that the value of his or her account is
less than $750 and be allowed 30 days to make additional investments to bring
the value of his account to at least $750.
HOW THE FUND'S PER SHARE VALUE IS DETERMINED
The net asset value of a Fund share is determined at least daily as of the
close of trading on the NYSE on each day the NYSE is open for trading and is
calculated by dividing the value of the Fund's total net assets by the number of
Fund shares outstanding. Portfolio securities for which current market prices
are readily available are valued using the mean between the bid and the asked
prices. Securities for which current market quotations are not readily available
are valued at fair value as determined in good faith by or under the supervision
of the Trust's officers in accordance with policies which are specifically
authorized by the Board of Trustees of the Trust. Generally, fixed income
securities are valued by an independent pricing service using market quotations,
prices provided by market makers, or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics,
in accordance with procedures established in good faith by the Board of
Trutsees. Short- term obligations with maturities of sixty days or less are
generally valued at amortized cost as reflecting fair value.
DISTRIBUTIONS AND TAX INFORMATION
Dividends and Distributions. Dividends from net investment income are
declared daily and paid monthly to shareholders of record on the last business
day of each month. Dividends are declared as to any shares outstanding beginning
at the close of business on the day on which federal funds for the purchase of
the shares have been received by the Fund. The Fund will distribute any net
long-term or short-term capital gains to the shareholders of the Fund on an
annual basis. Dividends and capital gains distributions are reinvested in
additional shares of the Fund at the net asset value per share on the
reinvestment date unless the shareholder has previously requested in writing to
the Transfer Agent that payment be made in cash.
That part of the net investment income of the Fund which is
attributable to interest from municipal securities which are described in
Section 103(a) of the Code and which is distributed to shareholders, less
certain deductions, will be designated by the Fund as an "exempt-interest
dividend" under the Code. The percentage of income designated as tax-exempt will
be applied uniformly to all distributions made by the Fund during each fiscal
year (ending on September 30) and may differ from the actual tax-exempt
percentage for any particular month. Exempt-interest dividends to shareholders
may be excluded from the shareholder's gross income for regular federal income
tax purposes. Any portion of distributions of net investment income not
designated as tax-exempt should be treated by shareholders as ordinary income
subject to federal income tax.
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<PAGE>
Federal Taxation. The Fund has elected to be treated as a regulated
investment company under Subchapter M of the Code and has qualified for such
treatment for its fiscal year ended September 30, 1995. It intends to continue
to so qualify. As such, the Fund will not pay any income or excise taxes on
income and capital gains distributed to its shareholders in accordance with the
timing requirements of the Code.
Interest on bonds issued to finance essential state and local government
operations is fully tax exempt for individual shareholders. However, interest on
certain private activity bonds (including loans for housing and student loans)
issued after August 7, 1986, while still excludable from gross income for
regular federal income tax purposes, will constitute a preference item for
taxpayers in determining their alternative minimum tax. The Fund may acquire
such bonds where such bonds are consistent with the Fund's objective and, in the
opinion of the Investment Manager, such bonds represent the most attractive
investment opportunity then available to the Fund. No more than 20% of the
Fund's net assets will be invested in Hawaii Municipal Securities whose interest
income is treated as a tax preference item under the federal individual
alternative minimum tax. Tax-exempt income also results in a tax preference item
for corporations, which may subject a corporate investor to liability (or
increased liability) under the corporate alternative minimum tax.
Distributions of long-term capital gains, whether in shares or cash,
are taxable as long-term capital gains for federal income tax purposes
regardless of how long a shareholder has held shares of the Fund. Distributions
of short-term capital gains are taxable to shareholders as ordinary income for
federal income tax purposes. The maximum individual tax rate applicable to
ordinary income is currently 39.6%, and the maximum individual tax rate
applicable to net long-term capital gains is currently 28%. Any loss realized
upon the redemption of shares within six months from the date of their purchase
will be disallowed to the extent of tax-exempt dividends received during such
period or will be treated as a long-term capital loss to the extent of any
amounts treated as long-term capital gain distributions during such six-month
period. Distributions declared in October, November or December as of a record
date in such a month will be treated as received by shareholders in December if
paid during January of the following year.
Shareholders will be informed annually of the amount and nature of the
Fund's income and distributions and are required to disclose their receipt of
tax-exempt income, including tax-exempt distributions from the Fund, on their
federal tax returns.
Interest on indebtedness incurred or continued by shareholders to
purchase or carry shares of the Fund is not deductible to the extent
attributable to exempt-interest dividends. In addition, persons who are
"substantial users" as defined in the Code (or persons related to substantial
users) of facilities financed by private activity bonds held by the Fund should
consult their tax advisers with respect to whether the Fund's exempt-interest
dividends retain their exclusion under the Code for such persons. Recipients of
Social Security and railroad retirement benefits may be taxable on a portion of
their benefits if their gross incomes exceed specified threshold amounts; exempt
interest dividends may be added to taxable income solely for the purpose of
determining whether the threshold amount has been exceeded.
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<PAGE>
Additional information about taxes is set forth in the Statement of
Additional Information section entitled "Distribution and Tax Information".
Shareholders should consult their own advisers concerning federal, state and
local taxation of distributions from the Fund.
State Taxation. The Fund has received an opinion letter from the Hawaii
Department of Taxation regarding the status of the Fund and its anticipated
dividends and distributions. Pursuant to that letter, individuals, estates,
trusts and corporations subject to Hawaii Income Taxation will not be required
to include dividends from the Fund in their personal or corporate taxable income
for Hawaii income tax purposes to the extent the dividends are derived from
interest on obligations of the State of Hawaii, including any political
subdivision, agency or instrumentality thereof, or of the United States and its
territories or possessions, to the extent such interest is exempt from state
income taxes under federal law.
GENERAL INFORMATION
The Fund. The Fund is a series of Leahi Investment Trust which was
organized as a Massachusetts business trust on July 23, 1987. The Agreement and
Declaration of Trust permits the Board of Trustees to issue an unlimited number
of full and fractional shares of beneficial interest with a par value of $.01,
which may be issued in any number of series. The Fund is the first, and
currently only, series being offered to the public, although the Board of
Trustees may from time to time authorize and issue other series, the assets and
liabilities of which will be separate and distinct from any other series.
Shares issued by the Fund have no preemptive, conversion, or
subscription rights. Shareholders have equal and exclusive rights as to
dividends and distributions as declared by the Fund and to the net assets of the
Fund upon liquidation or dissolution. Voting rights are not cumulative, so that
the holders of more than 50% of the shares voting in any election of Trustees
can, if they so choose, elect all of the Trustees. While the Trust is not
required to, nor does it intend to, hold annual meetings of shareholders, such
meetings may be called by the Trustees in their discretion, or upon demand by
the holders of 10% or more of the outstanding shares of the Fund for the purpose
of electing or removing Trustees.
Promotion and Marketing Plan. The Fund has adopted a plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act whereby it may reimburse the
Investment Manager each month up to a maximum of 0.25% per annum of the Fund's
average daily net assets for actual expenses incurred in the promotion and
marketing of the Fund's shares, including expenses of the Distributor which are
paid by the Investment Manager. Reimbursable expenses include the printing of
prospectuses and reports used for sales purposes, advertisements, expenses of
preparation and printing of sales literature, and other expenses related to the
promotion and marketing of the Fund's shares (including any service fees paid to
dealers or others who assist in the promotion and marketing of the Fund's
shares). The Plan also provides that the Investment Manager may include as a
promotion and marketing expense a portion of the Investment Manager's overhead
expenses attributable to the promotion and marketing of the Fund's shares,
including personnel and out-of-pocket costs. The Plan permits the Investment
Manager to carry forward for a maximum of three years (without carrying charge)
any promotion and marketing expenses covered by the Plan.
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<PAGE>
Reimbursement for expenses under the Plan are made on a "first-in,
first-out" basis. To the extent the amount permitted to be paid to the
Investment Manager in any one year (up to 0.25% of average net assets) exceeds
the Investment Manager's actual promotion and marketing expenses in that year
plus unpaid expenses incurred in the prior three years, the maximum permissible
payment will be reduced for that year accordingly so as not to exceed the level
of the Investment Manager's actual expenses. Under this type of arrangement, the
Investment Manager may not make a profit under the Plan. From inception of the
Plan through the fiscal year ended September 30, 1990, no reimbursement was made
by the Fund. The Investment Manager incurred $13,329, $20,289 and $15,800,
respectively, in expenses during the last three fiscal years which were
reimbursable under the Plan. During the fiscal year ended September 30, 1995,
$2,538 and $2,672 was paid by the Fund reimbursing promotional expenses incurred
in fiscal years 1993 and 1994.
Unreimbursed expenses are not treated as expenses or fixed liabilities
of the Fund until they are actually submitted for reimbursement by the
Investment Manager and the requested reimbursement is approved by the Board of
Trustees in accordance with the Plan. Once approved, such expenses will be
liabilities of the Fund even if the Plan is not renewed or is terminated. Prior
to the submission and approval of such Unreimbursed expenses, the Fund has no
liability for the payment of such expenses,
even if the Plan is terminated or not renewed, and such expenses are not
reflected as liabilities in the financial statements of the Fund.
In addition to providing for the expenses discussed above, the Plan also
recognizes that the Investment Manager and Distributor may use their fees or
other resources to pay expenses associated with activities primarily intended to
result in the promotion and marketing of the Fund's shares and that some of the
Fund's normal operating expenses, such as the investment management and
distribution fees, and other payments made in the ordinary course of their
business, are appropriately used in this manner. The Statement of Additional
Information has more details on the Plan.
Custodian, Transfer and Accounting Services Agent. The First National Bank
of Boston is the Fund's Custodian. The Bank of Hawaii, acting as agent for the
Custodian, is the Fund's depository and disbursing agent for redemptions.
Fund/Plan Services, Inc. is the Fund's Transfer and Accounting Services Agent.
Shareholder Inquiries. Shareholder inquiries should be directed to Leahi
Management Company, Inc. at 210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814,
(808) 522-7777.
This Prospectus is not an offering of the securities herein described
in any state in which the offering is unauthorized. No salesman, dealer or other
person is authorized to give information or make any representation other than
those contained in this Prospectus or in the Statement of Additional
Information.
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<PAGE>
LEAHI TAX-FREE INCOME TRUST
ACCOUNT APPLICATION
210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814 - (808) 522-7777
ACCOUNT REGISTRATION o Individual o Joint Tenants
o Uniform Transfer to Minors Act o Trust o Other
ACCOUNT NAME(S)
SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER
ACCOUNT ADDRESS
PHONE NUMBER BUSINESS PHONE
INITIAL INVESTMENT $ (minimum initial purchase: $1,000.00)
DISTRIBUTION OPTION If no option is indicated, Option A will be assigned.
<TABLE>
<CAPTION>
<S> <C> <C>
A. Dividends and capital gains B. Dividends in cash; capital C. Dividends and capital
o distributions reinvested in o gains distributions in o gains distributions in
additional shares. additional shares. cash.
</TABLE>
TELEPHONE REDEMPTION AUTHORIZATION (Optional)
o Check this box and attach a deposit slip for your bank
account if you wish to make telephone redemptions of $1,000
or more and have the proceeds wired to the indicated
account. (The account names must match exactly.) Any person
you supply with the required account information can make
telephone redemptions on your behalf. Proceeds from any
telephone redemption will be sent only to the address shown
on this account application. As indicated in the Prospectus
neither the trust nor the transfer agent will be liable for
any loss, expense, or cost arising out of any telephone
redemption request by a person reasonably believed to be a
shareholder.
Upon penalties of perjury, the undersigned certifies (1) that the number shown
on this form is my (our) correct taxpayer identification number; (2) that I (we)
am not subject to backup withholding because (a) I (we) have not been notified
that I (we) am subject to backup withholding, or (b) the Internal Revenue
Service has notified me (us) that I (we) am no longer subject to backup
withholding, or (c) I (we) am an exempt recipient, (3) that I (we) am of legal
age and capacity to purchase shares for my (our) own account or for the account
of the organization above; (4) that I (we) have read the Prospectus and agree to
its terms; (5) that the above information is correct; and (6) if indicated, that
the Transfer Agent is authorized to act upon telephone redemption requests and
that I (we) will not hold the Fund or Transfer Agent liable for any loss,
liability, cost or expense for acting upon telephone instructions.
Signature X Date
Additional Signature (if any) X
<PAGE>
LEAHI TAX-FREE INCOME TRUST
ACCOUNT APPLICATION
(continued)
210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814 - (808) 522-7777
SYSTEMATIC WITHDRAWAL PLAN (Optional)
o Check this box if you wish to participate in the Systematic Withdrawal
Program. To qualify for this program investors must establish an account
of at least $10,000.00.
Withdrawal amount: $ ___________________
($100 minimum)
Withdrawal schedule: o monthly o quarterly
Mail or deliver your application to:
LEAHI TAX-FREE INCOME TRUST
210 Ward Avenue
Suite 129
Honolulu, Hawaii 96814
(808) 522-7777
<PAGE>
LEAHI TAX-FREE INCOME TRUST
AUTHORIZATION AGREEMENT FOR AUTOMATIC INVESTMENT PROGRAM
(ACH DEBITS)
210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814
(808) 522-7777
Leahi Account No.__________
I(we) hereby authorize Leahi Tax-Free Income Trust, hereinafter called LEAHI, to
initiate debit entry, on or about the [ ]5th or [ ]20th (check one) day of each
month for a monthly investment in my LEAHI account in the amount of $__________
(minimum $50) to my(our) [ ]Checking or [ ]Savings (check one) account at the
BANK named below to debit the same to such account.
BANK NAME________________________ BRANCH_________________________
CITY________________________________ STATE______________ ZIP_________
ABA NUMBER (9 digits) ______________ ACCOUNT NO.____________________
This authorization is to remain in full force and effect until LEAHI has
received written notification from me (or either of us) of its termination in
such time and in such manner as to afford LEAHI and BANK a reasonable
opportunity to act on it. (PLEASE ATTACH A VOIDED CHECK OR DEPOSIT SLIP FOR
VERIFICATION).
NAME(S)___________________________________________________________________
SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER_______________________
SIGNATURE DATE______________
SIGNATURE(joint) DATE______________
- -------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
TO: The bank named above:
So that you may comply with your Depositor's request and authorization, LEAHI
agrees as follows:
1. To indemnify and hold you harmless from any loss you may suffer arising from
or in connection with the payment of a debit drawn by LEAHI to the order of the
fund, designated on the account of your depositor's executing the authorization,
including any costs or expenses reasonably incurred in connection with such
loss. LEAHI will not, however, indemnify you against any loss due to your
payment of any debit generated against insufficient funds.
2. To refund to you any amount erroneously paid by you to LEAHI on any such
debit upon a claim for the amount of any such debit on which erroneous payment
was made.
<PAGE>
LEAHI TAX-FREE INCOME TRUST
AUTHORIZATION AGREEMENT FOR AUTOMATIC INVESTMENT PROGRAM
(ACH DEBITS)
MAIL TO:
210 Ward Avenue, Suite 129
Honolulu, HI 96814
(808) 522-7777
INSTRUCTIONS
HOW DOES IT WORK?
1. Leahi Tax-Free Income Trust, through our bank, Bank of Hawaii, draws an
automatic clearing house (ACH) debit against your personal checking/savings
account each month.
2. Choose any amount (at least the minimum subsequent investment amount) that
you would like to invest regularly and your debit will be processed by Leahi
Tax-Free Income Trust.
3. Shares will be purchased and a confirmation sent to you.
HOW DO I SET IT UP?
1. Complete the form (and a fund application if you are establishing a new
account).
2. Attach a voided check to the Automatic Investment Program application.
3. Mail the form to Leahi Tax-Free Income Trust at the above address.
4. As soon as your bank accepts your authorization, debits will be generated and
your Automatic Investment Program started. In order for you to have Automatic
Clearing House (ACH) debits from your account, your bank must be able to accept
ACH transactions and/or be a member of an ACH association. We cannot guarantee
acceptance by your bank.
5. Please allow three to four weeks processing time before the first debit
occurs.
6. Returned items will result in a $20.00 fee being deducted from your account.
<PAGE>
TRUSTEES OF LEAHI INVESTMENT TRUST
ERNEST W. ALBRECHT, Honolulu, Hawaii
GAIL ANN CHEW, Honolulu, Hawaii
RONALD E. KENT, Honolulu, Hawaii
KAREN T. NAKAMURA, Honolulu, Hawaii
DIANNE J. QUALTROUGH, Honolulu, Hawaii
KIM F. SCOGGINS, Honolulu, Hawaii
DAVID M. WALKER , Honolulu, Hawaii
INVESTMENT MANAGER
LEAHI MANAGEMENT COMPANY, INC.
210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814
DISTRIBUTOR
LINSCO/PRIVATE LEDGER, CORP.
210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814
DEPOSITORY AND DISBURSING AGENT
BANK OF HAWAII
Ward Plaza Branch, Honolulu, Hawaii 96814
CUSTODIAN
THE FIRST NATIONAL BANK OF BOSTON 150
Royall Street, Canton, Massachusetts 02021
TRANSFER AGENT
FUND/PLAN SERVICES, INC.
