As filed with the Securities and Exchange Commission on September 30, 1996
File Nos. 33-41692 and 811-06351
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 8
and
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 11
GREEN CENTURY FUNDS
(Exact Name of Registrant as Specified in Charter)
29 Temple Place, Suite 200, Boston, Massachusetts 02111
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 617-482-0800
Kristina A. Curtis, Green Century Capital Management, Inc.
29 Temple Place, Suite 200, Boston, Massachusetts 02111
(Name and Address of Agent for Service)
Copy to:
Thomas M. Lenz, Esq.
Signature Financial Group, Inc.
6 St. James Avenue
Boston, MA 02116
It is proposed that this filing will become effective (check
appropriate box)
[x] immediately upon filing pursuant to pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES OF BENEFICIAL
INTEREST (PAR VALUE $0.01 PER SHARE) PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT
COMPANY ACT OF 1940. REGISTRANT FILED THE NOTICE REQUIRED BY RULE 24F-2 ON
AUGUST 29, 1996 FOR REGISTRANT'S FISCAL YEARS ENDED JUNE 30, 1996 AND JULY 31,
1996.
DOMINI SOCIAL INDEX PORTFOLIO HAS ALSO EXECUTED THIS REGISTRATION STATEMENT.
<PAGE>
EXPLANATORY NOTE
This Post-Effective Amendment No. 8 (the "Amendment") to the Registrant's
Registration Statement on Form N-1A is being filed with respect to the Green
Century Balanced Fund and the Green Century Equity Fund (formerly,the Green
Century Growth Fund) (the" Funds"), each a series of the Green Century Funds.
The Amendment incorporates by reference in its entirety Part A of Post-Effective
Amendment No. 7 to the Registrant's Registration Statement on Form N -1A filed
with th Securities and Exchange Commission on September 11, 1995 as if set
forth here in full. The Amendment is being filed pursuant to Rule 485(b) under
the Securities Act of 1933, as amended, for the purpose of updating the Funds'
and the Domini Social Index Portfolio's audited financial statements and adding
exhibits.
<PAGE>
I7061G
GREEN CENTURY FUNDS
FORM N -1A
CROSS REFERENCE SHEET
Part A
ITEM NO. PROSPECTUS HEADINGS
1. Cover Page. . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . Fee Information
3. Financial Highlights . . . . . Financial Highlights
4. General Description of Registrant . . . Cover Page; Investment
Objectives, Policies and Risk
Factors; Green Century Funds
Environmental Standards;
Organization and Management
of the Funds
5. Management of the Fund . . . . . Organization and Management of
the Funds
6. Capital Stock and other Securities . . Cover Page; Your Account;
Shareholder and Account Policies
7. Purchase of Securities Being Offered . Your Account
8. Redemption or Repurchase . . . . Your Account
9. Pending Legal Proceedings . . . Not applicable
Part B Statement of Additional
ITEM NO. INFORMATION HEADINGS
10. Cover Page . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . Table of Contents
12. General Information and History . . Not Applicable
13. Investment Objectives and Policies . . Investment Objectives, Risks
and Policies; Investment
Restrictions
<PAGE>
Part B Statement of Additional
ITEM NO. INFORMATION HEADINGS
14. Management of the Fund . . . . . Trustees, Officers and Advisory
Board
15. Control Persons and Principal Holders
of Securities . . . . . Trustees, Officers and Advisory
Board
16. Investment Advisory and Other Services . Investment Advisers;
Administrator, Transfer Agent and
Custodian, and Expenses
17. Brokerage Allocation and Other Practices. Portfolio Transactions and
Brokerage Commissions
18. Capital Stock and Other Securities . . . Description of Shares, Voting
Rights and Liabilities
19. Purchase, Redemption and Pricing of
Securities Being Offered . . Net Asset Value; Redemption in
Kind; Additional Information
20. Tax Status . . . . . . . . . . . Federal Taxes
21. Underwriters . . . . . . . . . . Distribution Plan
22. Calculation of Performance Data. . Performance Advertising
23. Financial Statements . . . . . . Financial Statements
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this registration statement.
<PAGE>
GREEN CENTURY FUNDS
GREEN CENTURY FUNDS
SUPPLEMENT DATED SEPTEMBER 30, 1996
TO PROSPECTUS DATED SEPTEMBER 11, 1995
1. The date of the Prospectus is amended to September 30, 1996.
2. The current Statement of Additional Information is dated September 30, 1996.
3. The first sentence of the section "Financial Highlights" is hereby amended
as follows:
The following information has been audited by KPMG Peat Marwick LLP,
independent certified public accountants, whose report thereon appears
in the Statement of Additional Information which may be obtained free
of charge. Prior to July 1, 1995, Tait, Weller & Baker served as
independent certified public accountants for the Balanced Fund.
4. The following figures for the fiscal year ended June 30, 1996 are inserted
into the financial highlights table for the Green Century Balanced Fund to
the left of the respective figures for June 30, 1995:
FOR THE YEAR ENDED
JUNE 30, 1996
Net Asset Value, beginning of period. . . . . . . . . . . . . . . . . $ 11.03
Income from investment operations:
Net investment income . . . . . . . . . . . . . . . . . . . . . . . 0.095
Net realized and unrealized ga n (loss) on investments. . . . . . . 2.313
-----
Total increase from investment operations . . . . . . . . . . . . . 2.408
-----
Less dividends:
Dividends from net investment income. . . . . . . . . . . . . . . . (0.098)
-------
Net Asset Value, end of period. . . . . . . . . . . . . . . . . . . . $ 13.34
=======
Total return.......................................................... 21.98%
Ratios/supplemental data
Net Assets, end of period (in 000's)................................$ 8,215
Ratio of expenses to average net assets............................. 2.50%
Ratio of net investment income to average net assets................ 0.85%
Portfolio Turnover. . . . . . . . . . . . . . . . . . . . . . . . . 136%
Average commission rate paid per share..............................$ 0.0628
<PAGE>
5. The following figures for the period September 13, 1995 (commencement of
operations) to July 31, 1996 replace the financial highlights table for the
Green Century Equity Fund:
FOR THE PERIOD
SEPTEMBER 13, 1995
(COMMENCEMENT OF
OPERATIONS) TO
JULY 31, 1996
Net Asset Value, beginning of period................................ $10.00
Income from investment operations:
Net investment income............................................. 0.02
Net realized and unrealized gain on investment .................... 1.04
------
Total increase from investment operations ......................... 1.06
------
Less dividends:
Dividends from net investment income............................... (0.02)
-------
Net Asset Value, end of period.................................... $11.04
========
Total return...................................................... 10.64%(a)
Ratios/supplemental data
Net Assets, end of period (in 000's) ................................ $880
Ratio of expenses to average net assets ............................. 1.50%(b)
Ratio of net investment income to average net assets . . . . . .. . 0.49%(b)
(a) Not annualized.
(b) Annualized.
6. The following figures replace the annualized total rate of return table for
the Green Century Equity Fund:
<TABLE>
<S> <C> <C> <C> <C>
1 Year 3 Years 5 Years Inception*
(as of 7/31/96) (as of 7/31/96) (as of 7/31/96) to 7/31/96
Annualized Total Rate of Return** 14.16% 13.17% 12.89% 11.62%
</TABLE>
* The Index Portfolio commenced investment operations on June 3, 1991.
** The Green Century Equity Fund, which commenced investment operations in
September, 1995, invests all of its assets in an existing separate
registered investment company which has the same investment objective as the
Fund (the "Portfolio"). Consistent with regulatory guidance, performance for
the period prior to the Fund's inception reflects the performance of the
Portfolio adjusted to reflect the deduction of the charges and expenses of
the Fund.
7. The fourth sentence of the third paragraph of the subsection "The Green
Century Balanced Fund Investment Objectives" is hereby amended as follows:
As of June 30, 1996, 21.4% of the net assets of the Fund were invested
in below investment grade securities.