P.O. Box 874, #2 Elm Street, Conshohocken,
Pennsylvania 19428
AUDITORS
TAIT, WELLER & BAKER
Two Penn Center, Suite 700, Philadelphia
Pennsylvania 19102
LEGAL COUNSEL TO TRUST
SULLIVAN & WORCESTER LLP One Post Office Square
Boston, Massachusetts 02109
LEAHI
TAX-FREE INCOME TRUST
Hawaii's own
double tax-free
mutual fund.
PROSPECTUS
FEBRUARY 1, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
February 1, 1996
LEAHI TAX-FREE INCOME TRUST
210 Ward Avenue, Suite 129
Honolulu, Hawaii 96814
(808) 522-7777
Leahi Tax-Free Income Trust (the "Fund") is a mutual fund whose
investment objective is providing investors with the maximum level of income
exempt from federal and Hawaii income taxes, consistent with preservation of
capital. The Fund seeks to achieve its objective by investing primarily in
obligations which pay interest exempt from federal and Hawaii income taxes. The
Fund is a series of Leahi Investment Trust, a Massachusetts business trust.
A prospectus for the Fund, dated February 1, 1996, provides the basic
information you should know before purchasing shares of the Fund and may be
obtained without charge from the Fund at the address stated above. This
Statement of Additional Information is not a prospectus. It contains information
in addition to and more detailed than the information set forth in the Fund's
Prospectus. It is intended to provide you with additional information regarding
the activities and operations of the Fund, and should be read in conjunction
with the Prospectus.
TABLE OF CONTENTS
THE TRUST.......................................................B-2
INVESTMENT OBJECTIVE AND POLICIES..............................B-2
INVESTMENT RESTRICTIONS..................................................B-6
DISTRIBUTIONS AND TAX INFORMATION...............................B-8
TRUSTEES AND OFFICERS....................................................B-12
MANAGEMENT OF THE FUND..........................................B-12
EXECUTION OF PORTFOLIO TRANSACTIONS.............................B-13
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..................B-14
DETERMINATION OF SHARE PRICE....................................B-15
PROMOTION AND MARKETING OF FUND SHARES..........................B-15
GENERAL INFORMATION.............................................B-18
FINANCIAL STATEMENTS............................................B-19
APPENDIX -
DESCRIPTION OF MUNICIPAL SECURITIES RATINGS..............................B-20
B-1
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THE TRUST
The Leahi Investment Trust (the "Trust") is an open-end,
non-diversified management investment company organized on July 23, 1987 as a
Massachusetts business trust. The Trust currently issues shares of beneficial
interest, $ .01 par value per share, in one series, the Leahi Tax-Free Income
Trust (the "Fund").
INVESTMENT OBJECTIVE AND POLICIES
The following discussion supplements the discussion of the Fund's
investment objective and policies as set forth in the Prospectus. There can be
no assurance, however, that the objective of the Fund will be attained.
MUNICIPAL SECURITIES
The Prospectus describes the general categories and characteristics of
municipal securities. Discussed below are the major attributes of the various
municipal and other securities in which the Fund may invest.
Municipal Notes:
Tax anticipation notes are used to finance working capital needs of
municipalities and are issued in anticipation of various seasonal tax revenues,
to be payable from these specific future taxes. They are usually general
obligations of the issuer, secured by the taxing power of the issuer for the
payment of principal and interest.
Revenue anticipation notes are issued in expectation of receipt of
other kinds of revenue, such as federal revenues available under the Federal
Revenue Sharing Program. They also are usually general obligations of the
issuer.
Bond anticipation notes normally are issued to provide interim
financing until long-term financing can be arranged. The long-term bonds then
provide the money for the repayment of the notes.
Construction loan notes are sold to provide construction financing for
specific projects. After successful completion and acceptance, many projects
receive permanent financing through the Federal Housing Administration under the
Federal National Mortgage Association or the Government National Mortgage
Association.
Short-term discount notes (tax-exempt commercial paper) are short-term
(365 days or less) promissory notes issued by municipalities to supplement their
cash flow.
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Municipal Bonds:
Municipal bonds, which meet longer term capital needs and generally
have maturities of more than one year when issued, have two principal
classifications: general obligation bonds and revenue bonds.
General obligation bonds are issued by states, counties, cities, towns,
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects, including construction or improvement of schools,
highways and roads, and water and sewer systems. The basic security behind
general obligation bonds is the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. The taxes that can be
levied for the payment of debt service may be limited or unlimited as to the
rate or amount of special assessments.
Revenue bonds are not secured by the full faith, credit and taxing
power of their issuer. Rather, the principal security for revenue bonds is
generally the net revenue derived from a particular facility, group of
facilities, or, in some cases, the proceeds of a special excise or other
specific revenue source. Revenue bonds are issued to finance a wide variety of
capital projects including: electric, gas, water and sewer systems; highways,
bridges, and tunnels; port and airport facilities; colleges, universities and
hospitals. Although the principal security behind these bonds may vary, many
provide additional security in the form of a debt service reserve fund whose
money may be used to make principal and interest payments on the issuer's
obligations. Housing finance authorities have a wide range of security,
including partially or fully insured mortgages, rent subsidized and/or
collateralized mortgages, and/or the net revenues from housing or other public
projects. Some authorities are provided further security in the form of a
state's assurance (although without obligation) to make up deficiencies in the
debt service reserve fund.
Industrial development bonds are in most cases revenue bonds and are
issued by or on behalf of public authorities to raise money to finance various
privately-operated facilities for business, manufacturing, housing, sports, and
pollution control. These bonds are also used to finance public facilities such
as airports, mass transit systems, ports, and parking. The payment of the
principal and interest on such bonds depends solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of the
real and personal property so financed as security for such payment. The Fund
will not purchase industrial development bonds to the extent that the interest
paid by particular bonds is not excluded from gross income for federal income
tax purposes pursuant to the Tax Reform Act of 1986.
There may, of course, be other types of municipal securities that
become available which are similar to the foregoing described municipal
securities in which the Fund may invest.
Other Municipal Securities:
Variable or floating rate demand notes ("VRDN's") are tax-exempt
obligations which contain a floating or variable interest rate adjustment
formula and an unconditional right of demand to receive payment of the unpaid
principal balance plus accrued interest upon a short notice period prior to
specified dates, either from the issuer or by drawing on a bank letter of
credit, a guarantee or insurance issued with respect to such instrument. The
interest rates are adjustable, at intervals ranging from daily to up to six
months, to some prevailing market rate for similar investments, such adjustment
formula being calculated to maintain the market value of the VRDN at
approximately the par value of the VRDN upon the adjustment date. The
adjustments are typically based upon the prime rate of a bank or some other
appropriate interest rate adjustment index.
B-3
<PAGE>
The Fund will decide which variable or floating rate demand instruments
it will purchase in accordance with procedures prescribed by the Trust's Board
of Trustees to minimize credit risks. Any VRDN must be of high quality as
determined by the Board of Trustees, with respect to both its long-term and
short-term aspects, except that where credit support for the instrument is
provided even in the event of default on the underlying security, the Fund may
rely only on the high quality character of the short-term aspect of the demand
instrument, i.e., the demand feature. A VRDN which is unrated must have high
quality characteristics similar to those rated in accordance with policies and
guidelines determined by the Trust's Board of Trustees. If the quality of any
VRDN falls below the high quality level required by the Board of Trustees, the
Fund must dispose of the instrument within a reasonable period of time by
exercising the demand feature or by selling the VRDN in the secondary market,
whichever is believed by the Investment Manager to be in the best interests of
the Fund and its shareholders.
The Fund may also invest in VRDN's in the form of participation
interests ("Participating VRDN's") in variable or floating rate tax-exempt
obligations held by a financial institution, typically a commercial bank
("institution"). Participating VRDN's provide the Fund with a specified
undivided interest (up to 100%) of the underlying obligation and the right to
demand payment of the unpaid principal balance plus accrued interest on the
Participating VRDN's from the institution upon a specified number of days'
notice. In addition, the Participating VRDN is backed by an irrevocable letter
of credit or guarantee of the institution. The Fund has an undivided interest in
the underlying obligation and thus participates on the same basis as the
institution which typically retains fees out of the interest paid on the
obligation for servicing the obligation, providing the letter of credit and
issuing the repurchase commitment.
The Fund may purchase from banks, brokers or dealers, or other
financial institutions, specified municipal securities with puts. A "put" is a
right to sell a defined underlying security within a specified period of time
and at a specified exercise price, which may be sold only with the underlying
security. A "standby commitment" is a put that entitles the holder to achieve
same-day settlement and to receive an exercise price equal to the amortized cost
of the underlying security plus accrued interest, if any, at the time of
exercise.
There are diversification requirements with respect to puts which may
be acquired by the Fund, to insure that the Fund's liquidity will not be
impaired by relying too heavily upon the same institution or a group of
institutions. For purposes of the diversification requirements, a put will be
considered to be from the institution to which the Fund must look for payment of
the exercise price. In the case of a standby commitment, the put would be from
the institution that has agreed to repurchase the underlying security, while in
the case of a demand feature, the put would be from the party that has provided
a letter of credit or other credit facility to insure payment of the exercise
price. The diversification limitations discussed in the Prospectus are applied
to the securities subject to puts from the same institution and not to the puts
themselves.
A standby commitment may not be used to affect the Fund's valuation of
the municipal security underlying the commitment. Any consideration paid by the
Fund for the standby commitment, whether paid in cash or by paying a premium for
the underlying security, which increases the cost of the security and reduces
the yield otherwise available from the same security, will be accounted for by
the Fund as unrealized depreciation until the standby commitment is exercised or
expires.
B-4
<PAGE>
Management understands that the Internal Revenue Service (the
"Service") has issued a revenue ruling to the effect that, under specified
circumstances, a registered investment company will be the owner of tax-exempt
municipal obligations acquired subject to a put option. The Service has also
issued private letter rulings to certain taxpayers (which do not serve as
precedent for other taxpayers) to the effect that tax-exempt interest received
by a regulated investment company with respect to such obligations will be
tax-exempt in the hands of the company and may be distributed to its
shareholders as exempt-interest dividends. The Service has subsequently
announced that it will not ordinarily issue advance ruling letters as to the
identity of the true owner of property in cases involving the sale of securities
or participation interests therein if the purchaser has the right to cause the
security, or the participation interest therein, to be purchased by either the
seller or a third party. The Fund intends to take the position that it is the
owner of any municipal obligations acquired subject to a standby commitment or
other put and that tax-exempt interest earned with respect to such municipal
obligations will be tax-exempt in its hands. There is no assurance that standby
commitments will be available to the Fund nor has the Fund assumed that such
commitments would continue to be available under all market conditions.
The Fund may also purchase escrow secured bonds, which are created when
an issuer refunds in advance of maturity (or pre-refunds) an outstanding bond
issue which is not immediately callable and it becomes necessary or desirable to
set aside funds for redemption of the bonds at a future date. In an advance
refunding the issuer will use the proceeds of a new bond issue to purchase high
grade interest bearing debt securities which are then deposited in an
irrevocable escrow account held by a trustee bank to secure all future payments
of principal and interest of the advance refunded bond. Escrow secured bonds
will often receive a triple A rating from the major rating services.
U.S. Government obligations which may be owned by the Fund are issued
by the U.S. Treasury and include bills, certificates of indebtedness, notes and
bonds, or are issued by agencies and instrumentalities of the U.S. Government
and backed by the full faith and credit of the U.S. Government.
Certificates of deposit are short-term obligations of commercial banks.
Commercial paper are promissory notes issued by municipalities or corporations
in order to finance their short-term credit needs.
REPURCHASE AGREEMENTS
The Fund may invest its assets in eligible U.S. Government securities
and concurrently enter into repurchase agreements with respect to such
securities. Under such agreements, the
B-5
<PAGE>
seller of the securities agrees to repurchase such securities at a mutually
agreed upon time and price. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price upon repurchase. In either case, the income to the
Fund is unrelated to the interest rate on the U.S. Government securities. Such
repurchase agreements will be made only with member banks of the federal reserve
system and primary government securities dealers whose creditworthiness has been
evaluated as satisfactory by the Investment Manager in accordance with
guidelines adopted by the Trust's Board of Trustees. The Fund will not generally
enter into repurchase agreements with more than seven days to maturity if, as a
result, more than 5% of the value of the Fund's total assets would be invested
in such repurchase agreements.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
U.S. Government securities subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government securities acquired by the
Fund subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government securities before its repurchase under a repurchase
agreement, the Fund may encounter delays and incur costs before being able to
sell the securities. Delays may involve loss of interest or a decline in price
of the U.S. Government securities. If a court characterizes the transaction as a
loan and the Fund has not perfected a security interest in the U.S. Government
securities, the Fund may be required to return the securities to the seller's
estate and be treated as an unsecured creditor of the seller. As an unsecured
creditor, the Fund would be at the risk of losing some or all of the principal
and income involved in the transaction. As with any unsecured debt instrument
purchased for the Fund, the Investment Manager seeks to minimize the risk of
loss through repurchase agreements by analyzing the credit-worthiness of the
obligor, in this case the seller of the U.S. Government securities.
Apart from the risk of bankruptcy or insolvency proceedings, there is
also the risk that the seller may fail to repurchase the securities. However,
the Fund will always receive as collateral for any repurchase agreement
securities, the market value of which is equal to at least 100% of the amount
invested by the Fund plus accrued interest, and the Fund will make payment
against such securities only upon account of its Custodian. If the market value
of the U.S. Government securities subject to the repurchase agreement becomes
less than the repurchase price (including interest), the Fund will direct the
seller of the U.S. Government securities to deliver additional securities so
that the market value of all securities subject to the repurchase agreement will
equal or exceed the repurchase price plus accrued interest. It is possible that
the Fund will be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
INVESTMENT RESTRICTIONS
The following policies and investment restrictions have been adopted by
the Fund and (unless otherwise noted) are fundamental and cannot be changed
without the affirmative vote of a majority of the Fund's outstanding voting
securities as defined in the 1940 Act. The Fund may not:
B-6
<PAGE>
1. As of the last day of each fiscal quarter, have more than 25% of its total
assets invested in the securities of any one issuer (other than the U.S.
Government and its agencies and instrumentalities), or, with respect to at least
50% of the Fund's total assets, (a) have more than 5% of the total assets of the
Fund invested in any one such issuer or (b) own more than 10% of the outstanding
voting securities or any one issuer.
2. Make loans to others, except (a) through the purchase of debt securities in
accordance with its investment objective and policies, and (b) to the extent the
entry into a repurchase agreement is deemed to be a loan.
3. (a) Borrow money, except temporarily for extraordinary or emergency purposes
from a bank and then not in excess of 25% of its total net assets (at the lower
of cost or fair market value). Any such borrowing will be made only if
immediately thereafter there is an asset coverage of at least 300% of all
borrowings, and no additional investments may be made while any such borrowings
are in excess of 5% of total assets.
(b) Mortgage, pledge or hypothecate any of its assets except in
connection with any such borrowings.
4. Purchase securities on margin, sell securities short, participate on a joint
or joint and several basis in any securities trading account, or underwrite
securities except insofar as the Fund may be technically deemed an underwriter
under the federal securities laws in connection with the disposition of
portfolio securities. (This restriction does not preclude the Fund from
obtaining such short-term credit as may be necessary for the clearance of
purchases and sales of its portfolio securities.)
5. Buy or sell interests in oil, gas or mineral exploration or development
programs, or real estate, provided that this limitation shall not prohibit the
purchase of municipal and other debt securities secured by real estate or
interests therein.
6. Purchase or hold securities of any issuer, if, at the time of purchase or
thereafter, any of the Trustees or officers of the Trust or the Fund's
Investment Manager owns beneficially more than 1/2 of 1%, and all such Trustees
or officers holding more than 1/2 of 1% together own beneficially more than 5%,
of the issuer's securities.
7. Purchase or sell common stocks, preferred stocks, warrants or other equity
securities, commodities or commodity contracts, or futures contracts, or invest
in put, call, straddle or spread options, except that the Fund may purchase,
hold and dispose of "obligations with puts attached" in accordance with its
investment policies.
8. Invest in securities of other investment companies (except as they may be
acquired as part of a merger, consolidation or acquisition of assets) which
would result in the Fund (i) owning more than 3% of the total outstanding voting
stock of another registered investment company; (ii) investing more than 5% of
its total assets in the securities of a single registered investment company; or
(iii) investing more than 10% of its total assets in the securities (other than
treasury stock) of registered investment companies. (This is an operating policy
which may be changed upon notice to shareholders.)
B-7
<PAGE>
9. Invest, in the aggregate, more than 10% of its assets in securities with
legal or contractual restrictions on resale, securities which are not readily
marketable, and repurchase agreements with more than seven days to maturity.
10. Invest in any issuer for the purposes of exercising control or management.
11. Issue senior securities, as identified in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, mortgages or pledges, or (b) entering into repurchase
transactions.
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in the percentage resulting from a change in
values or assets will not constitute a violation of that restriction.
DISTRIBUTIONS AND TAX INFORMATION
DISTRIBUTIONS:
The Fund declares dividends from net investment income daily and pays
such dividends on a monthly basis as stated in its Prospectus. The Fund's policy
is to declare as dividends 100% of its net investment income during each
calendar year. The Fund will also declare a distribution of net realized
long-term and undistributed short-term capital gains, if any, shortly after the
Fund's fiscal year-end, although an additional distribution may be made in
December if necessary to avoid federal excise tax.
TAX INFORMATION:
Federal Taxation
The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code")
and qualified as such for its fiscal year ended September 30, 1995. It intends
to continue to so qualify, which requires compliance with certain requirements
regarding the source of its income, diversification of its assets, and timing of
its distributions. The Fund's policy is to distribute to its shareholders all of
its investment company taxable income, its net tax-exempt income, and any net
realized capital gains for each fiscal year in a manner which complies with the
distribution requirements of the Code, so that the Fund will not be subject to
any Federal income or excise taxes.
A regulated investment company qualifying under Subchapter M of the
Code is required to distribute to its shareholders at least 90% of its
tax-exempt net investment income and at least 90% of its taxable net investment
income (including net short-term capital gains), if any, and is not subject to
federal income tax to the extent that it distributes annually its taxable net
investment income and net realized capital gains in the manner required under
the Code.
B-8
<PAGE>
The Fund will be subject to a 4% non-deductible annual excise tax on
amounts required to be but not distributed under a prescribed formula. The
formula requires payment to shareholders during a calendar year of distributions
representing at least 98% of the Fund's ordinary income for the calendar year
(including investment company income and net capital gains, and excluding gains
and losses from the sale or exchange of capital assets and the dividends-paid
deductions) and at least 98% of the excess of its capital gains over capital
losses realized during the one-year period ending October 31 during such year.
Subchapter M of the Code permits the character of tax-exempt dividends
distributed by a regulated investment company to flow through as tax-exempt
interest to its shareholders, provided that at least 50% of the value of its
assets at the end of each quarter of its taxable year is invested in state,
municipal and other obligations, the interest on which is exempt under Section
103(a) of the Code. The Fund intends to satisfy this 50% requirement in order to
permit its distributions of tax-exempt interest to be treated as such for
federal income tax purposes in the hands of the share-holders. Distributions to
shareholders of tax-exempt interest earned by the Fund for the taxable year are
therefore not subject to federal income tax, although they may be subject to the
individual or corporate alternative minimum taxes described below. A portion of
original issue discount relating to stripped municipal bonds and their coupons
may be treated as taxable income under certain circumstances.
Distributions of net investment company income, including the excess of
net short-term capital gains over net long-term capital losses, are taxable to
shareholders as ordinary income. Distributions of the excess of net long-term
capital gain over net short-term capital loss are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. Such distributions are not eligible for the
dividends-received deduction. Any loss realized upon the redemption of shares
within six months from the date of their purchase will be disallowed to the
extent of tax-exempt dividends received during such period or will be treated as
a long-term capital loss to the extent of any amounts treated as distributions
of long-term capital gain during such six-month period.
If any net realized long-term capital gains in excess of net realized
short-term capital losses are retained by the Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund will elect to
treat such capital gains as having been distributed to shareholders. As a
result, shareholders will report such capital gains as long-term capital gains,
and will be able to claim their share of federal income taxes paid by the Fund
on such gains as a credit against their own federal income tax liability, and
will be entitled to increase the adjusted tax basis of their Fund shares by the
difference between their pro rata share of such gains and their tax credit.
Distributions of any net investment company taxable income and net
realized capital gains will be taxable as described above, whether received in
shares or in cash. Shareholders electing to receive distributions in the form of
additional shares will have a cost basis for federal income tax purpose in each
share so received equal to the net asset value of a share on the reinvestment
date.
B-9
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All distributions of taxable and tax-exempt income and net realized
capital gain, whether received in shares or in cash, must be reported by
shareholders on their federal income tax returns.
Interest on indebtedness incurred by shareholders to purchase or carry
shares of the Fund will not be deductible for federal income tax purposes. Under
rules used by the Internal Revenue Service to determine when borrowed funds are
used for the purpose of purchasing or carrying particular assets, the purchase
of shares may be considered to have been made with borrowed funds even though
the borrowed funds are not directly traceable to the purchase of shares.
Under the federal income tax law, the Fund will be required to report
to the Internal Revenue Service all distributions of taxable income and capital
gains as well as gross proceeds from the redemption or exchange of Fund shares,
except in the case of exempt shareholders, which include most corporations.
Pursuant to the backup withholding provisions of Section 3406 of the Code,
distributions of any taxable income and capital gains and proceeds from the
redemption of Fund shares may be subject to withholding of federal income tax at
the rate of 31% in the case of non-exempt shareholders who fail to furnish the
Fund with their taxpayer identification numbers and with required certifications
regarding their status under the federal income tax law or if the Fund is
notified by the Internal Revenue Service or a broker that the number furnished
by the shareholder is incorrect or that the shareholder is subject to
withholding due to a failure to report all interest and dividend income. Under a
special exception, distributions made by the Fund will not be subject to backup
withholding if the Fund reasonably estimates that at least 95% of all such
distributions will consist of tax-exempt dividends. If the withholding
provisions are applicable, any such distributions and proceeds, whether taken in
cash or reinvested in additional shares, will be reduced by the amounts required
to be withheld. Corporate shareholders should certify their exempt status in
order to avoid possible erroneous application of backup withholding.
Up to 85% of an individual's social security or tier 1 railroad
retirement benefits may be included in federal taxable income for benefit
recipients whose adjusted gross income (including income from tax-exempt sources
such as tax-exempt bonds and the Fund) plus 50% of their benefits exceeds
certain base amounts. Income from the Fund is still tax-exempt to the extent
described in the Prospectus; it is only included in the calculation of whether a
recipient's income exceeds certain established amounts.
Section 147(a) of the Code prohibits exemption from taxation of
interest on certain governmental obligations to persons who are "substantial
users" (or persons related thereto) of facilities financed by such obligations.
The Fund has not undertaken any investigation as the users of the facilities
financed by tax-exempt bonds in its portfolio.
Federal tax legislation enacted in 1986 included several provisions
that may affect the supply of, and the demand for, tax-exempt bonds, as well as
the tax-exempt nature of interest paid thereon. For example:
B-10
<PAGE>
(i) Interest on certain private activity bonds issued after August 15, 1986
(or, in certain cases, on or after September 1, 1986) is generally not exempt
from regular tax, although it might have been exempt under prior law. These
include bonds the proceeds of which are used to finance sports facilities,
convention facilities, industrial parks, and nuclear waste disposal facilities;
(ii) Interest on all private activity bonds issued on or after August 8, 1986
(or, in certain cases, September 1, 1986) other than qualified Section 501(c)(3)
bonds or refundings of bonds originally issued before such dates is subject to
the individual or corporate alternative minimum tax;
(iii) Interest on all tax-exempt bonds, regardless of when issued, constitutes a
tax preference item subject to the corporate alternative minimum tax because 50%
of the difference between pre-tax adjusted book income and alternative minimum
taxable income or 75% of the difference between adjusted current earnings and
alternative minimum taxable income is subject to the corporate alternative
minimum tax; and
(iv) Due to the substantial number and range of requirements to be satisfied by
tax-exempt bonds in the future, the risk of retroactive revocation of the
tax-exempt status of bonds due to acts or omissions on the part of issuers or
conduit borrowers after the date of issuance will in general be greater than
under prior law but will vary for different types of bonds.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. domestic corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of shares of the Fund, including the possibility that
such a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or
at a lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by such persons.
State Taxation
The Hawaii Department of Taxation, in an opinion letter issued to the
Fund, has indicated that income received by the Fund, as a regulated investment
company under the Code, and distributed to shareholders who are subject to
Hawaii income taxation in compliance with the Code, will be treated for Hawaii
income tax purposes in the same manner as though it were received by the
shareholders directly from the issuer. The Hawaii income tax treatment of
dividends and distributions of the Fund will, therefore, depend on the source of
such dividends.
Hawaii income tax law provides that interest paid with respect to
obligations issued by the State of Hawaii, including any political subdivision,
agency or instrumentality thereof, shall be treated by Hawaiian recipients
thereof as items of interest excludable from income for Hawaii income tax
purposes. Hawaii also does not tax interest where prohibited by federal law, as
is the case with interest derived from obligations of U.S. possessions,
including Puerto Rico, Guam, and the Virgin Islands.
B-11
<PAGE>
Therefore, investment income of the Fund derived from Hawaii
obligations and obligations of the U.S. Government and certain of its
possessions, when distributed to individuals, estates, trusts and corporations
subject to Hawaii income taxation, will not be required to be included in the
personal or corporate Hawaii income tax of such shareholders. Dividends derived
from other sources and capital gains distributions will be taxable to Hawaii
shareholders under the Hawaii income tax law.
General
Each distribution by the Fund is accompanied by a brief explanation of
the form and character of the distribution. In January of each year the Fund
will issue to each shareholder a statement of the federal income tax status of
all distributions, including a statement of the percentage of the prior calendar
year's distributions which the Fund has designated as tax- exempt, and the
percentage of such tax-exempt distributions treated as a tax-preference item for
purposes of the alternative minimum tax.
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this Statement of Additional Information
in light of their particular tax situations.
TRUSTEES AND OFFICERS
The Trustees of the Trust serve for an indefinite term. The Trustees
are responsible for the overall management of the Fund, including general
supervision and review of its investment activities. The Trustees, in turn,
elect the officers of the Trust, who are responsible for administering the
day-to-day operations of the Trust and the Fund. The addresses of the current
Trustees and executive officers are set forth below.
Ernest W. Albrecht - 1010 Wilder Avenue #802, Honolulu, Hawaii 96822.
Gail A. Chew - 50 Bates Street #G, Honolulu, Hawaii 96817.
Ronald E. Kent* - 210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814.
Karen T. Nakamura - 3160 Waialae Avenue, Honolulu, Hawaii 96816.
Dianne J. Qualtrough* - 210 Ward Avenue, Suite 129, Honolulu, Hawaii 96814.
Kim F. Scoggins - 220 South King Street, Suite 1806, Honolulu, Hawaii 96813
David Walker - 4611 Kilauea Avenue, Honolulu, Hawaii 96816.
______________
* Mr. Kent and Ms. Qualtrough are "interested persons" of the Trust.
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<PAGE>
The Trustees of the Fund who are not affiliated with the Fund's Investment
Manager receive $100.00 for each meeting attended. The officers of the Fund
receive no compensation directly from the Fund for performing the duties of
their offices.
As of November 30, 1995, the Trustees and officers of the Trust as a group
owned less than 1% of the outstanding shares of the Fund.
MANAGEMENT OF THE FUND
The following information supplements, and should be read in conjunction
with, the section in the Fund's prospectus entitled "Management of the Fund".
Investment Manager
The Investment Manager serves as the Fund's Investment Manager pursuant to
an Investment Management Agreement with the Fund which was first approved by the
Board of Trustees , including those Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust or the Investment Manager (the
"Independent Trustees"), on October 29, 1992, and by a majority of the Fund's
outstanding shares at a special meeting of shareholders held on January 7, 1993.
The Investment Management Agreement continues in effect if approved annually by
(i) the Board of Trustees of the Trust, or (ii) the vote of a majority of the
Fund's outstanding voting securities (as defined in the 1940 Act), provided that
in either event the continuance also is approved by a majority of the
Independent Trustees, cast in person at a meeting called for the purpose of
voting on such approval. The Investment Management Agreement was last approved
by the Board of Trustees of the Trust, including a majority of the Independent
Trustees, on November 2, 1995. The Investment Management Agreement is terminable
without penalty on 60 days' written notice, by the Board of Trustees of the
Trust, by vote of the holders of a majority of the Fund's shares, or by the
Investment Manager. The Investment Management Agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).
The Investment Management Agreement provides that the Investment Manager
will not be liable to the Trust or any shareholder for any act or omission in
connection with its services to the Trust, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties under the Agreement.
The Investment Manager, Leahi Management Company, Inc., is a Hawaii
corporation. Ronald E. Kent is the principal shareholder and President of the
Investment Manager. Dianne J. Qualtrough is the Vice President of the Investment
Manager and Portfolio Manager of the Fund.
The use of the name "Leahi" by the Trust and the Fund is pursuant to a
license granted by the Investment Manager, and in the event the Investment
Management Agreement with the Fund is terminated, the Investment Manager has
reserved the right to require the Trust to amend its Declaration of Trust to
remove the reference to the name "Leahi" and to cease using such name in the
name of the Fund.
B-13
<PAGE>
For the fiscal year ended September 30, 1993, the former investment adviser
and the Investment Manager received fees in the amount of $21,643 and $160,345
respectively, no part of which was waived. Total expenses paid by the Fund for
the fiscal year ended September 30, 1993 amounted to 0.98% of average net
assets. For the fiscal year ended September 30, 1994, the Investment Manager was
paid $219,675, no part of which was waived. Total expenses paid by the Fund for
the fiscal year ended September 30, 1994, amounted to 0.85% of average net
assets. For the fiscal year ended September 30, 1995, the Investment Manager was
paid $214,800, no part of which was waived. Total expenses paid by the Fund for
the fiscal year ended September 30, 1995, amounted to .82% of average net
assets.
EXECUTION OF PORTFOLIO TRANSACTIONS
Under the Investment Management Agreement, the selection of brokers and
dealers to execute transactions is made by the Investment Manager in accordance
with criteria set forth in the Investment Management Agreement and any
directions which the Trustees may give. Since most purchases made by the Fund
are principal transactions at net prices, the Fund incurs little or no brokerage
commissions. The Fund will not purchase securities on a principal basis from any
broker-dealer which is affiliated with the Fund or the Investment Manager.
The Fund deals directly with the selling or purchasing principal or market
maker without incurring charges for the services of a broker on its behalf
unless it is determined that a better price or execution may be obtained by
utilizing the services of a broker. Purchases from dealers include a spread
between the bid and asked price and purchases of portfolio securities from
underwriters include a commission or concession paid by the issuer to the
underwriter. The Fund seeks to obtain prompt execution of orders at the most
favorable net price. Transactions may be directed to dealers for services
rendered by such dealers in the execution of orders or in return for the
Investment Manager's receipt of special research and statistical information
which the Investment Manager may lawfully and appropriately use in its
investment advisory capacities. It is not possible to place a dollar value on
the special executions or on the research services received by the Investment
Manager from dealers effecting transactions in portfolio securities. The
allocation of transactions in order to obtain additional research services
permits the Investment Manager to supplement its own research and analysis
activities and to obtain the views and information of individuals and research
staffs of other securities firms. Provided that the best execution is obtained,
sales of Fund shares may also be considered as a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions. For the fiscal
years ended 1993, 1994, and 1995 the Fund paid no brokerage commissions.
B-14
<PAGE>
If purchases or sales of securities of the Fund and one or more other
investment companies or clients supervised by the Investment Manager (or any of
its affiliates) are considered at or about the same time, transactions in such
securities will be allocated among the several investment companies and clients
in a manner deemed equitable to all by the Investment Manager, taking into
account the respective sizes of the entities and the amount of securities to be
purchased or sold. It is possible that in some cases this procedure could have a
detrimental effect on the price or volume of the security so far as the Fund is
concerned. In other cases, however, it is possible that the ability to
participate in volume transactions and to negotiate lower commissions will be
beneficial to the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Trust reserves the right in its sole discretion (i) to suspend the
continued offering of the Fund's shares, (ii) to reject purchase orders in whole
or in part when, in the judgment of the Investment Manager, such rejection is in
the best interest of the Fund, and (iii) to reduce or waive the minimum for
initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economics can be achieved in sales of the Fund's
shares.
Payments to shareholders for shares of the Fund redeemed directly from the
Fund will be made as promptly as possible but no later than seven days after
receipt by the Fund's Transfer Agent of the written request in proper form, with
the appropriate documentation as stated in the Prospectus, except that the Fund
may suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission ("SEC") or such Exchange is
closed for other than weekends and holidays; (b) an emergency exists as
determined by the SEC making disposal of portfolio securities or valuation of
net assets of the Fund not reasonably practicable; or (c) for such other period
as the SEC may permit for the protection of the Fund's shareholders. At various
times, the Fund may be requested to redeem its shares for which it has not yet
received good payment. In this circumstance, the Fund may delay the mailing of
redemption checks until the payment has been collected for the purchase of such
shares.
The Fund intends to pay cash (U.S. dollars) for all shares redeemed, but
under abnormal conditions which make payment in cash unwise, the Fund may make
payment wholly or partly in securities with a current market value equal to the
redemption price. In such case an investor may incur brokerage costs in
converting such securities to cash. The Fund has elected to be governed by the
provisions of Rule 18f-1 under the 1940 Act, which contains a formula for
determining the redemption amounts that must be paid in cash.
The value of shares on redemption may be more or less than the investor's
cost, depending upon the market value of the Fund's portfolio securities at the
time of redemption.
DETERMINATION OF SHARE PRICE
As noted in the Prospectus, the net asset value and offering price of
shares of the Fund will be determined once daily as of the close of trading on
the New York Stock Exchange, on each day such Exchange is open for trading. It
is expected that the Exchange will be closed on Saturdays and Sundays and on New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas. The Fund does not expect to determine the
net asset value of its shares on any day when the Exchange is not open for
trading even if there is sufficient trading in its portfolio securities on such
days to materially affect the net asset value per share.
B-15
<PAGE>
The net asset value per share of the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
(as described in the Prospectus); the resulting net assets are divided by the
number of shares of the Fund outstanding at the time of the calculation and the
result (adjusted to the nearest cent) is the net asset value per share.
PROMOTION AND MARKETING OF FUND SHARES
The Fund has adopted a plan (the "Plan"), pursuant to Rule 12b-1 under the
1940 Act, whereby it may reimburse the Investment Manager each month up to a
maximum of 0.25% per annum of its average daily net assets for actual expenses
incurred in the promotion and marketing of the Fund's shares. The basic terms of
the Plan are set forth in the Prospectus.