8. The following paragraph is added at the end of the subsection "The Green
Century Balanced Fund Investment Objectives":
The portfolio turnover rate is the ratio of the lesser of sales or
purchases to the monthly average value of the portfolio (excluding from
both the numerator and the denominator all securities with maturities
at the time of acquisition of one year or less). Higher levels of Fund
activity result in higher transaction costs and may also result in
taxes on realized gains to be borne by the Fund's shareholders.
Purchases and sales are made for the Fund whenever necessary, in
management's opinion, to meet the Fund's objective. The portfolio
turnover rate of the Balanced Fund for the fiscal years ended June 30,
1995 and 1996 was 16% and 136%, respectively. The higher portfolio
turnover for the fiscal year ended June 30, 1996 was due, in part, to
the restructuring effort by Winslow, which became the Subadviser of the
Balanced Fund
<PAGE>
on July 1, 1995. Winslow repositioned the equity portion of the Fund's
portfolio so as to emphasize investments in securities of
environmentally proactive growth companies. Winslow repositioned the
fixed income portion of the Fund's portfolio by reducing holdings of
Treasury securities and increasing holdings of environmentally
responsible corporate debt securities. It is anticipated that the
Portfolio turnover rate of the Balanced Fund will be lower in the
future.
9. The second sentence of the fifth paragraph of the subsection "The Green
Century Equity Fund Investment Objectives" is hereby amended as follows:
The annual portfolio turnover rates of the Index Portfolio for the
fiscal years ended July 31, 1995 and 1996 were 6% and 5%, respectively.
10. The third sentence of the third paragraph of the subsection "Winslow
Management Company, a Division of Eaton Vance Management" is hereby amended
as follows:
Currently, Winslow has $50 million in assets under management and
Winslow and Eaton Vance, collectively, have $17 billion in assets under
management.
11. The following sentence is added at the end of the second paragraph of the
subsection "Kinder, Lydenberg, Domini & Co., Inc. - Investment Adviser:"
For the fiscal year ended July 31, 1996, KLD received advisory fees of
$38,150 from the Portfolio.
12. The second sentence of the first paragraph of the subsection "Mellon Equity
Associates - Investment Manager" is hereby amended as follows:
Mellon Equity is a Pennsylvania business trust whose beneficial owners
are Mellon Bank N.A. and MMIP, Inc.
13. The fourth sentence of the first paragraph of the subsection "Mellon Equity
Associates - Investment Manager" is hereby amended as follows:
As of June 30, 1996 Mellon Equity had approximately $9.8 billion in
assets under management.
14. The following sentence is added to the end of the first paragraph of the
subsection "Signature Broker-Dealer Services, Inc. - Subadministrator:"
For the fiscal year ended July 31, 1996, Signature received
administrative services fees of $38,150.
15. The second sentence of the subsection "Investors Bank & Trust Company -
Transfer Agent and Custodian" is hereby amended as follows:
IBT currently processes approximately $107 billion in assets (including
$7 billion in foreign assets) with approximately $85 billion in assets
under custody and approximately 1300 mutual funds.
16. The subsections entitled Tait, Weller & Baker - Auditors and KPMG Peat
Marwick LLP - Auditors are hereby amended as follows:
AUDITORS - Tait, Weller & Baker served as the independent auditors of
the Balanced Fund until July 1, 1995 at which time KPMG Peat Marwick
LLP became the independent auditors of the Balanced Fund. KPMG Peat
Marwick are the independent auditors of the Equity Fund and the Index
Portfolio. Their address is 99 High Street, Boston, MA 02110.
17. The list of Trustees in the subsection "Green Century Funds Board of
Trustees" is hereby amended to delete Gina Collins.
EI7122B
<PAGE>
EI7059K
================================================================================
STATEMENT OF ADDITIONAL INFORMATION
GREEN CENTURY FUNDS
29 TEMPLE PLACE, SUITE 200, BOSTON, MASSACHUSETTS 02111
===============================================================================
Green Century Funds (the "Trust") offers two separate series (each, a
"Fund"), each with its own investment objective. Each series pursues its
respective investment objective through investments consistent with the Trust's
commitment to environmental responsibility. The GREEN CENTURY BALANCED FUND (the
"Balanced Fund") seeks capital growth and income from a diversified portfolio of
stocks and bonds compatible with the Trust's commitment to environmental
responsibility. The GREEN CENTURY EQUITY FUND (the "Equity Fund") seeks
long-term total return from a diversified portfolio of stocks which corresponds
to the total return performance of the "Domini Social IndexSM" (the "Social
Index"), an index comprised of stocks selected based upon environmental and
social criteria. The Equity Fund seeks to achieve its investment objective by
investing all of its investable assets (the "Assets") in the Domini Social Index
Portfolio (the "Index Portfolio"), a diversified open-end management investment
company having the same investment objective as the Equity Fund. The Index
Portfolio invests in the common stocks included in the Social Index. There can
be no assurance that the investment objective of each Fund will be achieved.
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the Trust's Prospectus dated September 30, 1996, a
copy of which may be obtained from the Trust at the address noted above. Terms
used but not defined herein, but which are defined in the Prospectus, are used
as defined in the Prospectus.
TABLE OF CONTENTS PAGE
Investment Objectives, Risks and Policies......................... 2
History of Green Century Funds and Green Century
Capital Management Shareholder Activism........................... 18
Investment Restrictions........................................... 20
Trustees, Officers and Advisory Board............................. 28
Investment Advisers............................................... 33
Administrator, Transfer Agent and Custodian, and Expenses ........ 36
Distribution Plan................................................. 37
Net Asset Value; Redemption in Kind............................... 38
Performance Advertising........................................... 40
Federal Taxes..................................................... 41
Description of Shares, Voting Rights and Liabilities.............. 43
Portfolio Transactions and Brokerage Commissions.................. 45
Independent Accountants and Experts............................... 50
Additional Information............................................ 50
Financial Statements.............................................. 51
Appendix - Description of Securities Ratings...................... i
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS SEPTEMBER 30, 1996.
<PAGE>
INVESTMENT OBJECTIVES, RISKS AND POLICIES
===============================================================================
The following supplements the information contained in the Prospectus
concerning the investment objective, policies and techniques of the Funds and
the Index Portfolio.
BALANCED FUND
U.S. GOVERNMENT AGENCY OBLIGATIONS--The Fund will invest in obligations
issued or guaranteed by U.S. Government agencies, authorities or
instrumentalities, some of which are backed by the full faith and credit of the
U.S. Government (i.e., direct pass-through certificates of the Government
National Mortgage Association ("GNMA")), some of which are supported by the
right of the issuer to borrow from the U.S. Government (i.e., obligations of the
Federal Home Loan Banks) and some of which are backed only by the credit of the
issuer itself (i.e., obligations of the Student Loan Marketing Association).
REPURCHASE AGREEMENTS--Repurchase agreements may be entered into for
the Fund only with selected banks or broker-dealers. This is an agreement in
which the seller (the "Lender") of a security agrees to repurchase from the Fund
the security sold at a mutually agreed upon time and price. As such, it is
viewed as the lending of money to the Lender. The resale price normally is in
excess of the purchase price, reflecting an agreed upon interest rate. The rate
is effective for the period of time assets of the Fund are invested in the
agreement and is not related to the coupon rate on the underlying security. The
period of these repurchase agreements will usually be short, from overnight to
one week. The securities which are subject to repurchase agreements, however,
may have maturity dates in excess of one year from the effective date of the
repurchase agreement. The Fund will always receive as collateral securities
whose market value (which is marked to the market daily), including accrued
interest, will be at least equal to 100% of the dollar amount invested on behalf
of the Fund in each agreement along with accrued interest. Payment for such
securities will be made for the Fund only upon physical delivery or evidence of
book entry transfer to the account of the Trust's custodian. If the seller under
a repurchase agreement becomes insolvent, the Fund's right to dispose of the
securities may be restricted. In the event of the commencement of bankruptcy or
insolvency proceedings with respect to the seller of the security before
repurchase of the security under a repurchase agreement, the Fund may encounter
delay and incur costs before being able to sell the security. If the Lender
defaults, the Fund might incur a loss if the value of the collateral securing
the repurchase agreement declines and might incur disposition costs in
connection with liquidating the collateral. In addition, if bankruptcy
proceedings are commenced with respect to the Lender, realization upon the
collateral on behalf of the Fund may be delayed or limited in certain
circumstances. The Lender may also fail to repurchase the obligations.