The Board of Trustees has determined that a continuous cash flow resulting
from the sale of new shares is necessary and appropriate to enable the Fund to
meet redemptions and to take advantage of buying opportunities without having to
make unwarranted liquidations of portfolio securities. Because the Fund imposes
no sales charge, the Board of Trustees determined that it would benefit the Fund
to have additional monies available for the promotion and marketing activities
undertaken on behalf of the Fund by the Investment Manager in connection with
the continuous sale of the Fund's shares. The Board of Trustees, including the
Trustees who are not interested persons as defined in the 1940 Act, concluded
that in the exercise of their reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Fund and its shareholders.
The Plan covers not only reimbursements for expenses incurred in the
promotion and marketing activities with respect to the Fund's shares, but also
payments pursuant to the Investment Management Agreement and Distribution
Agreement and any other payments made by the Fund in the ordinary course of its
business to the extent such payments, although primarily intended to cover
operational and not promotion-related activities, may be deemed primarily
intended to result in the sale of the Fund's shares within the context of Rule
12b-1 under the 1940 Act. The costs and activities, the payment of which is
intended to be within the scope of the Plan if deemed to be primarily intended
to result in the sale of the Fund's shares may include, but are not limited to,
the costs of preparation and mailing of all required reports and notices to
shareholders, prospectuses and proxy materials; all fees and expenses relating
to the qualification of the Fund and/or its shares under the Securities Act of
1933 and the 1940 Act; all costs in preparation and mailing of confirmations of
shares sold or redeemed, reports of share balances, and responding to telephone
or mail inquiries of investors or prospective investors; and payments to
financial institutions, advisers, or other firms.
As stated in the Prospectus, the Plan permits the Investment Manager to
receive reimbursement each month for actual expenses incurred in connection with
the promotion and marketing of the Fund shares and permits the Investment
Manager to include as part of such expenses for which is received reimbursement
under the Plan a pro rata portion of its overhead expenses attributable to such
activities. These overhead expenses include leases, communications, salaries,
training, supplies, photocopying and any other category of the Investment
Manager's expenses attributable to the promotion and marketing activities
undertaken by the Investment Manager with respect to the Fund's shares.
B-16
<PAGE>
To the extent promotion and marketing expenses of the Investment Manager
covered by the Plan in any one year are not fully reimbursed because they exceed
0.25% per annum of the Fund's average daily net assets, the Plan permits the
Investment Manager to carry forward such expenses (without carrying charge) for
a maximum of three years. Reimbursement for expenses under the Plan will be made
on a "first -in, first-out" basis. To the extent the amount permitted to be paid
under the Plan exceeds the Investment Manager's reimbursable expenses (including
those carried forward from prior years), the amount receivable by the Investment
Manager under the Plan will be reduced for that year so as not to exceed the
level of Investment Manager's actual expenses.
The Plan is currently in effect through November 3, 1996, and must be
renewed annually by the Board of Trustees, including a majority of the
Independent Trustees, cast in person at a meeting called for that purpose. It is
also required that the selection and nomination of such Trustees who are not
interested persons (should any election be necessary) be made by the current
Trustees who are not interested persons. The Plan and any marketing or service
agreement entered into pursuant to the Plan may be terminated at any time,
without any penalty, on 60 days' written notice, by such Trustees, by the
Investment Manager, or by vote of a majority of the Fund's outstanding shares
(as defined in the 1940 Act). Any dealer or other firm which enters into a
marketing or service agreement pursuant to the Plan may also terminate such
marketing or services agreement at any time upon written notice to the other
party. The Plan will terminate automatically upon termination of the Investment
Management Agreement.
The Plan and any related marketing or service agreement may not be amended
to increase materially the amount spent for promotion and marketing without
approval by a majority of the Fund's outstanding shares, and all such material
amendments to the Plan or any related marketing or service agreement also must
be approved by the Trustees who are not interested persons, cast in person at a
meeting called for the purpose of voting on any such amendment.
The Investment Manager is required to report in writing to the Trustees at
least quarterly on the amounts and purpose of any payment made under the Plan
and any related marketing or service agreement, as well as to furnish the
Trustees with such other information as may reasonably be requested in order to
enable the Trustees to make an informed determination of whether the Plan should
be continued.
For the fiscal year ended September 30, 1995, the expenses incurred by the
Investment Manager which were reimbursable by the Fund pursuant to the Plan
were:
Advertising $ 8,112
Distribution 5,512
Printing 239
Promotion and Marketing 1,937
-----------
Total $ 15,800
======
B-17
<PAGE>
Reimbursements of $2,538 and $2,672 were made by the Fund to the
Investment Manager for 1993 and 1994 carry forwards stated under the Plan. The
Investment Manager carried forward $10,791 and $17,617 for 1993 and 1994,
respectively, from the prior fiscal years, as permitted under the Plan.
Distribution Agreement
The Fund has entered into a Distribution Agreement with Linsco/Private
Ledger Corp. (the "Distributor") which provides that the Distributor is the
principal distributor of the shares of the Fund. The Agreement is renewable
annually by the Trust's Board of Trustees or by vote of a majority of the Fund's
outstanding shares, and in either event by vote of a majority of the Trustees
who are not interested persons of the Distributor or the Trust. The Agreement
may be terminated on 60 days' notice by either party, and is automatically
terminated upon assignment.
The Distributor is responsible for certain of the expenses of
distribution of the Fund's shares, including advertising expenses, costs of
printing sales material and prospectuses used to offer shares to the public, and
expenses of preparing and printing amendments to the Trust's registration
statement necessitated solely by the activities of the Distributor. These
expenses may be paid or reimbursed by the Investment Manager, and are included
in the expenses eligible for reimbursement by the Fund under the Plan.
The branch office of the Distributor located in Honolulu, Hawaii will
be the office primarily responsible for the sale of Fund shares.
The Distribution Agreement contains provisions with respect to renewal
and termination similar to those in the Investment Management Agreement.
Pursuant to the Distribution Agreement, the Trust has agreed to indemnify the
Distributor to the extent permitted by applicable law against certain
liabilities under the Securities Act of 1933.
GENERAL INFORMATION
Investors in the Fund will be informed of the Fund's progress through
periodic reports. Financial statements certified by independent public
accountants will be submitted to shareholders at least annually.
B-18
<PAGE>
The First National Bank of Boston, 150 Royall Street, Canton,
Massachusetts 02021, acts as Custodian of the securities and other assets of the
Fund. The Custodian does not participate in decisions relating to the purchase
and sale of securities by the Fund.
Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia,
Pennsylvania 19102, are independent auditors for the Trust.
Sullivan & Worcester LLP, One Post Office Square, Boston, Massachusetts
02109, are legal counsel to the Trust and the Fund.
The shareholders of a Massachusetts business trust could, under certain
circumstances, be held personally liable as partners for its obligations.
However, the Trust's Agreement and Declaration of Trust ("Declaration of Trust")
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust. The Declaration of Trust also provides for indemnification and
reimbursement of expenses out of the Fund's assets for any shareholder held
personally liable for obligations of the Fund or Trust. The Declaration of Trust
provides that the Trust shall, upon written request, assume the defense of any
claim made against any shareholder for any act or obligation of the Fund or
Trust and satisfy any judgment thereon. All such rights are limited to the
assets of the Fund. 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. Furthermore, the activities of the Trust as an investment company
as distinguished from an operating company would not likely give rise to
liabilities in excess of the Fund's total assets. 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 Fund
itself is unable to meet its obligations.
The Declaration of Trust and Bylaws of the Trust further provide that
no officer or Trustee of the Trust will be personally liable for any obligations
of the Trust, nor will any officer or Trustee be personally liable to the Trust
or its shareholders except by reason of his own bad faith, willful misfeasance,
gross negligence in the performance of his duties or reckless disregard of his
obligations and duties. With these exceptions, the Declaration of Trust provides
that an officer or Trustee of the Trust is entitled to be indemnified against
all liabilities and expenses incurred by the officer or Trustee in connection
with the defense or disposition of any proceeding in which he may be involved or
with which he may be threatened by reason of his being or having been an officer
or Trustee.
The Trust is registered with the SEC as a management investment
company. Such registration does not involve supervision of the management or
policies of the Fund. The Prospectus of the Fund and this Statement of
Additional Information omit certain of the information contained in the
Registration Statement filed with the SEC. Copies of such information may be
obtained from the SEC upon payment of the prescribed fee.
As of December 30, 1995, no shareholder of record directly or
beneficially owned 5% or more of the outstanding shares of the Fund.
B-19
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements of the Fund set forth in its Annual
Report to Shareholders for the year ended September 30, 1995, filed with the
Securities and Exchange Commission, are incorporated herein by reference. Any
person not receiving a copy of the Annual Report with this Statement of
Additional Information may call or write to the Trust and obtain a free copy.
B-20
<PAGE>
APPENDIX - DESCRIPTION OF MUNICIPAL SECURITIES RATINGS
The following paragraphs summarize the descriptions for the rating
symbols of municipal securities.
Municipal Bonds
Moody's Investors Services:
Aaa: Municipal 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 edge". 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 anticipated are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Municipal bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than Aaa
bonds because margins of protection may not be as large or fluctuation
of protective elements may be of greater amplitude or there may be
other elements present which make the long term risks appear somewhat
larger than in Aaa.
A: Municipal 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.
Bbb: Bonds which are rated Bbb 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.
Conditional Rating: Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operations experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction of elimination of basis of condition.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through B in its municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
Standard & Poor's Corporation:
AAA: Municipal bonds rated AAA are highest grade obligations. They possess
the ultimate degree of protection as to principal and interest. The
market they move with interest rates, and hence provide the maximum
safety on all counts.
AA: Municipal bonds rated AA also qualify as high grade obligations, and in
the majority of instances differ from AAA issues only in small degree.
Here, too, prices move with the long-term money market.
B-21
<PAGE>
A: Municipal bonds rated A are regarded as upper medium grade. They have
considerable investment strength but are not entirely free from adverse
effects of changes in economic and trade conditions. Interest and
principal are regarded as safe. They predominantly reflect money rates
in their market behaviors, but also to some extent, economic
conditions.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest
Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this category than
for bonds in the A category.
Provisional Ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Note: The S&P ratings may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.
Municipal Notes
Moody's:
Moody's ratings for state and municipal and other short-term
obligations will be designated Moody's Investment Grade ("MIG"). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in long-term borrowing risk are of lesser importance in the
short run. Symbols used will be as follows:
MIG-1: Notes are of the best quality enjoying strong protection from established
cash flows of funds for their servicing of from established and broad-based
access to the market for refinancing, or both.
MIG-2: Notes are of high quality, with margins of protections ample, although
not so large as in the preceding group.
MIG-3: Notes are of favorable quality, with all security elements accounted for,
but lacking the undeniable strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well established.
MIG-4: Notes are of adequate quality, carrying specific risk but having
protection and not being distinctly or predominantly speculative.
Standard & Poor's:
For municipal note issues due in three years or less the ratings below
usually will be assigned. Notes maturing beyond three years will most likely
receive a bond rating of the type recited above.
SP-1: Issues carrying this designation have a very strong or strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics will be given a "plus" (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
B-22
<PAGE>
Commercial Paper
Moody's:
Moody's Commercial Paper ratings, which are also applicable to
municipal paper investments permitted to be made by the Trust, are opinions of
the ability of issuers to repay punctually their promissory obligations not
having an original maturity in excess of nine months. Moody's employs the
following designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers:
P-1 (Prime-1): Superior capacity for repayment.
P-2 (Prime-2): Strong capacity for repayment.
P-2 (Prime-3): Acceptable capacity for repayment.
Standard & Poor's:
S & P ratings are a current assessment of the likelihood of timely
payment of debt having an original maturity of no more than 365 days. Ratings
are graded into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. Issues within the "A" category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety, as
follows:
A-1: This designation indicates the degree of safety regarding timely
payment is very strong. A "plus" (+) designation indicates an even
stronger likelihood of timely payment.
A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for
issues designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for
timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying
the higher designations.
B: Issues rated "B" are regarded as having only an adequate capacity for
timely payment. However, such capacity may be damaged by changing
conditions or short-term adversities.
The Commercial Paper Rating is not a recommendation to purchase or sell
a security. The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in or unavailability of, such information.
B-23
<PAGE>
LEAHI INVESTMENT TRUST
--------------------------
FROM N-1A
PART C
-------------------------
Item 1. Financial Statements and Exhibits
(a) Financial Statements for the Fiscal Year Ended September 30, 1995;
Schedule of Investments; Statement of Assets and Liabilities
dated September 30, 1995; Statement of Operations for the year
ended September 30, 1995; Statement of Changes in Net Assets
for the two years ended September 30, 1995; Financial
Highlights; the Notes to the Financial Statements; and the
Report of the Independent Certified Public Accountants
included in the Fund's Annual Report to Shareholders for the
year ended September 30, 1995 are incorporated herein by
reference.
(b) Exhibits:
(1) Agreement and Declaration of Trust.2
(2) By-Laws of the Registrant.2
(3) The Registrant is not a party to any Voting Trust
Agreement.
(4) Specimen copy of share certificate.
(5) Investment Management Agreement. 1
(6)(a) Distribution Agreement.1
(6)(b) Selling Group Agreement.1
(7) The Registrant has no bonus, profit sharing, pension or
other similar contract or agreement.
(8) Custodian Agreement.1
(9) The Registrant has no other material contracts not made
in the ordinary course of business.
(10) Opinion of Counsel .2
(11) Consent of Independent Certified Public Accountants.2
(12) There are no Financial Statements omitted from Item 23.
(13) Letter of Understanding relating to initial capital.1
(14) The Registrant has no retirement plan.
(15) Promotion and Marketing Plan pursuant to Rule 12b-1.1
(16) The Registrant does not quote performance as provided in
Item 22.
(17) Financial Data Schedule. 2
(18) The Registrant has not adopted a plan pursuant to Rule
18f-2.
(19) Power of Attorney.2
1 Previously filed as part of the Registrant's Registration Statement,
File Nos. 33-17022, 811-5321 and incorporated herein by reference.
2 Filed herewith.
<PAGE>
Item 2. Persons Controlled by or Under Common Control with Registrant
This item is not applicable. There is no person controlled
by or under common control with the Registrant.
Item 3. Number of Holders of Securities
Number of Record Holders
Title of Class as of November 30,1995
-------------- ---------------------
Shares of Beneficial
Interest, $0.01 par value 1,128
Item 4. Indemnification
Article VII, Sections 2 and 3, of the Agreement and
Declaration of Trust and Article VI of the By-Laws of the
Trust, previously filed, contain the provisions concerning
indemnification and are incorporated herein by reference.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to the
trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as therefore
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
trustee, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding)
is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether
such indemnification by its is against public policy as
expressed in the 1940 Act and will be governed by the final
adjudication of such issue.
Item 5. Business and Other Connections of Investment Adviser of
Registrant
Investment Manager. The officers and director of the
Investment Manager also serve as officers and/or Trustees
of the Registrant. For additional information, please
see Part B.
Item 6. Principal Underwriters
(a) Other investment companies for which Registrant's
principal underwriter ("Distributor") acts as
principal underwriter, depositor, or exclusive
distributor.
None
(b) Information on each director and officer of the
Distributor is as follows:
<PAGE>
Positions
Name and Principal Position With and Offices
Business Address Distributor with Registrant
Todd Anthony Robinson Chairman of the Board,
Chief Executive Officer None
David H. Butterfield President, Chief Operating
Officer, Director None
Andrew J. Micheletti Chief Financial Officer,
Managing Director of Finance, None
Assistant Secretary
Stephanie L. Brown Managing Director of
Compliance/General None
Counsel/Secretary
James S. Putnam Managing Director of
National Sales None
Karen Forslund Managing Director of
Trading & Operations None
Mark G. Lopez Managing Director of
Insurance & Direct None
Investments
(c) Not Applicable.
Item 7. Location of Accounts and Records
The accounts, books or other documents required to be
maintained by Section 31(a) of the 1940 Act are kept by the
Registrant's Transfer Agent, except those records relating
to portfolio transactions and the basic organizational and
Trust documents of the Registrant (see Subsections
(2)(iii), (4), (5), (6), (7), (9), (10) and (11) of Rules
31a-1(b)) which are kept by the Registrant at 210 Ward
Avenue, Suite 129, Honolulu, Hawaii 96814.
Item 8. Management Services
There are no management-related service contracts which are
not discussed in Parts A and B to this Registration
Statement.
Item 9. Undertaking
Not Applicable.
- --------
* The address of each individual is 5935 Cornerstone Court West, San Diego,
California 92121.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment No. 9 to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Honolulu, the State of Hawaii, on the 24th day
of January, 1996.
LEAHI INVESTMENT TRUST
By: /s/ Dianne J. Qualtrough
Dianne J. Qualtrough,
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 9 has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
Ronald E. Kent* Trustee and January 24, 1996
Ronald E. Kent Chairman of the Board
/s/ Dianne J. Qualtrough Trustee and President January 24, 1996
Dianne J. Qualtrough
Ernest W. Albrecht* Trustee January 24, 1996
Ernest W. Albrecht
Gail Ann Chew* Trustee January 24, 1996
Gail Ann Chew
Karen T. Nakamura* Trustee January 24, 1996
Karen T. Nakamura
Kim F. Scoggins* Trustee January 24, 1996
Kim F. Scoggins
David M. Walker* Trustee January 24, 1996
David M. Walker
*By: /s/ Dianne J. Qualtrough
Dianne J. Qualtrough
(Attorney-in-fact pursuant to Powers of
Attorney previously filed or filed herewith)
Exhibit 99.1
AGREEMENT AND DECLARATION OF TRUST
of
LEAHI INVESTMENT TRUST
a Massachusetts Business Trust
Dated: July 23, 1987
<PAGE>
TABLE OF CONTENTS
LEAHI INVESTMENT TRUST
AGREEMENT AND DECLARATION OF TRUST
Page
ARTICLE I Name and Definitions..........................................1
Section 1. Name..............................................1
Section 2. Definitions.......................................1
ARTICLE II Purpose of Trust..............................................2
ARTICLE III Shares........................................................2
Section 1. Division of Beneficial Interest...................2
Section 2. Ownership of Shares...............................3
Section 3. Investments in the Trust..........................3
Section 4. Status of Shares and Limitation of
Personal Liability...........................3
Section 5. Power of Board of Trustees to Change Provisions
Relating to Shares...........................4
Section 6. Establishment and Designation of Series...........4
Section 7. Indemnification of Shareholders...................6
ARTICLE IV The Board of Trustees.........................................6
Section 1. Number, Election and Tenure.......................6
Section 2. Effect of Death, Resignation, etc. of a Trustee...7
Section 3. Powers............................................7
Section 4. Payment of Expenses by the Trust.................10
Section 5. Payment of Expenses by Shareholders..............10
Section 6. Ownership of Assets of the Trust.................10
Section 7. Service Contracts................................11
ARTICLE V Shareholders' Voting Powers and Meetings.....................12
Section 1. Voting Powers....................................12
Section 2. Voting Power and Meetings........................12
Section 3. Quorum and Required Vote.........................13
Section 4. Action By Written Consent........................13
Section 5. Record Dates.....................................13
Section 6. Additional Provisions............................14
<PAGE>
ARTICLE VI Net Asset Value, Distributions, and Redemptions..............14
Section 1. Determination of Net Asset Value, Net
Income, and Distributions...................14
Section 2. Redemptions and Repurchases......................14
Section 3. Redemptions at the Option of the Trust............15
ARTICLE VII Compensation and Limitation of Liability of Trustees.........15
Section 1. Compensation.....................................15
Section 2. Limitation of Liability..........................15
Section 3. Indemnification..................................15
ARTICLE VIII Miscellaneous................................................16
Section 1. Trustees, Shareholders, etc. Not Personally
Liable; Notice..............................16
Section 2. Trustee's Good Faith Action, Expert Advice,
No Bond or Surety...........................16
Section 3. Liability of Third Persons Dealing
with Trustees...............................16
Section 4. Termination of Trust or Series...................17
Section 5. Merger and Consolidation.........................17
Section 6. Filing of Copies, References, Headings...........17
Section 7. Applicable Law...................................18
Section 8. Provisions in Conflict with Law or Regulations...18
Section 9. Amendments.......................................18
Section 10. Trust Only.......................................18
Section 11. Use of the Name "Leahi"..........................18
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
LEAHI INVESTMENT TRUST
THIS AGREEMENT AND DECLARATION OF TRUST is made and entered into as of
this 23rd day of July, 1987 by the Trustees named hereunder.
WHEREAS the Trustees desire and have agreed to manage all property
coming into their hands as trustees of a Massachusetts business trust in
accordance with the provisions hereinafter set forth,
NOW, THEREFORE, the Trustees hereby direct that this Agreement and
Declaration of Trust be filed with the Secretary of The Commonwealth of
Massachusetts and do hereby declare that they will hold all cash, securities and
other assets, which they may from time to time acquire in any manner as Trustees
hereunder, IN TRUST, and manage and dispose of the same upon the following terms
and conditions for the pro rata benefit of the holders of Shares in this Trust.
ARTICLE I
Name and Definitions
Section 1. Name. This Trust shall be known as the LEAHI INVESTMENT
TRUST and the Trustees shall conduct the business of the Trust under that name
or any other name as they may from time to time determine.
Section 2. Definitions. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business t established by
this Agreement and Declaration of Trust, as amended from time to time;
(b) The "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of the
Trust or the Trustees.
(c) "Trustees" refers to the persons who have signed this Agreement and
Declaration of Trust, so long as they continue in office in accordance with the
terms hereof, and all other persons who may from time to time be duly elected or
appointed to serve on the Board of Trustees in accordance with the provisions
hereof, and reference herein to a Trustee or the Trustees shall refer to such
person or persons in their capacity as trustees hereunder;
(d) "Shares" means the shares of beneficial interest into which the
beneficial interest in the Trust shall be divided from time to time and includes
fractions of Shares as well as whole Shares;
<PAGE>
(e) "Shareholder" means a record owner of outstanding Shares;
(f) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof, whether domestic or foreign;
(g) The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
(h) The terms "Commission" and "Principal Underwriter" shall have the
meanings given them in the 1940 Act;
(i) "Declaration of Trust" shall mean this Agreement and Declaration of
Trust, as amended or restated from time to time;
(j) "By-Laws" shall mean the By-Laws of the Trust as amended from time
to time;
(k) The term "Interested Person" has the meaning given it in Section
2(a)(19) of the 1940 Act.
(l) "Investment Manager" means a party furnishing services to the Trust
pursuant to any contract described in Article IV, Section 7(a) hereof.
(m) "Series Company" refers to the form of registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in any
successor statutory provision; and
(n) "Series" refers to each Series of Shares established and designated
under or in accordance with the provisions of Article III.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to conduct, operate and carry on ,the
business of a managed investment company registered under the 1940 Act through
one or more portfolios invested primarily in securities.
ARTICLE III
Shares
Section 1. Division of Beneficial Interest. The beneficial interest in
the Trust shall at all times be divided into an unlimited number of Shares, with
a par value of $ .01 per Share.
2
<PAGE>
The Trustees may authorize the division of Shares into separate Series, and the
different Series shall be established and designated, and the variations in the
relative rights and preferences as between the different Series shall be fixed
and determined, by the Trustees.
Subject to the provisions of Section 6 of this Article III, each Share
shall have voting rights as provided in Article V hereof, and holders of the
Shares of any Series shall be entitled to receive dividends, when and as
declared with respect thereto in the manner provided in Article VI, Section 1
hereof. No Shares shall have any priority or preference over any other Share of
the same Series with respect to dividends or distributions upon termination of
the Trust or of such Series made pursuant to Article VIII, Section 4 hereof. All
dividends and distributions shall be made ratably among all Shareholders of a
particular Series from the assets belonging to such Series according to the
number of Shares of such Series held of record by such Shareholder on the record
date for any dividend or on the date of termination, as the case may be.
Shareholders shall have no preemptive or other right to subscribe to any
additional Shares or other securities issued by the Trust or any Series. The
Trustees may from time to time divide or combine the Shares of any particular
Series into a greater or lesser number of Shares of that Series without thereby
changing the proportionate beneficial interest of the Shares of that Series in
the assets belonging to that Series or in any way affecting the rights of Shares
of any other Series.
Section 2. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or a transfer or similar agent for the Trust,
which books shall be maintained separately for the Shares of each Series. No
certificates certifying the ownership of Shares shall be issued except as the
Board of Trustees may otherwise determine from time to time. The Trustees may
make such rules as they consider appropriate for the transfer of Shares of each
Series and similar matters. The record books of the Trust as kept by the Trust
or any transfer or similar agent, as the case may be, shall be conclusive as to
who are the Shareholders of each Series and as to the number of Shares of each
Series held from time to time by each.
Section 3. Investments in the Trust. The Trustees may accept
investments in the Trust from such Persons, at such times, on such terms, and
for such consideration as they from time to time authorize.
Section 4. Status of Shares and Limitation of Personal Liability.
Shares shall be deemed to be personal property giving only the rights provided
in this instrument. Every Shareholder by virtue of having become a Shareholder
shall be held to have expressly assented and agreed to the terms hereof and to
have become a party hereto. The death of a Shareholder during the existence of
the Trust shall not operate to terminate the Trust, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but entitles
such representative only to the rights of said deceased Shareholder under this
Trust. Ownership of Shares shall not entitle the Shareholder to any title in or
to the whole or any part of the Trust Property or right to call for a partition
or division of the same or for an accounting, nor shall the ownership of Shares
3
<PAGE>
constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power to bind
personally any Shareholders, nor, except as specifically provided herein, to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay.
Section 5. Power of Board of Trustees to Change Provisions Relating to
Shares. Notwithstanding any other provision of this Declaration of Trust and
without limiting the power of the Board of Trustees to amend the Declaration of
Trust as provided elsewhere herein, the Board of Trustees shall have the power
to amend this Declaration of Trust, at any time and from time to time, in such
manner as the Board of Trustees may determine in their sole discretion, without
the need for Shareholder action, so as to add to, delete, replace or otherwise
modify any provisions relating to the Shares contained in this Declaration of
Trust, provided that before adopting any such amendment without Shareholder
approval the Board of Trustees shall determine that it is consistent with the
fair and equitable treatment of all Shareholders or that Shareholder approval is
no otherwise required by the 1940 Act or other applicable law.
Without limiting the generality of the foregoing, the Board of Trustees
may, for the above-stated purposes, amend the Declaration of Trust to amend any
of the provisions set forth in paragraphs (a) through (i) of Section 6 of this
Article III.
Section 6. Establishment and Designation of Series. The establishment
and designation of any Series of Shares shall be effective upon the resolution
by a majority of the then Trustees, setting forth such establishment and
designation and the relative rights and preferences of such Series, or as
otherwise provided in such resolution.
Shares of each Series established pursuant to this Section 6, unless
otherwise provided in the resolution establishing such Series, shall have the
following relative rights and preferences:
(a) Assets Belonging to Series. All consideration received by the Trust
for the issue or sale of Shares of a particular Series, together with all assets
in which such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof from whatever source derived, including, without
limitation, any proceeds derived from the sale, exchange or liquidation of such
assets, and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to that Series for
all purposes, subject only to the rights of creditors, and shall be so recorded
upon the books of account of the Trust. Such consideration, assets, income,
earnings, profits and proceeds thereof, from whatever source derived, including,
without limitation, any proceeds derived from the sale, exchange or liquidation
of such assets, and any funds or payments derived from any reinvestment of such
proceeds, in whatever form the same may be, are herein referred to as "assets
belonging to" that Series. In the event that there are any assets, income,
4
<PAGE>
earnings, profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series (collectively "General
Assets), the Trustees shall allocate such General Assets to, between or among
any one or more of the Series in such manner and on such basis as they, in their
sole discretion, deem fair and equitable, and any General Asset so allocated to
a particular Series shall belong to that Series. Each such allocation by the
trustees shall be conclusive and binding upon the Shareholders of all Series for
all purposes.
(b) Liabilities Belonging to Series. The assets belonging to each
particular Series shall be charged with the liabilities of the Trust in respect
to that Series and all expenses, costs, charges and reserves attributable to
that Series, and any general liabilities of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the Series in such
manner and on such basis as the Trustees in their sole discretion deem fair and
equitable. The liabilities, expenses, costs, charges, and reserves so charged to
a Series are herein referred to as "liabilities belonging to" that Series. Each
allocation of liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the holders of all Series for all purposes.
Under no circumstances shall the assets allocated or belonging to any particular
Series be charged with liabilities attributable to any other Series. All Persons
who have extended credit which has been allocated to a particular Series, or who
have a claim or contract which has been allocated to any particular Series,
shall look only to the assets of that particular Series for payment of such
credit, claim, or contract.
(c) Dividends, Distributions, Redemptions, and Repurchases.
Notwithstanding any other provisions of this Declaration of Trust, including,
without limitation, Article 6, no dividend or distribution (including, without
limitation, any distribution paid upon termination of the Trust or of any
Series) with respect to, nor any redemption or repurchase of, the Shares of any
Series shall be effected by the Trust other than from the assets belonging to
such Series, nor, except as specifically provided in Section 7 of this Article
3, shall any Shareholder of any particular Series otherwise have any right or
claim against the assets belonging to any other Series except to the extent that
such Shareholder has such a right or claim hereunder as a Shareholder of such
other Series. The Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be treated as
income and which items as capital; and each such determination and allocation
shall be conclusive and binding upon the Shareholders.
(d) Voting. All Shares of the Trust entitled to vote on a matter shall
vote separately by Series. That is, the Shareholders of each Series shall have
the right to approve or disapprove matters affecting the Trust and each
respective Series as if the Series were separate companies. There are, however,
two exceptions to voting by separate Series. First, if the 1940 Act requires all
Shares of the Trust to be voted in the aggregate without differentiation between
the separate Series, then all the Trust's Shares shall be entitled to vote on a
one-vote-per-Share basis. but not all Series, then only the Shareholders of such
affected Series shall be entitled to vote on the matter.
5
<PAGE>
(e) Equality. All the Shares of each particular Series shall represent
an equal proportionate interest in the assets belonging to that Series (subject
to the liabilities belonging to that Series), and each Share of any particular
Series shall be equal to each other Share of that Series.
(f) Fractions. Any fractional Share of a Series shall carry
proportionately all the rights and obligations of a whole share of that Series,
including rights with respect to voting, receipt of dividends and distributions,
redemption of Shares and termination of the Trust.
(g) Exchange Privilege. The Trustees shall have the authority to
provide that the holders of Shares of any Series shall have the right to
exchange said Shares for Shares of one or more other Series of Shares in
accordance with such requirements and procedures as may be established by the
Trustees.
(h) Combination of Series. The Trustees shall have the authority,
without the approval of the Shareholders of any Series unless otherwise required
by applicable law, to combine the assets and liabilities belonging to any two or
more Series into assets and liabilities belonging to a single Series.
(i) Elimination of Series. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may by resolution of a majority of the then Trustees abolish that
Series and rescind the establishment and designation thereof.
Section 7. Indemnification of Shareholders. In case any Shareholder or
former Shareholder shall be held to be personally liable solely by reason of his
or her being or having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former Shareholder (or
his of her heirs, executors, administrators, or other legal representatives or
in the case of a corporation or other entity, its corporate or other general
successor) shall be entitled out of the assets of the Trust to be held harmless
from and indemnified against all loss and expense arising from such liability.
ARTICLE IV
The Board of Trustees
Section 1. Number, Election and Tenure. The number of Trustees
constituting the Board of Trustees shall be fixed from time to time by a written
instrument signed or approved at a duly constituted meeting by a majority of the
Board of Trustees, provided, however, that the number of Trustees shall in no
event be less than one nor more than 15. The Board of Trustees, by r action of a
majority of the then Trustees at a duly constituted meeting, may fill vacancies
in the Board of Trustees or remove Trustees with or without cause. Each Trustee
shall serve during the continued lifetime of the Trust until he dies, resigns,
is declared bankrupt or incompetent by a court of appropriate jurisdiction, or
6
<PAGE>
is removed, or, if sooner, until the next meeting of Shareholders called for the
purpose of electing Trustees and until the election and qualification of his
successor. Any Trustee may resign at any time by written instrument signed by
him and delivered to any officer of the Trust or to a meeting of the Trustees.
Such resignation shall be effective upon receipt unless specified to be
effective at some other time. Except to the extent expressly provided in a
written agreement with the Trust, no Trustee resigning and no Trustee removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal. The
Shareholders may fix the number of Trustees and elect Trustees at any meeting of
Shareholders called by the Trustees for that purpose.
Section 2. Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal, or incapacity of one or more
Trustees, or all of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is
filled as provided in Article 4, Section 1, the Trustees in office, regardless
of their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by this Declaration of Trust
As conclusive evidence of such vacancy, a written instrument certifying the
existence of such vacancy may be executed by an officer of the Trust or by a
majority of the Board of Trustees. In the event of the death, declination,
resignation, retirement, removal, or incapacity of all the then Trustees within
a short period of time and without the opportunity for at least one Trustee
being able to appoint additional Trustees to fill vacancies, the Trust's
investment adviser or investment advisers jointly, if there is more than one,
are empowered to appoint new Trustees subject to the provisions of Section 16(a)
of the 1940 Act.
Section 3. Powers. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the Board of Trustees, and
such Board shall have all powers necessary or convenient to carry out that
responsibility including the power to engage in securities transactions of all
kinds on behalf of the Trust. Without limiting the foregoing, the Trustees may:
adopt By-Laws not inconsistent with this Declaration of Trust providing for the
regulation and management of the affairs of the Trust and may amend and repeal
them to the extent that such By-Laws do not reserve that right to the
Shareholders; fill vacancies in or remove from their number, and may elect and
remove such officers and appoint and terminate such agents as they consider
appropriate; appoint from their own number and establish and terminate one or
more committees consisting of two or more Trustees which may exercise the powers
and authority of the Board of Trustees to the extent that the Trustees
determine; employ one or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of securities or
with a Federal Reserve Bank, retain a transfer agent or a shareholder servicing
agent, or both; provide for the issuance and distribution of Shares by the Trust
directly or through one or more Principal Underwriters or otherwise; redeem,
repurchase and transfer Shares pursuant to applicable law; set record dates for
7
<PAGE>
the determination of Shareholders with respect to various matters; declare and
pay dividends and distributions to Shareholders of each Series from the assets
of such Series; and in general delegate such authority as they consider
desirable to any officer of the Trust, to any committee of the Trustees and to
any agent or employee of the Trust or to any such custodian, transfer or
shareholder servicing agent, or Principal Underwriter. Any determination as to
what is in the interests of the Trust made by the Trustees in good faith shall
be conclusive. In construing the provisions of this Declaration of Trust, the
presumption shall be in favor of a grant of power to the Trustees.