Repurchase agreements are considered collateralized loans under the Investment
Company Act of 1940, as amended (the "1940 Act").
A repurchase agreement with more than seven days to maturity may not be
entered into for the Fund if, as a result, more than 15% of the market value of
the Fund's net assets would be invested in such repurchase agreements together
with any illiquid securities that the Fund may hold. The Balanced Fund has no
2
<PAGE>
current intention to invest more than 5% of its net assets in repurchase
agreements.
CERTIFICATES OF DEPOSIT--The Fund may invest in certificates of deposit
of large domestic or foreign banks (i.e., banks which at the time of their most
recent annual financial statements show total assets in excess of one billion
U.S. dollars or the equivalent thereof) and certificates of deposit of smaller
banks as described below. Although the Trust recognizes that the size of a bank
is important, this fact alone is not necessarily indicative of its
creditworthiness. Investment in certificates of deposit issued by foreign banks
or foreign branches of domestic banks involves investment risks that are
different in some respects from those associated with investment in certificates
of deposit issued by domestic banks, including the possible imposition of
withholding taxes on interest income, the possible adoption of foreign
governmental restrictions which might adversely affect the payment of principal
and interest on such certificates of deposit, or other adverse political or
economic developments. In addition, it might be more difficult to obtain and
enforce a judgment against a foreign bank or a foreign branch of a domestic
bank. (See "Foreign Securities".)
The Fund may also invest in certificates of deposit issued by banks and
savings and loan institutions which had at the time of their most recent annual
financial statements total assets of less than one billion dollars, provided
that (i) the principal amounts of such certificates of deposit are insured by an
agency of the U.S. Government, (ii) at no time will the Fund hold more than
$100,000 principal amount of certificates of deposit of any one such bank, and
(iii) at the time of acquisition, no more than 10% of the Fund's assets (taken
at current value) are invested in certificates of deposit of such banks having
total assets not in excess of one billion dollars.
WHEN-ISSUED SECURITIES--The Fund may purchase securities offered on a
"when-issued" or "forward delivery" basis. When so offered, the price, which is
generally expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for the when-issued or forward
delivery securities take place at a later date. During the period between
purchase and settlement, no payment is made by the purchaser to the issuer and
no interest on the when-issued or forward delivery security accrues to the
purchaser. While when-issued or forward delivery securities may be sold prior to
the settlement date, it is intended that the Fund will purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the Fund makes the commitment to purchase a
security on a when-issued or forward delivery basis, it will record the
transaction and reflect the value of the security in determining its net asset
value. The market value of when-issued or forward delivery securities may be
more or less than the purchase price. The Trust does not believe that the Fund's
net asset value or income will be adversely affected by its purchase of
securities on a when-issued or forward delivery basis. The Fund will establish a
segregated account in which it will maintain cash, U.S. Government securities
and high-grade debt obligations equal in value to commitments for when-issued or
forward delivery securities.
3
<PAGE>
MORTGAGE-BACKED SECURITIES AND MORTGAGE PASS-THROUGH SECURITIES--The
Fund may also invest in mortgage-backed securities, which are interests in pools
of mortgage loans, including mortgage loans made by savings and loan
institutions, mortgage bankers, commercial banks and others. Pools of mortgage
loans are assembled as securities for sale to investors by various governmental,
government-related and private organizations as further described below.
Unscheduled or early payments on the underlying mortgage may shorten
the securities' effective maturities and lessen their growth potential. The Fund
may agree to purchase or sell these securities with payment and delivery taking
place at a future date. A decline in interest rates may lead to a faster rate of
repayment of the underlying mortgages, and expose the Fund to a lower rate of
return upon reinvestment. To the extent that such mortgage-backed securities are
held by the Fund, the prepayment right will tend to limit to some degree the
increase in net asset value of the Fund because the value of the mortgage-backed
securities held by the Fund may not appreciate as rapidly as the price of
noncallable debt securities.
Interests in pools of mortgage-backed securities differ from other
forms of debt securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or specified call
dates. Instead, these securities provide a monthly payment which consists of
both interest and principal payments. In effect, these payments are a
"pass-through" of the monthly payments made by the individual borrowers on their
mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by repayments of principal resulting
from the sale of the underlying property, refinancing or foreclosure, net of
fees or costs which may be incurred. Some mortgage-related securities (such as
securities issued by the Government National Mortgage Association) are described
as "modified pass-through." These securities entitle the holder to receive all
interest and principal payments owed on the mortgage pool, net of certain fees,
at the scheduled payment dates regardless of whether or not the mortgagor
actually makes the payment.
The principal governmental guarantor of mortgage-related securities is
the Government National Mortgage Association ("GNMA"). GNMA is a wholly owned
United States Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and credit of
the United States Government, the timely payment of principal and interest on
securities issued by institutions approved by GNMA (such as savings and loan
institutions, commercial banks and mortgage bankers) and backed by pools of
FHA-insured or VA-guaranteed mortgages. These guarantees, however, do not apply
to the market value or yield of mortgage-backed securities or to the value of
Fund shares. Also, GNMA securities often are purchased at a premium over the
maturity value of the underlying mortgages. This premium is not guaranteed and
will be lost if prepayment occurs.
Government-related guarantors (i.e., not backed by the full faith and
credit of the United States Government) include the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC").
FNMA is a government-sponsored corporation owned entirely by private
stockholders. It is subject to general regulation by the Secretary of Housing
4
<PAGE>
and Urban Development. FNMA purchases conventional (i.e., not insured or
guaranteed by any government agency) mortgages from a list of approved
seller/servicers which include state and federally chartered savings and loan
associations, mutual savings banks, commercial banks and credit unions and
mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to
timely payment of principal and interest by FNMA but are not backed by the full
faith and credit of the United States Government.
FHLMC is a corporate instrumentality of the United States Government
and was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. Its stock is owned by
the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates
("PCs") which represent interests in conventional mortgages from FHLMC's
national portfolio. FHLMC guarantees the timely payment of interest and ultimate
collection of principal, but PCs are not backed by the full faith and credit of
the United States Government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such nongovernmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government or agency guarantees of payments. However, timely payment of interest
and principal of these pools may be supported by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by governmental
entities, private insurers and the mortgage poolers. Such insurance and
guarantees and the creditworthiness of the issuers thereof will be considered in
determining whether a mortgage-related security meets the Fund's investment
quality standards. There can be no assurance that the private insurers or
guarantors can meet their obligations under the insurance policies or guarantee
arrangements. The Fund may buy mortgage-related securities without insurance or
guarantees, if through an examination of the loan experience and practices of
the originators/servicers and poolers, the Fund's investment adviser and
investment subadviser determine that the securities meet the Fund's quality
standards. Although the market for such securities is becoming increasingly
liquid, securities issued by certain private organizations may not be readily
marketable.
FOREIGN CURRENCIES--Investments in foreign securities usually will
involve currencies of foreign countries. Moreover, the Fund temporarily may hold
funds in bank deposits in foreign currencies during the completion of investment
programs and may purchase forward foreign currency contracts, foreign currency
futures contracts and options on such contracts. Because of these factors, the
value of the assets of the Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversions between various currencies. Although the Fund values its assets
daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. It will do so from time
to time, and investors should be aware of the costs of currency conversion.
5
<PAGE>
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies. Thus, a dealer may offer
to sell a foreign currency to the Fund at one rate, while offering a lesser rate
of exchange should the Fund desire to resell that currency to the dealer. The
Fund will conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market, or through entering into forward or futures contracts to purchase or
sell foreign currencies.
Because the Balanced Fund may be invested in both U.S. and foreign
securities markets, changes in the Fund's share price will not be correlated
with movements in the U.S. markets. The Fund's share price will reflect the
movements of both the different stock and bond markets in which it is invested
and of the currencies in which the investments are denominated; the strength or
weakness of the U.S. dollar against foreign currencies may account for part of
the Fund's investment performance. U.S. and foreign securities markets do not
always move in step with each other, and the total returns from different
markets may vary significantly. The Fund may invest in many securities markets
around the world in an attempt to take advantage of opportunities wherever they
may arise.
FLOATING RATE OBLIGATIONS--Certain of the obligations that the Fund may
purchase have a floating or variable rate of interest. Such obligations bear
interest at rates that are not fixed, but which vary with changes in specific
market rates or indices, such as the Prime Rate, and at specified intervals.
Certain of such obligations may carry a demand feature that would permit the
holder to tender them back to the issuer at par value prior to maturity.
Because of the variable rate nature of such instruments, the yield of
the Fund purchasing such instruments will decline and its shareholders will
forego the opportunity for capital appreciation during periods when prevailing
interest rates have declined. On the other hand, during periods where prevailing
interest rates have increased, the Fund's yield will increase and its
shareholders will have reduced risk to capital depreciation.
ZERO COUPON SECURITIES--The Fund may invest in zero coupon securities
which pay no cash income and are sold at substantial discounts from their value
at maturity. Zero coupon securities include so-called "stripped" U.S. Treasury
obligations as well as privately issued securities which are issued by a bank or
a securities firm that has purchased U.S. Treasury obligations and separated
their interest and principal components. When held to maturity, their entire
income, which consists of accretion of discount, comes from the difference
between the purchase price and their value at maturity. Zero coupon securities
are subject to greater market value fluctuations from changing interest rates
than debt obligations of comparable maturities which make current distributions
of interest (cash). Zero coupon convertible securities offer the opportunity for
capital appreciation as increases (or decreases) in market value of such
securities closely follows the movements in the market value of the underlying
common stock. Zero coupon convertible securities generally are expected to be
less volatile than the underlying common stocks as they usually are issued with
short maturities (15 years or less) and are issued with options and/or
redemption
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features exercisable by the holder of the obligation entitling the holder to
redeem the obligation and receive a defined cash payment.
Zero coupon securities include securities issued directly by the U.S.
Treasury, and U.S. Treasury bonds or notes and their unmatured interest coupons
and receipts for their underlying principal ("coupons") which have been
separated by their holder, typically a custodian bank or investment brokerage
firm. A holder will separate the interest coupons from the underlying principal
(the "corpus") of the U.S. Treasury security. A number of securities firms and
banks have stripped the interest coupons and receipts and then resold them in
custodial receipt programs with a number of different names, including "Treasury
Income Growth Receipts" ("TIGRS") and Certificate of Accrual on Treasuries
("CATS"). The underlying U.S. Treasury bonds and notes themselves are held in
book-entry form at the Federal Reserve Bank or, in the case of bearer securities
(i.e., unregistered securities which are owned ostensibly by the bearer or
holder thereof), in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of ownership of the U.S.
Treasury securities has stated that for federal tax and securities purposes, in
their opinion purchasers of such certificates, such as the Funds, most likely
will be deemed the beneficial holder of the underlying U.S. Government
securities. The Fund understands that the staff of the Division of Investment
Management of the Securities and Exchange Commission ("SEC") no longer considers
such privately stripped obligations to be U.S. Government securities, as defined
in the 1940 Act; therefore, the Fund intends to adhere to this staff position
and will not treat such privately stripped obligations to be U.S. Government
securities for the purpose of determining if the Fund is "diversified," or for
any other purpose, under the 1940 Act.
The Treasury has facilitated transfers of ownership of zero coupon
securities by accounting separately for the beneficial ownership of particular
interest coupon and corpus payments on Treasury securities through the Federal
Reserve book-entry record-keeping system. The Federal Reserve program as
established by the Treasury Department is known as "STRIPS" or "Separate Trading
of Registered Interest and Principal of Securities." Under the STRIPS program,
the Fund will be able to have its beneficial ownership of zero coupon securities
recorded directly in the book-entry record-keeping system in lieu of having to
hold certificates or other evidences of ownership of the underlying U.S.
Treasury securities.
When U.S. Treasury obligations have been stripped of their unmatured
interest coupons by the holder, the principal or corpus is sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. Once stripped or separated, the corpus and coupons may be sold
separately. Typically, the coupons are sold separately or grouped with other
coupons with like maturity dates and sold in such bundled form. Purchasers of
stripped obligations acquire, in effect, discount obligations that are
economically identical to the zero coupon securities that the Treasury sells
itself.
EQUITY INVESTMENTS--Equity investments may or may not pay dividends and may
or may not carry voting rights. Common stock occupies the most junior position
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in a company's capital structure. Convertible securities entitle the holder to
exchange the securities for a specified number of shares of common stock,
usually of the same company, at specified prices within a certain period of time
and to receive interest or dividends until the holder elects to convert. The
provisions of any convertible security determine its ranking in a company's
capital structure. In the case of subordinated convertible debentures, the
holder's claims on assets and earnings are subordinated to the claims of other
creditors, and are senior to the claims of preferred and common shareholders. In
the case of preferred stock and convertible preferred stock, the holder's claims
on assets and earnings are subordinated to the claims of all creditors but are
senior to the claims of common shareholders.
DEBT SECURITIES--The Fund may invest in debt securities of foreign and
U.S. issuers. The Fund's debt investments may be selected on the basis of
capital appreciation potential, by evaluating, among other things, potential
yield, if any, credit quality, and the fundamental outlooks for currency and
interest rate trends in different parts of the globe, taking into account the
ability to hedge a degree of currency or local bond price risk. The Fund's
investments in high yield, high risk debt obligations rated below investment
grade, which have speculative characteristics, bear special risks. They are
subject to greater credit risks, including the possibility of default or
bankruptcy of the issuer. The value of such investments may also be subject to a
greater degree of volatility in response to interest rate fluctuations, economic
downturns and changes in the financial condition of the issuer. These securities
generally are less liquid than higher quality securities. During periods of
deteriorating economic conditions and contractions in the credit markets, the
ability of such issuers to service their debt, meet projected goals or obtain
additional financing may be impaired. The Fund will also take such action as it
considers appropriate in the event of anticipated financial difficulties,
default or bankruptcy of either the issuer of any such obligation or of the
underlying source of funds for debt service. Such action may include retaining
the services of various persons and firms (including affiliates of the
investment adviser and investment subadviser) to evaluate or protect any real
estate or other assets securing any such obligation or acquired by the Fund as a
result of any such event. The Fund will incur additional expenditures in taking
protective action with respect to portfolio obligations in default and assets
securing such obligations.
INVESTMENTS BELOW INVESTMENT GRADE--Lower-rated securities ("junk
bonds") usually offer higher yields than higher-rated securities. However, there
is more risk associated with these investments. This is because of the reduced
creditworthiness and increased risk of default that these securities carry.
Lower-rated securities generally tend to reflect short-term corporate and market
developments to a greater extent than higher-rated securities which react
primarily to fluctuations in the general level of interest rates. Lower rated
securities also involve greater sensitivity to significant increases in interest
rates. Short-term corporate and market developments affecting the prices and
liquidity of lower-rated securities could include adverse news impacting major
issues or underwriters or dealers in lower-rated or unrated securities. In
addition, since there are fewer investors in lower-rated securities, it may be
harder to sell securities at an optimum time.