Without limiting the foregoing, the Board of Trustees shall have power
and authority:
(a) To invest and reinvest cash, to hold cash uninvested, and to
subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold,
pledge, sell, assign, transfer, exchange, distribute, write options on, lend or
otherwise deal or dispose of contracts for the future acquisition or delivery of
fixed income or other securities, and securities of every nature and kind,
including, without limitation, all types of bonds, debentures, stocks,
negotiable or non-negotiable instruments, obligations, evidences of
indebtedness, certificates of deposit or indebtedness, commercial paper,
repurchase agreements, bankers' acceptances, and other securities of any kind,
issued, created, guaranteed, or sponsored by any and all Persons, including,
without limitation, states, territories, and possessions of the United States
and the District of Columbia and any political subdivision, agency, or
instrumentality thereof, any foreign government or any political subdivision of
the U.S. Government or any foreign government, or any international
instrumentality, or by any bank or savings institution, or by any corporation or
organization organized under the laws of the United States or of any state,
territory, or possession thereof, or by any corporation or organization
organized under any foreign law, or in "when issued" contracts for any such
securities, to change the investments of the assets of the Trust; and to
exercise any and all rights, powers, and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act with
respect thereto, with power to designate one or more Persons, to exercise any of
said rights, powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights relating
to any or all of the assets of the Trust;
(c) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion with
relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and right of subscription or otherwise which in
any manner arise out of ownership of securities;
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(e) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form, or in its own
name or in the name of a custodian or subcustodian or a nominee or nominees or
otherwise;
(f) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer of any security which is
held in the Trust; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer; and to pay calls or subscriptions
with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee,
depositary, voting trustee or otherwise, and in that connection to deposit any
security with, or transfer any security to, any such committee, depositary or
trustee, and to delegate to them such power and authority with relation to any
security (whether or not so deposited or transferred) as the Trustees shall deem
proper, and to agree to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the Trustees shall deem
proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(i) To enter into joint ventures, general or limited partnerships and
any other combinations or associations;
(j) To borrow funds or other property in the name of the Trust
exclusively for Trust purposes;
(k) To endorse or guarantee the payment of any notes or other
obligations of any Person; to make contracts of guaranty or suretyship, or
otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property r such
insurance as they may deem necessary or appropriate for the conduct of the
business, including, without limitation, insurance policies insuring the assets
of the Trust or payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers, principal underwriters, or
independent contractors of the Trust, individually against claims and
liabilities of every nature arising by reason of holding, being or having held
any such office or position, or by reason of any action alleged to have been
taken or omitted by any such Person as Trustee, officer, employee, agent,
investment adviser, principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person against
liability; and
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(m) To adopt, establish and carry out pension, profit-sharing, share
bonus, share purchase, savings, thrift other retirement, incentive and benefit
plans, trusts and provisions, including the purchasing of life insurance and
annuity contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the Trust.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust or one or more of its Series. The
Trustees shall not in any way be bound or limited by any present or future law
or custom in regard to investment by fiduciaries. The Trustees shall not be
required to obtain any court order to deal with any assets of the Trust or take
any other action hereunder.
Section 4. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust, or partly out of the principal and partly out of income, as they deem
fair, all expenses, fees, charges, taxes and liabilities incurred or arising in
connection with the Trust, or in connection with the management thereof,
including, but not limited to, the Trustees' compensation and such expenses and
charges for the services of the Trust's officers, employees, investment adviser
or manager, principal underwriter, auditors, counsel, custodian, transfer agent,
Shareholder servicing agent, and such other agents or independent contractors
and such other expenses and charges as the Trustees may deem necessary or proper
to incur.
Section 5. Payment of Expenses by Shareholders. The Trustees shall have
the power, as frequently as they may determine, to cause each Shareholder, or
each Shareholder of any particular Series, to pay directly, in advance or
arrears, for charges of the Trust's custodian or transfer, Shareholder servicing
or similar agent, an amount fixed from time to time by the Trustees, by setting
off such charges due from such Shareholder from declared but unpaid dividends
owed such Shareholder and/or by reducing the number of shares in the account of
such Shareholder by that number of full and/or fractional Shares which
represents the outstanding amount of surcharges due from such Shareholder.
Section 6. Ownership of Assets of the Trust. Title to all of the assets
of the Trust shall at all times be considered as vested in the Trustees as joint
tenants except that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of the Trustees, or
in the name of the Trust, or in the name of any other Person as nominee, on such
terms as the Trustees may determine. The right, title and interest of the
Trustees in the Trust Property shall vest automatically in each Person who may
hereafter become a Trustee. Upon the resignation, removal or death of a Trustee
he shall automatically cease to have any right, title or interest in any of the
Trust Property, and the right, title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
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Section 7. Service Contracts.
(a) Subject to such requirements and restrictions as may be set forth
in the By-Laws, the Trustees may, at any time and from time to time, contract
for exclusive or nonexclusive advisory, management and/or administrative
services for the Trust or for any Series with any corporation, trust,
association or other organization; and any such contract may contain such other
terms as the Trustees may determine, including without limitation, authority for
the Investment Manager or Administrator to determine from time to time without
prior consultation with the Trustees what investments shall be purchased, held,
sold or exchanged and what portion, if any, of the assets of the Trust shall be
held uninvested and to make changes in the Trust's investments, or such other
activities as may specifically be delegated to such party.
(b) The Trustees may also, at any time and from time to time, contract
with any corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or Principal Underwriter for the Shares of
one or more of the Series. Every such contract shall comply with such
requirements and restrictions as may be set forth in the By-Laws; and any such
contract may contain such other terms as the Trustees may determine.
(c) The Trustees are also empowered, at any time and from time to time,
to contract with any corporations, trusts, associations or other organizations,
appointing it or them the custodian, transfer agent and/or shareholder servicing
agent for the Trust or one or more of its Series. Every such contract shall
comply with such requirements and restrictions as may be set forth in the
by-Laws or stipulated by resolution of the Trustees.
(d) The Trustees are further empowered, at any time and from time to
time, to contract with any entity to provide such other services to the Trust or
one or more of the Series, as the Trustees determine to be in the best interests
of the Trust and the applicable Series.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the
Trust is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter, distributor, or affiliate or
agent of or for any corporation, trust, association, or other
organization, or for any parent or affiliate of any organization with
which an advisory, management or administration contract, or principal
underwriter's or distributor's contract, or transfer, shareholder
servicing or other type of service contract may have been or may
hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust, or
that
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(ii) any corporation, trust, association or other organization
with which an advisory, management or administration contract or
principal underwriter's or distributor s contract, or transfer,
shareholder servicing or other type of service contract may have been
or may hereafter be made also has an advisory, management or
administration contract, or principal underwriter's or distributor's
contract, or transfer, shareholder servicing or other service contract
with one or more other corporations, trust, associations, or other
organizations, or has other business or interests,
shall not affect the validity of any such contract or disqualify any
Shareholder, Trustee or officer of the from voting upon or executing the same,
or create any liability or accountability to the Trust or its Shareholders,
provided approval of each such contract is made pursuant to the requirements of
the 1940 Act.
ARTICLE V
Shareholders' Voting Powers and Meetings
Section 1. Voting Powers. Subject to the provisions of Article 3,
Section 6(d), the Shareholders shall have power to vote only (i) for the
election of Trustees as provided in Article 4, Section 1, (ii) to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, (iii) with respect to the termination; of the Trust or any Series
to the extent and as provided in Article VIII, Section 4, and (iv) with respect
to such additional matters relating to the Trust as may be required by this
Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any state, or as the Trustees may
consider necessary or desirable. 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. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary from any one of
them. A proxy purporting to be executed by or on behalf of a Shareholder shall
be deemed valid unless challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. At any time when no Shares of a
Series are outstanding, the Trustees may exercise all rights of Shareholders of
that Series with respect to matters affecting that Series, take any action
required by law, this Declaration of Trust or the By-Laws, to be taken by the
Shareholders.
Section 2. Voting Power and Meetings. Meetings of the Shareholders may
be called by the Trustees for the purpose of electing Trustees as provided in
Article 4, Section 1 and for such other purposes as may be prescribed by law, by
this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may
12
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also be called by the Trustees from time to time for the purpose of taking
action upon any other matter deemed by the Trustees to be necessary or
desirable. A meeting of Shareholders may be held at any place designated by the
Trustees. Written notice of any meeting of Shareholders shall be given or caused
to be given by the Trustees by mailing such notice at least seven (7) days
before such meeting, postage prepaid, stating the time and place of the meeting,
to each Shareholder at the Shareholder's address as it appears on the records of
the Trust. Whenever notice of a meeting is required to be given to a Shareholder
under this Declaration of Trust or the By-Laws, a written waiver thereof,
executed before or after the meeting by such Shareholder or his attorney
thereunto authorized and filed with the records of the meeting, shall be deemed
equivalent to such notice.
Section 3. Quorum and Required Vote. Except when a larger quorum is
required by applicable law, by the By-Laws or by this Declaration of Trust,
forty percent (40%) of the Shares entitled to vote shall constitute a quorum at
a Shareholders' meeting. When any one or more Series is to vote as a single
class separate from any other Shares which are to vote on the same matters as a
separate class or classes, forty percent (40%) of the Shares of each such Series
entitled to vote shall constitute a quorum at a Shareholder's meeting of that
Series. Any meeting of Shareholders may be adjourned from time to time by a
majority of the votes properly cast upon the question of adjourning a meeting to
another date and time, whether or not a quorum is present, and the meeting may
be held as adjourned within a reasonable time after the date set for the
original meeting without further notice. Subject to the provisions of Article 3,
Section 6(d), when a quorum is present at any meeting, a majority of the Shares
voted shall decide any questions and a plurality shall elect a Trustee, except
when a larger vote is required by any provision of this Declaration of Trust or
the By-Laws or by applicable law.
Section 4. Action By Written Consent. Any action taken by Shareholders
may be taken without a meeting if Shareholders holding a majority of the Shares
entitled to vote on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or by the
By-Laws) and holding a majority (or such larger proportion as aforesaid) of the
Shares of any Series entitled to vote separately on the matter consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
Section 5. Record Dates. For the purpose of determining the
Shareholders of any Series who are entitled to vote or act at any meeting or any
adjournment thereof, the Trustees may from time to time fix a time, which shall
be not more than ninety (90) days before the date of any meeting of
Shareholders, as the record date for determining the Shareholders of such Series
having the right to notice of and to vote at such meeting and any adjournment
thereof, and in such case only Shareholders of record on such record date shall
have such right, notwithstanding any transfer of shares on the books of the
Trust after the record date. For the purpose of determining the Shareholders of
any Series who are entitled to receive payment of any dividend or of any other
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<PAGE>
distribution, the Trustees may from time to time fix a date, which shall be
before the date for the payment of such dividend or such other payment, as the
record date for determining the Shareholders of such Series having the right to
receive such dividend or distribution. Without fixing a record date the Trustees
may for voting and/or distribution purposes close the register or transfer books
for one or more Series for all or any part of the period between a record date
and a meeting of Shareholders or the payment of a distribution. Nothing in this
Section shall be construed as precluding the Trustees from setting different
record dates for different Series.
Section 6. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters.
ARTICLE VI
Net Asset Value, Distributions, and Redemptions
Section 1. Determination of Net Asset Value, Net Income, and
Distributions. Subject to Article III, Section 6 hereof, the Trustees, in their
absolute discretion, may prescribe and shall set forth in the By-laws or in a
duly adopted vote of the Trustees such bases and time for determining the per
Share or net asset value of the Shares of any Series or net income attributable
to the Shares of any Series, or the declaration and payment of dividends and
distributions on the Shares of any Series, as they may deem necessary or
desirable.
Section 2. Redemptions and Repurchases. The Trust shall purchase such
Shares as are offered by any Shareholder for redemption, upon the presentation
of a proper instrument of transfer together with a request directed to the Trust
or a Person designated by the Trust that the Trust purchase such Shares or in
accordance with such other procedures for redemption as the Trustees may from
time to time authorize; and the Trust will pay therefor the net asset value
thereof, in accordance with the By-Laws and applicable law. Payment for said
Shares shall be made by the Trust to the Shareholder within seven days after the
date on which the request is made in proper form. The obligation set forth in
this Section 2 is subject to the provision that in the event that any time the
New York Stock Exchange is closed for other than weekends or holidays, or if
permitted by the Rules of the Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable for
the Trust to dispose of the investments of the applicable Series or to determine
fairly the value of the net assets belonging to such Series or during any other
period permitted by order of the Commission for the protection of investors,
such obligations may be suspended or postponed by the Trustees.
The redemption price may in any case or cases be paid wholly or partly
in kind if the Trustees determine that such payment is advisable in the interest
of the remaining Shareholders of the Series for which the Shares are being
redeemed. Subject to the foregoing, the fair value, selection and quantity of
securities or other property so paid or delivered as all or part of the
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redemption price may be determined by or under authority of the Trustees. ln no
case shall the Trust be liable for any delay of any corporation or other Person
in transferring securities selected for delivery as all or part of any payment
in kind.
Section 3. Redemptions at the Option of the Trust. The Trust shall have
the right at its option and at any time to redeem Shares of any Shareholder at
the net asset value thereof as described in Section 1 of this Article VI: (i) if
at such time such Shareholder owns Shares of any Series having an aggregate net
asset value of less than an amount determined from time to time by the Trustees;
or (ii) to the extent that such Shareholder owns Shares of a particular Series
equal to or in excess of a percentage of the outstanding Shares of that Series
determined from time to time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares equal to or in excess of a percentage, determined from
time to time by the Trustees, of the outstanding Shares of the Trust or of any
Series.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Section 1. Compensation. The Trustees as such shall be entitled to
reasonable compensation from the Trust, and they may fix the amount of such
compensation. Nothing herein shall in any way prevent the employment of any
Trustee for advisory, management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Section 2. Limitation of Liability. The Trustees shall not be
responsible or liable in any event for any neglect or wrong-doing of any
officer, agent, employee, manager or Principal Underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any other Trustee,
but nothing herein contained shall protect any Trustee against any liability to
which he would otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusive deemed to have been issued, executed or done only in or with respect
to their or his capacity as Trustees or Trustee, and Trustees or Trustee shall
not be personally liable thereon.
Section 3. Indemnification. The Trustees shall be entitled and
empowered to the fullest extent permitted by law to purchase with Trust assets
insurance for and to provide by resolution or in the By-Laws for indemnification
out of Trust assets for liability and for all expenses reasonably incurred or
paid or expected to be paid by a Trustee or officer in connection with any
claim, action, suit or proceeding in which he becomes involved by virtue of his
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capacity or former capacity with the Trust. The provisions, including any
exceptions and limitations concerning indemnification, may be set forth in
detail in the By-Laws or in a resolution of the Board of Trustees.
ARTICLE VIII
Miscellaneous
Section 1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
All Persons extending credit to, contracting with or having any claim against
the Trust or any Series shall look only to the assets of the Trust, or, to the
extent that the liability of the Trust may have been expressly limited by
contract to the assets of a particular Series, only to the assets belonging to
the relevant Series, for payment under such credit, contract or claim; and
neither the Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any Trustee against
any liability to which such Trustee would otherwise be subject by reason of
wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued on behalf of the Trust by the Board of Trustees, by any officers or
officer or otherwise may include a notice that this Declaration of Trust is on
file with the Secretary of The Commonwealth of Massachusetts and may recite that
the note, bond, contract, instrument, certificate, or undertaking was executed
or made by or on behalf of the Trust or by them as Trustee or Trustees or as
officers or officer or otherwise and not individually and that the obligations
of such instrument are not binding upon any of them or the Shareholders
individually but are binding only upon the assets and property of the Trust or
upon the assets belonging to the Series for the benefit of which the Trustees
have caused the note, bond, contract, instrument, certificate or undertaking to
be made or issued, and may contain such further recital as he or they may deem
appropriate, but the omission or any such recital shall not operate to bind any
Trustee or Trustees or officer or officers or Shareholders or any other person
individually.
Section 2. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. A Trustee shall be liable solely for
his own wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and 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 shall be under no liability for any act or
omission in accordance with such advice nor for failing to follow such advice.
The Trustees shall not be required to give any bond as such, nor any surety if a
bond is required.
Section 3. Liability of Third Persons Dealing with Trustees. No Person
dealing with the Trustees shall be bound to make any inquiry concerning the
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validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
Section 4. Termination of Trust or Series. Unless terminated as
provided herein, the Trust shall continue without limitation of time. The Trust
may be terminated at any time by vote of at least two-thirds (66-2/3%) of the
Shares of each Series entitled to vote, voting separately by Series, or by the
Trustees by written notice to the Shareholders. Any Series may be terminated at
any time by vote of at least two-thirds (66-2/3%) of the Shares of that Series
or by the Trustees by written notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be),
after paying or otherwise providing for all charges, taxes, expenses and
liabilities belonging, severally, to each Series (or the applicable Series, as
the case may be), whether due or accrued or anticipated as may be determined by
the Trustees, the Trust shall, in accordance with such procedures as the
Trustees consider appropriate, reduce the remaining assets belonging, severally,
to each Series (or the applicable Series, as the case may be), to distributable
form in cash or shares or other securities, or any combination thereof, and
distribute the proceeds belonging to each Series (or the applicable Series, as
the case may be), to the Shareholders of that Series, as a Series, ratably
according to the number of Shares of that Series held by the several
Shareholders on the date of termination.