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<PAGE>
An economic downturn may adversely affect the value of some lower-rated
bonds. Such a downturn may especially affect highly leveraged companies or
companies in cyclically sensitive industries, where deterioration in a company's
cash flow may impair its ability to meet its obligation to pay principal and
interest to bondholders in a timely fashion. From time to time, as a result of
changing conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than originally expected at the time such bonds were
purchased. In the event of a restructuring, the Balanced Fund may bear
additional legal or administrative expenses in order to maximize recovery from
an issuer. The secondary trading market for lower-rated bonds is generally less
liquid than the secondary trading market for higher-rated bonds.
The risk of loss due to default by the issuer is significantly greater
for the holders of high yield securities because such securities are generally
unsecured and are often subordinated to other obligations of the issuer. During
an economic downturn or a sustained period of rising interest rates, highly
leveraged issuers of high yield securities may experience financial stress and
may not have sufficient revenues to meet their interest payment obligations. An
issuer's ability to service its debt obligations may also be adversely affected
by specific corporate developments, its inability to meet specific projected
business forecasts, or the unavailability of additional financing.
Factors adversely affecting the market value of high yield and other
portfolio securities will adversely affect the Balanced Fund's net asset value.
In addition, the Fund may incur additional expenses to the extent it is required
to seek recovery upon a default in the payment of principal or interest on its
portfolio holdings.
OPTIONS ON SECURITIES--The Fund may write (sell) covered call and put
options to a limited extent on its portfolio securities ("covered options") in
an attempt to increase gain. However, the Fund may forgo the benefits of
appreciation on securities sold or may pay more than the market price on
securities acquired pursuant to call and put options written by the Fund.
The Fund may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration date
as the option previously written. This transaction is called a "closing purchase
transaction." Where the Fund cannot effect a closing purchase transaction, it
may be forced to incur brokerage commissions or dealer spreads in selling
securities it receives or it may be forced to hold underlying securities until
an option is exercised or expires.
The hours of trading for options on securities may not conform to the
hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying securities
markets that cannot be reflected in the option markets. It is impossible to
predict the volume of trading that may exist in such options, and there can be
no assurance that viable exchange markets will develop or continue.
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<PAGE>
The Fund may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. At present, approximately ten
broker-dealers, including several of the largest primary dealers in U.S.
Government securities, make these markets. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker rather
than an exchange, and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations. To reduce this risk, the
Fund will purchase such options only from broker-dealers who are primary
government securities dealers recognized by the Federal Reserve Bank of New York
and who agree to (and are expected to be capable of) entering into closing
transactions, although there can be no guarantee that any such option will be
liquidated at a favorable price prior to expiration. The investment adviser and
investment subadviser will monitor the creditworthiness of dealers with whom the
Fund enters into such options transactions under the general supervision of the
Trust's Trustees.
OPTIONS ON SECURITIES INDICES--In addition to options on securities,
the Fund may also purchase and write (sell) call and put options on securities
indices. The absence of a liquid secondary market to close out options positions
on securities indices is more likely to occur, although the Fund generally will
only purchase or write such an option if the investment adviser and investment
subadviser believe the option can be closed out. Use of options on securities
indices also entails the risk that trading in such options may be interrupted if
trading in certain securities included in the index is interrupted. The Fund
will not purchase such options unless its investment adviser and investment
subadviser believe the market is sufficiently developed such that the risk of
trading in such options is no greater than the risk of trading in options on
securities. Price movements in the Fund's portfolio may not correlate precisely
with movements in the level of an index and, therefore, the use of options on
indices cannot serve as a complete hedge. Because options on securities indices
require settlement in cash, the Fund may be forced to liquidate portfolio
securities to meet settlement obligations.
OPTIONS ON CURRENCIES--The Fund may write (sell) call and put options
on currencies to increase gain and may purchase such options to hedge the value
of securities the Fund holds or intends to buy. Purchased currency options may
be denominated in a currency that is linked to the currency the Fund owns or may
wish to purchase. This technique, referred to as "proxy hedging," involves the
additional risk that the linkage between the currencies may be changed or
eliminated.
FUTURES CONTRACTS--The Fund may enter into futures contracts on
securities, currencies and indices which are traded on exchanges that are
licensed and regulated by the Commodity Futures Trading Commission ("CFTC") or,
consistent with CFTC regulations, on foreign exchanges. The Fund will do so to
hedge against anticipated changes in securities values, as a substitute for the
purchase or sale of securities or currencies or to enhance return.
To the extent that the Fund enters into futures contracts, options on
futures contracts and options on foreign currencies traded on an exchange
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<PAGE>
regulated by the CFTC, in each case that are not for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish these positions (excluding the amount by which options are
"in-the-money") may not exceed 5% of the liquidation value of the Fund's
portfolio, after taking into account unrealized profits and unrealized losses on
any contracts the Fund has entered into.
The Fund may also purchase and write call and put options on futures
contracts which are traded on exchanges that are licensed and regulated by the
CFTC, or, consistent with CFTC regulations, on foreign exchanges.
While the holder or writer of an option on a futures contract may
normally terminate its position by selling or purchasing an offsetting option of
the same series, the Fund's ability to establish and close out options positions
at fairly established prices will be subject to the existence of a liquid
market. The Balanced Fund will not purchase or write options on futures
contracts unless, in the Trust's advisers' opinion, the market for such options
has sufficient liquidity that the risks associated with such options
transactions are not at unacceptable levels.
While futures contracts will be traded to reduce certain risks, futures
trading itself entails certain other risks. Unanticipated changes in securities
values, interest rates or currency prices may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts.
Some futures contracts may not have a broad and liquid market, in which case the
contracts may not be able to be closed at a fair price and the Fund may lose in
excess of the initial margin deposit. Moreover, in the event of an imperfect
correlation between the futures contract and the portfolio position which is
intended to be protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss.
The Fund will incur brokerage costs and will be required to post and
maintain "margin" as a good-faith deposit against performance of its obligations
under futures contracts and under options written by the Fund. In addition, the
Fund is required to segregate assets, such as liquid securities and cash, in an
amount equal to the value of the instruments underlying futures contracts and
call options purchased and put options written by the Fund.
FORWARD CURRENCY EXCHANGE CONTRACTS--A forward currency exchange
contract ("forward contract") involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
While the Fund will enter into forward and futures contracts to reduce
currency exchange rate risks, transactions in such contracts involve certain
other risks. Thus, while the Fund may benefit from such transactions,
unanticipated changes in currency prices may result in a poorer overall
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<PAGE>
performance for the Fund than if it had not engaged in any such transaction.
Moreover, there may be an imperfect correlation between the Fund's portfolio
holdings of securities denominated in a particular currency and forward or
futures contracts entered into by the Fund. Such imperfect correlation may
prevent the Fund from achieving a complete hedge or expose the Fund to risk of
foreign exchange loss.
COMBINED TRANSACTIONS--The Fund may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, multiple
foreign currency transactions (including forward foreign currency exchange
contracts) and any combination of futures, options and foreign currency
transactions ("component" transactions), instead of a single transaction, as
part of a single hedging strategy when, in the opinion of the investment adviser
and investment subadviser, it is in the best interest of the Fund to do so. A
combined transaction, while part of a single hedging strategy, may contain
elements of risk that are present in each of its component transactions.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS--Options, futures and
forward foreign currency transactions which obligate the Fund to provide cash,
securities or currencies to complete such transactions will entail the Fund
either segregating assets in an account with, or on the books of, the Custodian
to the extent the Fund does not own the securities, or the securities
denominated in the currency, which are the subject of the obligation, or
otherwise "covering" the transaction as allowed under interpretive positions of
the SEC. For example, a call option written by the Fund will require the Fund to
hold the securities subject to the call (or securities convertible into the
needed securities without additional consideration) or to segregate high grade
liquid debt obligations sufficient to meet the obligation by purchasing and
delivering the securities if the call is exercised. A call option written on an
index will require the Fund to have portfolio securities which correlate with
the index or to segregate such high grade liquid assets. A put option written by
the Fund also will require the Fund to segregate such high grade liquid assets
sufficient to cover the Fund's obligation to buy the securities covered by the
put if the put is exercised.
Except when the Fund enters into a forward contract for the purpose of
the purchase or sale of a security denominated in a foreign currency, a forward
foreign currency contract which obligates the Fund to provide currencies will
require the Fund to hold currencies or liquid securities denominated in that
currency which will equal the Fund's obligations. Such a contract requiring the
purchase of currencies also requires segregation.
Unless the Fund owns or maintains a segregated account consisting of
the securities, cash or currencies which are the subject of the obligation as
described above, the Fund will hold cash, U.S. Government securities or other
high grade liquid debt obligations in a segregated account. These assets cannot
be transferred while the obligation is outstanding unless replaced with other
suitable assets. Rather than segregating assets in the case of an index-based
transaction, the Fund could own securities substantially replicating the
movement of the particular index.
In the case of a futures contract, the Fund, apart from its duty to
segregate, must deposit initial margin and variation margin, as often as daily
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<PAGE>
if the position moves adversely, sufficient to meet its obligation to purchase
or provide securities or currencies, or to pay the amount owed at the expiration
of an index-based futures contract. Similarly, options on futures contracts
require margin to the extent necessary to meet the Fund's commitments.
In lieu of such procedures, such transactions may be covered by other
means, consistent with applicable regulatory policies. The Fund may enter into
certain offsetting transactions so that its combined position, coupled with any
segregated assets, equals its net outstanding obligation in related options and
hedging transactions. For example, the Fund could purchase a put option if the
strike price of that option is the same or higher than the strike price of a put
option sold by the Fund. Moreover, instead of segregating assets if the Fund
held a futures or forward contract, it could purchase a put option on the same
futures or forward contract with a strike price as high or higher than the price
of the contract held. Of course, the offsetting transaction must terminate at
the time of or after the primary transaction.
OTHER MORTGAGE-BACKED SECURITIES--Governmental, government-related or
private entities may create mortgage loan pools and other mortgage-related
securities offering mortgage pass-through and mortgage-collateralized
investments in addition to those described above. The mortgages underlying these
securities may include alternative mortgage instruments, that is, mortgage
instruments whose principal or interest payments may vary or whose terms to
maturity may differ from customary long-term fixed rate mortgages. As new types
of mortgage-related securities are developed and offered to investors, the
investment adviser and investment subadviser will, consistent with the Fund's
investment objective, policies and quality standards, consider making
investments in such new types of mortgage-related securities. The Fund will not
purchase any such other mortgage-backed securities until the Trust's Prospectus
and this Statement of Additional Information have been supplemented.
EQUITY FUND
The Equity Fund seeks to achieve its investment objective by investing
all its Assets in the Index Portfolio, which has the same investment objective
as the Equity Fund. The Index Portfolio seeks to achieve its investment
objective by investing in the common stocks comprising the Social Index. The
Equity Fund's policy is to invest at least 80% of its Assets (either directly or
through the Index Portfolio) in the stocks comprising the Social Index.
In selecting stocks for inclusion in the Social Index:
1. The investment adviser of the Index Portfolio (the "Adviser of the
Index Portfolio") evaluated, in accordance with the social criteria described in
the Prospectus, each of the companies the stocks of which comprise the Standard
& Poor's 500 Composite Stock Price Index (the "S&P 500"). If a company whose
stock was included in the S&P 500 met the Adviser of the Index Portfolio's
social criteria and met its further criteria for industry diversification,
financial solvency, market capitalization, and minimal portfolio turnover, it
was included in the Social Index. As of ^ July 31, 1996, of the 500 companies
whose stocks comprised the S&P 500, approximately ^ 50% were included in the
Social Index.
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2. The remaining stocks comprising the Social Index (i.e., those which
are not included in the S&P 500) were selected based upon the Adviser of the
Index Portfolio's evaluation of the social criteria described in the Prospectus,
as well as upon its criteria for industry diversification, financial solvency,
market capitalization, and minimal portfolio turnover. Because of the social
criteria applied in the selection of stocks comprising the Social Index,
industry sector weighting in the Social Index may vary materially from the
industry weightings in other stock indices, including the S&P 500, and certain
industry sectors will be excluded altogether.
Kinder, Lydenberg & Domini & Co., Inc. ("KLD" or "Adviser of the Index
Portfolio") may exclude from the Social Index stocks issued by companies which
are in bankruptcy or whose bankruptcy the Adviser of the Index Portfolio
believes may be imminent.
The component stocks of the S&P 500 are chosen by Standard & Poor's
Corporation ("S&P") solely with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in the
New York Stock Exchange common stock population, taken as the assumed model for
the composition of the total market. Construction of the S&P 500 by S&P proceeds
from industry groups to the whole. Since some industries are characterized by
companies of relatively small stock capitalization, the S&P 500 does not
comprise the 500 largest companies listed on the New York Stock Exchange. Not
all stocks included in the S&P 500 are listed on the New York Stock Exchange.
However, the total market value of the S&P 500 as of ^ July 31, 1996 represented
^ 76.3% of the aggregate market value of common stocks traded on the New York
Stock Exchange.
Inclusion of a stock in the S&P 500 Index in no way implies an opinion
by S&P as to its attractiveness as an investment, nor is S&P a sponsor of or
otherwise affiliated with the Equity Fund or the Index Portfolio. "S&P 500" is a
trademark of S&P. A company which is not included in the S&P 500 may be included
in the Social Index primarily in order to afford representation to an industrial
sector which would otherwise be under-represented in the Social Index. Because
of the environmental and social criteria applied in the selection of stocks
comprising the Social Index, industry sector weighting in the Social Index may
vary materially from the industry weightings in other stock indices, including
the S&P 500.
The weightings of stocks in the Social Index are based on each stock's
relative total market capitalization, (i.e., market price per share times the
number of shares outstanding.) Because of this weighting, as of July 31, 1996
approximately 40% of the Social Index was comprised of the 20 largest
companies in that Index.
The Index Portfolio intends to readjust its securities holdings
periodically such that those holdings will correspond, to the extent reasonably
practicable, to the Social Index both in terms of composition and weighting. The
timing and extent of adjustments in the holdings of the Index Portfolio, and the
extent of the correlation of the holdings of the Index Portfolio with the Social
Index, will reflect the Index Portfolio's investment manager's judgment as to
the appropriate balance as between the goal of correlating its holdings with the
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<PAGE>
composition of the Social Index and the goals of minimizing transaction costs
and keeping sufficient reserves available for anticipated redemptions of shares.
To the extent practicable, the Index Portfolio will seek a correlation between
the weightings of securities held by the Index Portfolio to the weightings of
the securities in the Social Index of 0.95 or better. Subject to the goal of
achieving a 0.95 or better correlation between the weightings of the securities
held by the Index Portfolio and the weightings of the securities in the Social
Index, Mellon Equity Associates ("Mellon Equity" or the "Investment Manager")
may slightly overweigh and/or underweight certain holdings of the Index
Portfolio compared to the Social Index in an effort to enhance the performance
of the Index Portfolio to help offset the expenses of the Index Portfolio and
the Equity Fund and the effect of the size and timing of cash flows into and out
of the Index Portfolio and the Equity Fund. There can be no assurances, of
course, that such portfolio enhancement strategies will be successful, and the
performance of the Index Portfolio may as a result be worse than if such
strategies were not undertaken. The Board of Trustees of the Index Portfolio
will receive and review, at least quarterly, a report prepared by the Investment
Manager comparing the performance of the Index Portfolio with that of the Social
Index, and comparing the composition and weighting of the Index Portfolio's
holdings with those of the Social Index, and will consider what action, if any,
should be taken in the event of a significant variation between the performance
of the Equity Fund or the Index Portfolio, as the case may be, and that of the
Social Index, or between the composition and weighting of the Index Portfolio's
securities holdings with those of the stocks comprising the Social Index. If the
correlation between the weightings of securities held by the Index Portfolio and
the weightings of the stocks in the Social Index falls below 0.95, the Board of
Trustees of the Index Portfolio will review, with the Investment Manager of the
Index Portfolio methods for increasing such correlation, such as through
adjustments in securities holdings of the Index Portfolio. As of June 30, 1996,
the correlation between the weightings of securities held by the Index
Portfolio and the weightings of the stocks in the Social Index was 0.99. To the
extent practicable, the Index Portfolio will attempt to be fully invested.