Section 5. Merger and Consolidation. The Trustees may cause the Trust
or one or more of its Series to be merged into or consolidated with another
Trust or company or the Shares exchanged under or pursuant to any state or
Federal statute, if any, or otherwise to the extent permitted by law. Such
merger or consolidation or Share exchange must be authorized by vote of a
majority of the outstanding Shares of the Trust, as a whole, or any affected
Series, as may be applicable; provided that in all respects not governed by
statute or applicable law, the Trustees shall have power to prescribe the
procedure necessary or appropriate to accomplish a sale of assets, merger or
consolidation.
Section 6. Filing of Copies, References, Headings. The original or a
copy of this instrument and of each amendment hereto shall be kept at the office
of the Trust where it may inspected by any Shareholder. A copy of this
instrument and each amendment hereto shall be filed by the Trust with the
Secretary of The Commonwealth of Massachusetts and with any other governmental
office where such filing 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 amendments have been made and as to any matters in connection with
the Trust hereunder; and, with the same effect as if it were the original, may
rely on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such amendments. In this instrument and in any such
amendment, references to this instrument, and all expressions like "herein",
"hereof" and "hereunder", shall be deemed to refer to this instrument as amended
or affected by any such amendments. Headings are placed herein for convenience
of reference only and shall not be taken as a part hereof or control or affect
the meaning, construction or effect of this instrument. Whenever the singular
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number is used herein, the same shall include the plural; and the neuter,
masculine and feminine genders shall include each other, as applicable. This
instrument may be executed in any number of counterparts each of which shall be
deemed an original.
Section 7. Applicable Law. This Agreement and Declaration of Trust 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 8. Provisions in Conflict with Law or Regulations.
(a) The provisions of the Declaration of Trust are severable, and if
the Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of the Declaration of Trust; provided, however, that such determination
shall not affect any of the remaining provisions of the Declaration of Trust or
render invalid or improper any action taken or omitted prior to such
determination.
(b) If any provision of the Declaration of Trust shall be held invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration of Trust in any jurisdiction.
Section 9. Amendments. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then Trustees.
Section 10. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment, or any form of legal relationship other than a trust.
Nothing in this Agreement and Declaration of Trust shall be construed to make
the Shareholders, either by themselves or with the Trustees, partners or members
of a joint stock association.
Section 11. Use of the Name "Leahi". Leahi Management Company, Inc., as
the proposed Manager/Administrator, has consented to the use by the Trust of the
identifying word "Leahi" as part of the name of the Trust and in the name of any
Series of Shares. Such consent is conditioned upon the employment of the
Manager/Administrator, or an affiliate of said Company, as Manager/Administrator
of the Trust and said Series. The name or identifying words "Leahi" or any
variation thereof may be used from time to time in other connections and for
other purposes by the Manager/Administrator or affiliated entities. The
Manager/Administrator has the right to require the Trust to cease using "Leahi"
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in the name of the Trust and in the names of its Series if the Trust and said
Series cease to employ, for any reason, the Manager/Administrator, or an
affiliate of said Company, as the Manager/Administrator or adviser of the Trust
or such Series. Future names adopted by the Trust for itself and its Series
shall be the property of the Manager/Administrator and its affiliates, and the
use of such names shall be subject to the same conditions set forth in this
Section insofar as such name or identifying words require the consent of the
Manager/Administrator.
IN WITNESS WHEREOF, the Trustees named below do hereby set their hands as of
the 23rd day of July, 1987.
/s/ Ronald E. Kent /s/ Jeremiah J. Bresnahan, Jr.
RONALD E. KENT JEREMIAH J. BRESNAHAN, JR.
19
Exhibit 99.2
BY-LAWS
for the regulation, except as
otherwise provided by statute or
the Agreement and Declaration of Trust of
LEAHI INVESTMENT TRUST
a Massachusetts Business Trust
<PAGE>
TABLE OF CONTENTS
BY-LAWS
LEAHI INVESTMENT TRUST
Page
ARTICLE I OFFICES.....................................................1
Section 1. PRINCIPAL OFFICE................................1
Section 2. OTHER OFFICES...................................1
ARTICLE II MEETINGS OF SHAREHOLDERS....................................1
Section 1. PLACE OF MEETINGS...............................1
Section 2. CALL OF MEETING.................................1
Section 3. NOTICE OF SHAREHOLDERS' MEETING.................1
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT
OF NOTICE.......................................1
Section 5. ADJOURNED MEETING; NOTICE.......................2
Section 6. VOTING..........................................2
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT
SHAREHOLDERS....................................2
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING...............................3
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE,
VOTING AND GIVING CONSENTS......................3
Section 10. PROXIES.........................................4
Section 11. INSPECTORS OF ELECTION..........................4
ARTICLE III TRUSTEES....................................................5
Section 1. POWERS..........................................5
Section 2. NUMBER OF TRUSTEES..............................5
Section 3. VACANCIES.......................................5
Section 4. PLACE OF MEETINGS AND MEETINGS BY
TELEPHONE......................................5
Section 5. REGULAR MEETINGS................................5
Section 6. SPECIAL MEETINGS................................6
Section 7. QUORUM..........................................6
Section 8. WAIVER OF NOTICE................................6
Section 9. ADJOURNMENT.....................................6
Section 10. NOTICE OF ADJOURNMENT...........................6
Section 11. ACTION WITHOUT A MEETING........................6
Section 12. FEES AND COMPENSATION OF TRUSTEES...............7
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES...........7
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ARTICLE IV COMMITTEES...................................................7
Section 1. COMMITTEES OF TRUSTEES...........................7
Section 2. MEETINGS AND ACTION OF COMMITTEES................7
ARTICLE V OFFICERS.....................................................8
Section 1. OFFICERS.........................................8
Section 2. ELECTION OF OFFICERS.............................8
Section 3. SUBORDINATE OFFICERS.............................8
Section 4. REMOVAL AND RESIGNATION OF OFFICERS..............8
Section 5. VACANCIES IN OFFICES.............................8
Section 6. CHAIRMAN OF THE BOARD............................9
Section 7. PRESIDENT........................................9
Section 8. VICE PRESIDENTS..................................9
Section 9. SECRETARY........................................9
Section 10. TREASURER.......................................10
ARTICLE VI INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES
AND OTHER AGENTS............................................10
Section 1. AGENTS, PROCEEDINGS AND EXPENSES................10
Section 2. ACTIONS OTHER THAN BY TRUST.....................10
Section 3. ACTIONS BY THE TRUST............................11
Section 4. EXCLUSION OF INDEMNIFICATION....................11
Section 5. SUCCESSFUL DEFENSE BY AGENT.....................11
Section 6. REQUIRED APPROVAL...............................11
Section 7. AUTHORIZATION OF INDEMNIFICATION AND
DETERMINATION OF REASONABLENESS.................12
Section 8. ADVANCE OF EXPENSES.............................12
Section 9. OTHER CONTRACTUAL RIGHTS........................12
Section 10. LIMITATIONS.....................................12
Section 11. INSURANCE.......................................13
Section 12. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN............13
ARTICLE VII RECORDS AND REPORTS.........................................13
Section 1. MAINTENANCE AND INSPECTION OF
SHARE REGISTER..................................13
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS...........13
Section 3. MAINTENANCE AND INSPECTION OF
OTHER RECORDS...................................13
Section 4. INSPECTION BY TRUSTEES..........................14
Section 5. FINANCIAL STATEMENTS............................14
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ARTICLE VIII GENERAL MATTERS.............................................14
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS........14
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED.........14
Section 3. CERTIFICATES FOR SHARES.........................14
Section 4. LOST CERTIFICATES...............................15
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES
HELD BY TRUST...................................15
Section 6. FISCAL YEAR.....................................15
ARTICLE IX AMENDMENTS..................................................15
Section 1. AMENDMENT BY SHAREHOLDERS.......................15
Section 2. AMENDMENT BY TRUSTEES...........................15
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BY-LAWS
OF
LEAHI INVESTMENT TRUST
A Massachusetts Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The Board of Trustees shall fix and, from
time to time, may change the location of the principal executive office of the
Trust at any place within or outside The Commonwealth of Massachusetts.
Section 2. OTHER OFFICES. The Board of Trustees may at any time
establish branch or subordinate offices at any place or places where the Trust
intends to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside The Commonwealth of Massachusetts designated by the
Board of Trustees. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be called
at any time by the Board of Trustees or by the chairman of the Board or by the
president.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than seventy-five (75) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which Trustees are to be elected also
shall include the name of any nominee or nominees whom at the time of the notice
are intended to be presented for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a Trustee has a direct or indirect financial
interest, (ii) an amendment of the Declaration of Trust, (iii) a reorganization
of the Trust, or (iv) a voluntary dissolution of the Trust, the notice shall
also state the general nature of that proposal.
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail
or telegraphic or other written communication, charges prepaid, addressed to the
shareholder at the address of that shareholder appearing on the books of the
Trust or its transfer agent or given by the shareholder to the Trust for the
purpose of notice. If no such address appears on the Trust's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the Trust's
<PAGE>
principal executive office, or if published at least once in a newspaper of
general circulation in the county where that office is located. Notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust by the
United States Postal Service marked to indicate that the Postal Service is
unable to deliver the notice to the shareholder at that address, all future
notices or reports shall be deemed to have been duly given without further
mailing if these shall be available to the shareholder on written demand of the
shareholder at the principal executive office of the Trust for a period of one
year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholder's meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the minute book of the Trust.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting,
whether or not a quorum is present, may be adjourned from time to time by the
vote of the majority of the shares represented at that meeting, either in person
or by proxy.
When any meeting of shareholders is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken; unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than sixty (60) days from the date set for the original
meeting, in which case the Board of Trustees shall set a new record date. Notice
of any such adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the provisions of
Sections 3 and 4 of this Article II. At any adjourned meeting, the Trust may
transact any business which might have been transacted at the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Declaration of Trust, as in effect at such time. The shareholders' vote may be
by voice vote or by ballot, provided, however, that any election for Trustees
must be by ballot if demanded by any shareholder before the voting has begun. On
any matter other than elections of Trustees, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, but if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
the total shares that the shareholder is entitled to vote on such proposal.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of the meeting of shareholders, however called and noticed and
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice if a quorum be present either in person or by proxy and
if either before or after the meeting, each person entitled to vote who was not
present in person or by proxy signs a written waiver of notice or a consent to a
holding of the meeting or an approval of the minutes.
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The waiver of notice or consent need not specify either the business to be
transacted or the purpose of any meeting of shareholders.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the beginning of the
meeting.
Section 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any
action which may be taken at any meeting of shareholders may be taken without a
meeting and without prior notice if a consent in writing setting forth the
action so taken is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
that action at a meeting at which all shares entitled to vote on that action
were present and voted. All such consents shall be filed with the Secretary of
the Trust and shall be maintained in the Trust's records. Any shareholder giving
a written consent or the shareholder's proxy holders or a transferee of the
shares or a personal representative of the shareholder or their respective proxy
holders may revoke the consent by a writing received by the Secretary of the
Trust before written consents of the number of shares required to authorize the
proposed action have been filed with the Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of the action approved by the shareholders without a meeting. This notice
shall be given in the manner specified in Section 4 of this Article II. In the
case of approval of (i) contracts or transactions in which a Trustee has a
direct or indirect financial interest, (ii) indemnification of agents of the
Trust, and (iii) a reorganization of the Trust, the notice shall be given at
least ten ~10) days before the consummation of any action authorized by that
approval.
Section 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the shareholders entitled to notice of any
meeting or to vote or entitled to give consent to action without a meeting, the
Board of Trustees may fix in advance a record date which shall not be more than
ninety (90) days nor less than seven (7) days before the date of any such
meeting as provided in the Declaration of Trust.
If the Board of Trustees does not so fix a record date:
(a) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at
the close of business on the business day next preceding the
day on which notice is given or if notice is waived, at the
close of business on the business day next preceding the day
on which the meeting is held.
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(b) The record date for determining shareholders entitled to give
consent to action in writing without a meeting, (i) when no
prior action by the Board of Trustees has been taken, shall be
the day on which the first written consent is given, or (ii)
when prior action of the Board of Trustees has been taken,
shall be at the close of business on the day on which the
Board of Trustees adopt the resolution relating to that action
or the seventy-fifth day before the date of such other action,
whichever is later.
Section 10. PROXIES. Every person entitled to vote for Trustees or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the Secretary of the Trust. A proxy shall be deemed signed if the shareholder's
name is placed on the proxy (whether by manual signature, typewriting,
telegraphic transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) revoked by the
person executing it before the vote pursuant to that proxy by a writing
delivered to the Trust stating that the proxy is revoked or by a subsequent
proxy executed by or attendance at the meeting and voting in person by the
person executing that proxy; or (ii) written notice of the death or incapacity
of the maker of that proxy is received by the Trust before the vote pursuant to
that proxy is counted; provided however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy unless otherwise
provided in the proxy. The revocability of a proxy that states on its face that
it is irrevocable shall be governed by the provisions of the Texas Securities
Act.
Section 11. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Trustees may appoint any persons other than nominees for office to
act as-inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may and on
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3) If inspectors are appointed at a meeting on the request of
one or more shareholders or proxies, the holders of a majority of shares or
their proxies present at the meeting shall determine whether one (1) or three
(3) inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the chairman of the meeting may and on the
request of any shareholder or a shareholder's proxy, shall appoint a person to
fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the
existence of a quorum and the authenticity, validity and
effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
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(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the
Declaration of Trust and these By-Laws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the Trust shall be managed and all powers shall be exercised by or
under the direction of the Board of Trustees.
Section 2. NUMBER OF TRUSTEES. The exact number of Trustees within the
limits specified in the Agreement and Declaration of Trust shall be seven (7),
until changed by a duly adopted amendment to these By-Laws.
Section 3. VACANCIES. Vacancies in the Board of Trustees may be filled
by a majority of the remaining Trustees, though less than a quorum, or by a sole
remaining Trustee, unless the Board of Trustees calls a meeting of shareholders
for the purposes of electing Trustees. In the event that at any time less than a
majority of the Trustees holding office at that time were so elected by the
holders of the outstanding voting securities of the Trust, the Board of Trustees
shall forthwith cause to be held as promptly as possible, and in any event
within sixty (60) days, a meeting of such holders for the purpose of electing
Trustees to fill any existing vacancies in the Board of Trustees, unless such
period is extended by order of the United States Securities and Exchange
Commission.
Notwithstanding the above, whenever and for so long as the Trust is a
participant in or otherwise has in effect a Plan under which the Trust may be
deemed to bear expenses of distributing its shares as that practice is described
in Rule 12b-1 under the Investment Company Act of 1940, then the selection and
nomination of the Trustees who are not interested persons of the Trust (as that
term is defined in the Investment Company Act of 1940) shall be, and is,
committed to the discretion of such disinterested Trustees.
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
the Board of Trustees may be held at any place within or outside The
Commonwealth of Massachusetts that has been designated from time to time by
resolution of the Board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the Trust. Any meeting,
regular or special, may be held by conference telephone or similar communication
equipment, so long as all Trustees participating in the meeting can hear one
another and all such Trustees shall be deemed to be present in person at the
meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Trustees
shall be held without call at such time as shall from time to time be fixed by
the Board of Trustees. Such regular meetings may be held without notice.
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<PAGE>
Section 6. SPECIAL MEETINGS. Special meetings of the Board of Trustees
for any purpose or purposes may be called at any time by the chairman of the
board or the president or any vice president or the secretary or any two (2)
Trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each Trustee or sent by first-class mail or
telegram, charges prepaid, addressed to each Trustee at that Trustee's address
as it is shown on the records of the Trust. In case the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. In case the notice is delivered personally
or by telephone or to the telegraph company, it shall be given at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
Trustee or to a person at the office of the Trustee who the person giving the
notice has reason to believe will promptly communicate it to the Trustee. The
notice need not specify the purpose of the meeting or the place if the meeting
is to be held at the principal executive office of the Trust.
Section 7. QUORUM. A majority of the authorized number of Trustees
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the Trustees present at a meeting duly held at which a quorum
is present shall be regarded as the act of the Board of Trustees, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
Trustees if any action taken is approved by a least a majority of the required
quorum for that meeting.
Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given to
any Trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any Trustee who attends the meeting without protesting
before or at its commencement the lack of notice to that Trustee.
Section 9. ADJOURNMENT. A majority of the Trustees present, whether or
not constituting a quorum, may adjourn any meeting to another time and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
holding an adjourned meeting need not be given unless the meeting is adjourned
for more than forty-eight (48) hours, in which case notice of the time and place
shall be given before the time of the adjourned meeting in the manner specified
in Section 7 of this Article III to the Trustees who were present at the time of
the adjournment.