SECURITIES SUBJECT TO TAXATION: The Index Portfolio does not purchase
securities which the Index Portfolio believes, at the time of purchase, will be
subject to exchange controls or foreign withholding taxes; however, there can be
no assurance that such laws may not become applicable to certain of the Index
Portfolio's investments. In the event unforeseen exchange controls or foreign
withholding taxes are imposed with respect to any of the Index Portfolio's
investments, the effect may be to reduce the income received by the Index
Portfolio on such investments.
RULE 144A SECURITIES: Although neither the Equity Fund nor the Index
Portfolio has any current intention to do so, each may invest in securities
which may be resold pursuant to Rule 144A under the Securities Act of 1933, as
amended (the "1933 Act").
OPTION CONTRACTS: Although it has no current intention to do so, the
Index Portfolio may in the future enter into certain transactions in stock
options for the purpose of hedging against possible increases in the value of
securities which are expected to be purchased by the Index Portfolio or possible
declines in the value of securities which are expected to be sold by the Index
Portfolio.
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Generally, the Index Portfolio would only enter into such transactions on a
short-term basis pending readjustment of its holdings of underlying stocks.
The purchase of an option on an equity security provides the holder
with the right, but not the obligation, to purchase the underlying security, in
the case of a call option, or to sell the underlying security, in the case of a
put option, for a fixed price at any time up to a stated expiration date. The
holder is required to pay a non-refundable premium, which represents the
purchase price of the option. The holder of an option can lose the entire amount
of the premium, plus related transaction costs, but not more. Upon exercise of
the option, the holder is required to pay the purchase price of the underlying
security in the case of a call option, or deliver the security in return for the
purchase price in the case of a put option.
Prior to exercise or expiration, an option position may be terminated
only by entering into a closing purchase or sale transaction. This requires a
secondary market on the exchange on which the position was originally
established. While the Index Portfolio would establish an option position only
if there appears to be a liquid secondary market therefor, there can be no
assurance that such a market will exist for any particular option contract at
any specific time. In that event, it may not be possible to close out a position
held by the Index Portfolio, and the Index Portfolio could be required to
purchase or sell the instrument underlying an option, make or receive a cash
settlement or meet ongoing variation margin requirements. The inability to close
out option positions also could have an adverse impact on the Index Portfolio's
ability effectively to hedge its portfolio.
Each exchange on which option contracts are traded has established a
number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser of
the Index Portfolio does not believe that these trading and position limits
would have an adverse impact on the possible use of hedging strategies by the
Index Portfolio.
SHORT SALES: Although it has no current intention to do so, the Index
Portfolio may make short sales of securities or maintain a short position, if at
all times when a short position is open the Index Portfolio owns an equal amount
of such securities, or securities convertible into such securities.
BALANCED FUND AND EQUITY FUND
FOREIGN SECURITIES--The investment advisers believe that
diversification of assets on a global basis decreases the degree to which events
in any one country, including the United States, will affect an investor's
entire investment holdings. In the period since World War II, many leading
foreign economies have grown more rapidly than the United States economy,
providing investment opportunities, although there can be no assurance that this
will be true in the future. As with any long-term investment, the value of
shares when sold may be higher or lower than when purchased.
Investors should recognize that investing in foreign securities
involves certain risk factors, including those set forth below, which are not
typically
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associated with investing in United States securities and which may affect the
Funds' performance favorably or unfavorably. Many foreign stock markets, while
growing in volume of trading activity, have substantially less volume than the
New York Stock Exchange, and securities of some foreign companies are less
liquid and more volatile than securities of domestic companies. Similarly,
volume and liquidity in most foreign bond markets is less than that in the
United States market and at times, volatility of price can be greater than in
the United States. Further, foreign markets have different clearance and
settlement procedures and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems either could result in losses to a Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. Fixed commissions on some foreign stock exchanges
are generally higher than negotiated commissions on U.S. exchanges, although the
Funds will endeavor to achieve the most favorable net results on portfolio
transactions. Further, the Funds may encounter difficulties or be unable to
pursue legal remedies and obtain judgment in foreign courts. There is generally
less government supervision and regulation of business and industry practices,
stock exchanges, brokers and listed companies than in the United States. It may
be more difficult for the Funds' agents to keep currently informed about
corporate actions such as stock dividends or other matters which may affect the
prices of portfolio securities. Communications between the United States and
foreign countries may be less reliable than within the United States, thus
increasing the risk of delayed settlements of portfolio transactions or loss of
certificates for portfolio securities. In addition, with respect to certain
foreign countries, there is the possibility of expropriation or confiscatory
taxation, political or social instability, or diplomatic developments which
could affect United States investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the United States
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. The investment advisers seek to mitigate the risks associated with the
foregoing considerations through diversification and continuous professional
management.
The Funds may also invest in sponsored and unsponsored American
Depository Receipts (ADRs) and, in the case of the Balanced Fund, Global
Depository Receipts (GDRs). ADRs are receipts typically issued by a U.S. bank or
trust company evidencing ownership in the underlying securities. Transactions in
these securities may not necessarily be settled in the same currency as
transactions in the securities into which they represent. Generally ADRs, in
registered form, are designed for use in U.S. securities markets.
RISKS OF SPECIALIZED INVESTMENT TECHNIQUES ABROAD--The above described
specialized investment techniques, when conducted abroad, may not be regulated
as effectively as in the United States; may not involve a clearing mechanism and
related guarantees; and are subject to the risk of governmental actions
affecting
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trading in, or the prices of, foreign securities. The value of such positions
also could be adversely affected by (i) other complex foreign political, legal
and economic factors, (ii) lesser availability than in the United States of data
on which to make trading decisions, (iii) delays in the Funds' ability to act
upon economic events occurring in foreign markets during nonbusiness hours in
the United States, (iv) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States, and (v)
lesser trading volume.
LENDING OF PORTFOLIO SECURITIES--Each Fund and the Index Portfolio may
lend their securities to brokers, dealers and financial institutions, provided
(1) the loan is secured continuously by collateral, consisting of U.S.
Government securities or cash or letters of credit, which is marked to the
market daily to ensure that each loan is fully collateralized at all times; (2)
the loan may be called at any time and the return of the securities loaned
obtained within three business days; (3) each Fund or the Index Portfolio, as
the case may be, will receive any interest or dividends paid on the securities
loaned; and (4) the aggregate market value of securities loaned will not at any
time exceed 30% of the total assets of the Funds or the Index Portfolio, as the
case may be.
Each Fund and the Index Portfolio will earn income for lending their
securities either in the form of fees received from the borrower of the
securities or in connection with the investment of cash collateral in short-term
money market instruments. Loans of securities involve a risk that the borrower
may fail to return the securities or may fail to provide additional collateral.
In connection with lending securities, the Funds and the Index
Portfolio may pay reasonable finders, administrative and custodial fees. No such
fees will be paid to any person if it or any of its affiliates is affiliated
with the Funds, the Index Portfolio, the investment adviser of the Funds or
Index Portfolio, the investment subadviser of the Balanced Fund or the
investment manager of the Index Portfolio.
At the present time, the Balanced Fund has no intention to loan
securities worth more than 5% of the Fund's assets. Although the Index Portfolio
reserves the right to lend its securities, it has no current intention of doing
so in the foreseeable future. The Equity Fund will not lend its securities.