Section 11. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the Board of Trustees may be taken without a meeting if a
majority of the members of the Board of Trustees shall individually or
collectively consent in writing to that action. Such action by written consent
6
<PAGE>
shall have the same force and effect as a majority vote of the Board of
Trustees. Such written consent or consents shall be filed with the minutes of
the proceedings of the Board of Trustees.
Section 12. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Trustees. This Section 12 shall not be construed to preclude any
Trustee from serving the Trust in any other capacity as an officer, agent,
employee, or otherwise and receiving compensation for those services.
Section 13. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (5) months
at any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration of Trust except as otherwise expressly provided
herein or by resolution of the Board of Trustees.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board of Trustees may by
resolution adopted by a majority of the authorized number of Trustees designate
one or more committees, each consisting of two (2) or more Trustees, to serve at
the pleasure of the Board. The Board may designate one or more Trustees as
alternate members of any committee who may replace any absent member at any
meeting of the committee. Any committee to the extent provided in the resolution
of the Board, shall have the authority of the Board, except with respect to:
(a) the approval of any action which under applicable law also
requires shareholders' approval or approval of the outstanding
shares, or requires approval by a majority of the entire Board
or certain members of said Board;
(b) the filling of vacancies on the Board of Trustees or in any
committee;
(c) the fixing of compensation of the Trustees for serving on the
Board of Trustees or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the
By-Laws or the adoption of new By-Laws;
(e) the amendment or repeal of any resolution of the Board of
Trustees which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the Trust, except at a
rate or in a periodic amount or within a designated range
determined by the Board of Trustees; or
(g) the appointment of any other committees of the Board of
Trustees or the members of these committees.
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of
committees shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
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thereof as are necessary to substitute the committee and its members for the
Board of Trustees and its members, except that the time of regular meetings of
committees may be determined either by resolution of the Board of Trustees or by
resolution of the committee. Special meetings of committees may also be called
by resolution of the Board of Trustees. Alternate members shall be given notice
of meetings of committees and shall have the right to attend all meetings of
committees. The Board of Trustees may adopt rules for the government of any
committee not inconsistent with the provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a president, a
secretary, and a treasurer. The Trust may also have, at the discretion of the
Board of Trustees, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article V. Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the Trust, except such
officers as may appointed in accordance with the provisions of Section 3 or
Section 5 of this Article V, shall be chosen by the Board of Trustees, and each
shall serve at the pleasure of the Board of Trustees, subject to the rights, if
any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board of Trustees may appoint and
may empower the president to appoint such other officers as the business of the
Trust may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in these By-Laws or as the
Board of Trustees may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Trustees at any regular
or special meeting of the Board of Trustees or by the principal executive
officer or by such other officer upon whom such power of removal may be
conferred by the Board of Trustees.
Any officer may resign at any time by giving written notice to the
Trust. Any resignation shall take effect at the date of the receipt of that
notice or at any later time specified in that notice; and unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of
death, resignation, removal, disqualification or other cause shall be filled
8
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in the manner prescribed in these By-Laws for regular appointment to that
office. The president may make temporary appointments to a vacant office pending
action by the Board of Trustees.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an
officer is elected, shall if present preside at meetings of the Board of
Trustees and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Trustees or prescribed by the
By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Trustees to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the Trust
and shall, subject to the control of the Board of Trustees, have general
supervision, direction and control of the business and the officers of the
Trust. He shall preside at all meetings of the shareholders and in the absence
o~ the chairman of the board or if there be none, at all meetings of the Board
of Trustees. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the Board of Trustees or these
By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Trustees or if not ranked, the executive vice president (who shall be
considered first ranked) and such other vice presidents as shall be designated
by the Board of Trustees, shall perform all the duties of the president and when
so acting shall have all powers of and be subject to all the restrictions upon
the president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Trustees or the president or the chairman of the board or by these
By-Laws.
Section 9. SECRETARY. The secretary shall keep or cause to be kept at
the principal executive office of the Trust or such other place as the Board of
Trustees may direct a book of minutes of all meetings and actions of Trustees,
committees of Trustees and shareholders with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at Trustees' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings, and the
proceedings.
The secretary shall keep or cause to be kept at the principal executive
office of the Trust or at the office of the Trust's transfer agent or registrar,
a share register or a duplicate share register showing the names of all
shareholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same and the number and date
of cancellation of every certificate surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board of Trustees required to be given by these
By-Laws or by applicable law and shall have such other powers and perform such
other duties as may be prescribed by the Board of Trustees or by these By-Laws.
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Section 10. TREASURER. The treasurer shall be the chief financial
officer and chief accounting officer of the Trust and shall keep and maintain or
cause to be kept and maintained adequate and correct books and records of
accounts of the properties and business transactions of the Trust, including
accounts of its assets, liabilities, receipts, disbursements, gains, losses,
capital, retained earnings and shares. The books of account shall at all
reasonable times be open to inspection by any Trustee.
The treasurer shall deposit all monies and other valuables in the name
and to the credit of the Trust with such depositaries as may be designated by
the Board of Trustees. He shall disburse the funds of the Trust as may be
ordered by the Board of Trustees, shall render to the president and Trustees,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the Trust and shall have
other powers and perform such other duties as may be prescribed by the Board of
Trustees or these By-Laws.
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed: (a) in the case of conduct in his official
capacity as a Trustee of the Trust, that his conduct was in the Trust's best
interests and (b), in all other cases, that his conduct was at least not opposed
to the Trust's best interests and (c) in the case of a criminal proceeding, that
he had no reasonable cause to believe the conduct of that person was unlawful.
The termination of any proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which the
person reasonably believed to be in the best interests of this Trust or that the
person had reasonable cause to believe that the person's conduct was unlawful.
10
<PAGE>
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of this Trust to procure a
judgment in its favor by reason of the fact that that person is or was an agent
of this Trust, against expenses actually and reasonably incurred by that person
in connection with the defense or settlement of that action if that person acted
in good faith, in a manner that person believed to be in the best interests of
this Trust and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard, of the duties involved in the conduct of
the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis that
personal benefit was improperly received by him, whether or
not the benefit resulted from an action taken in the person's
official capacity; or
(b) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the
performance of that person's duty to this Trust, unless and
only to the extent that the court in which that action was
brought shall determine upon application that in view of all
the circumstances of the case, that person was not liable by
reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine; or
(c) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval,
or of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party Trustees, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
11
<PAGE>
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not
parties to the proceeding and are not interested persons of
the Trust (as defined in the Investment Company Act of 1940);
or
(b) A written opinion by an independent legal counsel.
Section 7. AUTHORIZATION OF INDEMNIFICATION AND DETERMINATION OF
REASONABLENESS. An authorization of indemnification and determination as to
reasonableness of expenses must be made in the same manner as set forth in
Section 6 of this Article for the determination that indemnification is
permissible, except that if the determination that indemnification is
permissible is made by independent legal counsel, authorization of
indemnification and determination as to reasonableness of expenses must be made
by a majority vote of a quorum consisting of Trustees who, at the time of the
vote, are not named defendants or respondents in the proceeding; or if such a
quorum cannot be obtained, by a majority vote of a committee of the Board of
Trustees, designated to act in the matter by a majority vote of all Trustees,
consisting solely of two or more Trustees who, at the time of the vote, are not
named defendants or respondents in the proceeding.
Section 8. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding (a) receipt of a written affirmation by the Trustee of his good faith
belief that he has met the standard of conduct necessary for indemnification
under this Article and a written undertaking by or on behalf of the agent, such
undertaking being an unlimited general obligation to repay the amount of the
advance if it is ultimately determined that he has not met those requirements,
and (b) a determination that the facts then known to those making the
determination would not preclude indemnification under this Article.
Determinations and authorizations of payments under this Section must be made in
the manner specified in Section 6 of this Article for determining that the
indemnification is permissible.
Section 9. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 10. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any circumstances
where it appears:
(a) That it would be inconsistent with a provision of the
Declaration of Trust, a resolution of the shareholders, or an
agreement in effect at the time of accrual of the alleged
cause of action asserted in the proceeding in which the
expenses were incurred or other amounts were paid which
prohibits or otherwise limits indemnification; or
12
<PAGE>
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 11. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article.
Section 12. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit, any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. This
Trust shall keep at its principal executive office or at the office of its
transfer agent or registrar, if either be appointed and as determined by
resolution of the Board of Trustees, a record of its shareholders, giving the
names and addresses of all shareholders and the number and series of shares held
by each shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep
at its principal executive office the original or a copy of these By-Laws as
amended to date, which shall be open to inspection by the shareholders at all
reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the shareholders and the Board
of Trustees and any committee or committees of the Board of Trustees shall be
kept at such place or places designated by the Board of Trustees or in the
absence of such designation, at the principal executive office of the Trust. The
minutes shall be kept in written form and the accounting books and records shall
be kept either in written form or in any other form capable of being converted
into written form. The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate at any reasonable time during usual business hours for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or by
an agent or attorney and shall include the right to copy and make extracts.
13
<PAGE>
Section 4. INSPECTION BY TRUSTEES. Every Trustee shall have the
absolute right at any reasonable time to inspect all books, records, and
documents of every kind and the physical properties of the Trust. This
inspection by a Trustee may be made in person or by an agent or attorney and the
right of inspection includes the right to copy and make extracts of documents.
Section 5. FINANCIAL STATEMENTS. A copy of any financial statements and
any income statement of the Trust for each quarterly period of each fiscal year
and accompanying balance sheet of the Trust as of the end of each such period
that has been prepared by the Trust shall be kept on file in the principal
executive office of the Trust for at least twelve (12) months and each such
statement shall be exhibited at all reasonable times to any shareholder
demanding an examination of any such statement or a copy shall be mailed to any
such shareholder.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the Trust or the certificate of an authorized officer of
the Trust that the financial statements were prepared without audit from the
books and records of the Trust.
ARTICLE VIII
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness issued in the name of or payable to the Trust shall be signed or
endorsed in such manner and by such person or persons as shall be designated
from time to time in accordance with the resolution of the Board of Trustees.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board of
Trustees, except as otherwise provided in these By-Laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Trust and this authority may be
general or confined to specific instances; and unless so authorized or ratified
by the Board of Trustees or within the agency power of an officer, no officer,
agent, or employee shall have any power or authority to bind the Trust by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares o~ beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the chairman of the board or the
president or vice president and by the treasurer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the series of shares owned by the shareholders. Any or all of the signatures on
the certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed on a
certificate shall have ceased to be that officer, transfer agent, or registrar
14
<PAGE>
before that certificate is issued, it may be issued by the Trust with the same
effect as if that person were an officer, transfer agent or registrar at the
date of issue. Notwithstanding the foregoing, the Trust may adopt-and use a
system of issuance, recordation and transfer of its shares by electronic or
other means.
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no
new certificates for shares shall be issued to replace an old certificate unless
the latter is surrendered to the Trust and canceled at the same time. The Board
of Trustees may in case any share certificate or certificate for any other
security is lost, stolen, or destroyed, authorize the issuance of a replacement
certificate on such terms and conditions as the Board of Trustees may require,
including a provision for indemnification of the Trust secured by a bond or
other adequate security sufficient to protect the Trust against any claim that
may be made against it, including any expense or liability on account of the
alleged loss, theft, or destruction of the certificate or the issuance of the
replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST.
The chairman of the board, the president or any vice president or any other
person authorized by resolution of the Board of Trustees or by any of the
foregoing designated officers, is authorized to vote or represent on behalf of
the Trust any and all shares of any corporation, partnership, trusts, or other
entities, foreign or domestic, standing in the name of the Trust. The authority
granted may be exercised in person or by a proxy duly executed by such
designated person.
Section 6. FISCAL YEAR. The fiscal year of the Trust shall be fixed and
refixed or changed from time to time by resolution of the Trustees. The fiscal
year of the Trust shall be the taxable year of each Series of the Trust.
ARTICLE IX
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended or
repealed by the affirmative vote or written consent of a majority of the
outstanding shares entitled to vote, except as otherwise provided by applicable
law or by the Declaration of Trust or these By-Laws.
Section 2. AMENDMENT BY TRUSTEES. Subject to the right of shareholders
as provided in Section 1 of this Article to adopt, amend or repeal By-Laws, and
except as otherwise provided by applicable law or by the Declaration of Trust,
these By-Laws may be adopted, amended, or repealed by the Board of Trustees.
15
January 15, 1996
Leahi Investment Trust
Ward Plaza
210 Ward Avenue
Suite 129
Honolulu, Hawaii 96814
Ladies and Gentlemen:
As counsel to Leahi Investment Trust, a Massachusetts business trust
(the "Trust"), we have been asked to render our opinion with respect to the
issuance by the Trust of shares of beneficial interest (the "Shares") of Leahi
Tax-Free Income Trust (the "Fund"), which is a series of the Trust which has
been established and designated pursuant to Section 6 of Article III of the
Trust's Agreement and Declaration of Trust dated July 23, 1987, all as more
fully described in the prospectus (the "Prospectus") and statement of additional
information ("SAI") contained in Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A of the Trust (file No. 33-17022) under the
Securities Act of 1933, as amended
We wish to advise you that we have made such inquiry of your officers
and trustees and have examined such corporate documents, records and
certificates and other documents and such questions of law as we have deemed
necessary for the purposes of this opinion.
In rendering this opinion, we have relied, with your approval, as to
all questions of fact material to this opinion, upon certificates of public
officials and of your officers and have assumed, with your approval, that the
signatures on all documents examined by us are genuine, which facts we have not
independently verified.
Based upon and subject to the foregoing, we are of the opinion that the
Shares when issued and sold pursuant to the terms, provisions and conditions of
the Prospectus and SAI in effect at the time of sale, will be legally and
validly issued, fully paid and nonassessable by the Trust.
With respect to the opinion stated above, we wish to point out that the
shareholders of a Massachusetts business trust may, under some circumstances, be
subject to assessment at the instance of creditors to pay the obligations of
such trust in the event that its assets are insufficient for the purpose.
<PAGE>
-2-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm as the legal counsel to
the Trust in the Prospectus and SAI contained in the Registration Statement. In
giving such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
SULLIVAN & WORCESTER
A Registered Limited Liability Partnership
Exhibit 99.11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement,
(Form N-1A), and related Statement of Additional Information of Leahi Investment
Trust and to the inclusion of our report dated October 12, 1995 to the
Shareholders and Board of Trustees of Leahi Investment Trust.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 15, 1996
Exhibit 99.19
POWER OF ATTORNEY
Each of the undersigned Trustees and Officers of LEAHI INVESTMENT TRUST
(the "Trust") hereby appoints RONALD E. KENT, DIANNE J. QUALTROUGH, and SULLIVAN
& WORCESTER (with full power to each of them to act alone) his attorney-in-fact
and agent, in all capacities, to execute and to file any document relating to
the Trust's Registration Statement on Form N-1A under the Investment Company Act
of 1940 and under the Securities Act of 1933, including any and all amendments
thereto, covering the registration and the sales of shares by the Trust,
including all exhibits and any and all documents required to be filed with
respect thereto with any regulatory authority, including applications for
exemptive orders or rulings. Each of the undersigned grants to each of said
attorneys full authority to do every act necessary to be done in order to
effectuate the same as fully, to all intents and purposes, as he could do if
personally present, thereby ratifying all that said attorneys-in-fact and agents
may lawfully do or cause to be done by virtue hereof.
The undersigned Trustees and Officers hereby execute this Power of
Attorney as of this AUGUST 10, 1995.
/s/ Ronald E. Kent /s/ Ernest W. Albrecht
Ronald E. Kent Ernest W. Albrecht, Trustee
Trustee and Principal
Chairman
/s/ Gail Ann Chew /s/ Kim F. Scoggins
Gail Ann Chew, Trustee Kim F. Scoggins, Trustee
/s/ Karen T. Nakamura /s/ Dianne J. Qualtrough
Karen T. Nakamura, Trustee Dianne J. Qualtrough
Trustee and Principal,
President
/s/ David M. Walker
David M. Walker, Trustee
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This Schedule contains Summary Financial Information extracted from the
Registrant's financial statements contained in its most recent Annual Report and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 42,472,062
<INVESTMENTS-AT-VALUE> 44,635,958
<RECEIVABLES> 793,462
<ASSETS-OTHER> 367,798
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,797,218
<PAYABLE-FOR-SECURITIES> 161,363
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 98,858
<TOTAL-LIABILITIES> 260,221
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,445,853
<SHARES-COMMON-STOCK> 3,314,325
<SHARES-COMMON-PRIOR> 3,317,487
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (72,752)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,163,896
<NET-ASSETS> 45,536,997
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,627,754
<OTHER-INCOME> 0
<EXPENSES-NET> 352,090
<NET-INVESTMENT-INCOME> 2,275,664
<REALIZED-GAINS-CURRENT> (59,064)
<APPREC-INCREASE-CURRENT> 1,586,371
<NET-CHANGE-FROM-OPS> 3,802,971
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,275,664)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 423,298
<NUMBER-OF-SHARES-REDEEMED> (541,062)
<SHARES-REINVESTED> 114,602
<NET-CHANGE-IN-ASSETS> 1,608,756
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (13,688)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 214,800
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 352,090
<AVERAGE-NET-ASSETS> 42,962,287
<PER-SHARE-NAV-BEGIN> 13.24
<PER-SHARE-NII> .71
<PER-SHARE-GAIN-APPREC> .50
<PER-SHARE-DIVIDEND> (.71)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.74
<EXPENSE-RATIO> .82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