HISTORY OF THE GREEN CENTURY FUNDS AND
GREEN CENTURY CAPITAL MANAGEMENT
SHAREHOLDER ACTIVISM
While the companies in the portfolios of the Green Century Balanced
Fund and the Index Portfolio must meet Green Century's environmental standards,
some still have room for improvement. In such cases, Green Century may enter
into dialogue with those companies or file a shareholder resolution to initiate
improvement.
CERES -- Green Century Capital Management has been actively involved with CERES,
the Coalition of Environmentally Responsible Economies, created in 1989 to spur
corporations to better their environmental behavior. The CERES Principles
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establish comprehensive corporate environmental standards and disclosure
requirements. Companies that endorse the Principles back up their pledges with
concrete information, publicly reported in the CERES Report. Green Century
Capital Management's participation in CERES has enabled us to join in
negotiations with various corporations, which have ranged from Aveda and Ben &
Jerry's to General Motors and Sunoco, and help increase the pressure for change.
Green Century Funds President Mindy Lubber also spoke at the May 1993 PepsiCo
annual shareholders meeting in favor of that company's endorsement of the CERES
Principles.
PEPSICO -- Green Century continued the dialogue with PepsiCo in November of
1993, when the Balanced Fund filed a shareholder resolution to spur the
corporation to further improve its environmental programs and limit its active
opposition to environmental protection measures such as recycling campaigns and
efforts to pass state and national Bottle Bill legislation. The vote was held at
the May 1994 annual shareholders meeting at which Green Century President Lubber
made a presentation in support of the resolution. The resolution received 43.8
million votes, equal to 8.45% of the votes cast on the resolution. This was a
strong first showing, sending a message to PepsiCo management about the growing
shareholder concern for the environment.
In 1995, PepsiCo came to the negotiating table with Green Century,
apparently wishing to avoid the negative publicity that another shareholder
resolution involving PepsiCo's opposition to the bottle bill could create. The
company agreed to conduct a comprehensive study of its environmental policies
and devise a set of principles designed to guide company-wide action. PepsiCo
also agreed to discontinue the use of disposable shipping containers in favor of
plastic shells that it will reuse. The company also committed to manufacture a
new aluminum lid that will save 25 million pounds of aluminum per year.
GENERAL MILLS -- In July of 1994, Green Century Capital Management learned that
General Mills had allowed the manufacture and distribution of 50 million boxes
of cereal that had been made from oats treated with an illegal pesticide. Though
General Mills recalled the contaminated cereal, Green Century Capital Management
wrote to General Mills CEO H. Brewster Atwater requesting that the company more
closely monitor its food manufacturing. Mr. Atwater responded by outlining the
steps the company would take to prevent similar mishaps.
INTEL -- In 1994 the Green Century Balanced Fund joined forces with the Jessie
Smith Noyes Foundation in filing a shareholder resolution that would require
Intel, an electronics producer, to make publicly available information which
would allow public assessment of its facilities' environmental and safety
hazards. The resolution was in response to a report by the Southwest Organizing
Project which states that Intel's Rio Rancho plant in New Mexico would require
amounts of water exceeding local capacity. While the resolution did not pass, it
did move Intel President Andrew Grove to initiate a long sought after dialogue
with Noyes' President Stephen Viederman.
The following year, the Green Century Balanced Fund and Noyes filed
another shareholder resolution with Intel, prompting Intel to revise its
Environmental, Health and Safety Policy to include sharing information on the
company's
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environmental and safety hazards with the public. Further, Intel agreed that the
"communities" with which it will share information will include all community
groups and not just the elected officials and local advisory panels set up by
Intel to which the company had offered limited information in the past. As a
result, Noyes, with the support of Green Century and the other co-filers,
withdrew the shareholders resolution. The resolution's proponents and local
community organizations will continue to monitor Intel's implementation of the
new policy.
SECURITIES AND EXCHANGE COMMISSION -- In February of 1995, Green Century Funds
President Mindy Lubber corresponded with SEC Commissioner Arthur Levitt to urge
him not to allow the SEC to restrict shareholder activism, and with Senator John
Kerry to urge him to consider the rights of shareholders to file resolutions
when considering two pending nominations to the Securities and Exchange
Commission.
TIME WARNER -- In 1992, Time Warner, Inc. committed to convert Time magazine to
chlorine-free paper. The company has not only not done so as of yet, but has
resisted requests to report on its plans to convert.
In 1995, Green Century Funds President Lubber wrote Time President
Reginald Brack to request that Time convert to chlorine free paper in its
publications. The Green Century Balanced Fund then joined as a co-filer in a
shareholder resolution at Time which asks the Time Board of Directors to report
on its plans to convert to the use of chlorine-free paper. The resolution was
presented at Time Warner's annual shareholder meeting by Green Century Trustee
Wendy Wendlandt on May 16, 1996.
INVESTMENT RESTRICTIONS
===============================================================================
Each Fund and the Index Portfolio is operated under the following
investment restrictions which are deemed fundamental policies and may be changed
with respect to a Fund or the Index Portfolio only with the approval of the
holders of a "majority of the outstanding voting securities" of the Fund or the
Index Portfolio which, as defined in the 1940 Act and as used herein, means the
vote of (i) 67% or more of the Fund's shares or the Index Portfolio's interests
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund or interests in the Index Portfolio are present in person or
represented by proxy; or (ii) more than 50% of the Fund's outstanding shares or
the Index Portfolio's outstanding interests whichever is less. Whenever the
Equity Fund is requested to vote on a change in the investment restrictions of
the Index Portfolio, the Fund will hold a meeting of its shareholders and will
cast its vote as instructed by its shareholders.
BALANCED FUND
The Trust, on behalf of the Balanced Fund may not:
(1) borrow money or mortgage or hypothecate assets of the Fund, except
that in an amount not to exceed 1/3 of the current value of the Fund's net
assets, it may borrow money as a temporary measure for extraordinary or
emergency purposes
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and enter into reverse repurchase agreements or dollar roll transactions, and
except that it may pledge, mortgage or hypothecate not more than 1/3 of such
assets to secure such borrowings (it is intended that money would be borrowed
only from banks and only either to accommodate requests for the redemption of
shares while effecting an orderly liquidation of portfolio securities or to
maintain liquidity in the event of an unanticipated failure to complete a
portfolio security transaction or other similar situations) or reverse
repurchase agreements, provided that collateral arrangements with respect to
options and futures, including deposits of initial deposit and variation margin,
are not considered a pledge of assets for purposes of this restriction and
except that assets may be pledged to secure letters of credit solely for the
purpose of participating in a captive insurance company sponsored by the
Investment Company Institute; for additional related restrictions, see clause
(i) under the caption "Non-Fundamental State and Federal Restrictions" below.
(As an operating policy, the Fund may not engage in reverse repurchase
agreements.);
(2) purchase any security or evidence of interest therein on margin,
except that such short-term credit as may be necessary for the clearance of
purchases and sales of securities may be obtained and except that deposits of
initial deposit and variation margin may be made in connection with the
purchase, ownership, holding or sale of futures;
(3) underwrite securities issued by other persons except insofar as the
Trust or the Fund may technically be deemed an underwriter under the 1933 Act in
selling a portfolio security;
(4) make loans to other persons except (a) through the lending of the
Fund's portfolio securities and provided that any such loans not exceed 30% of
the Fund's total assets (taken at market value), (b) through the use of
repurchase agreements or the purchase of short-term obligations and provided
that not more than 10% of the Fund's net assets will be invested in repurchase
agreements maturing in more than seven days, or (c) by purchasing a portion of
an issue of debt securities of types commonly distributed privately to financial
institutions, for which purposes the purchase of short-term commercial paper or
a portion of an issue of debt securities which are part of an issue to the
public shall not be considered the making of a loan;
(5) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business (the
Trust may hold and sell, for the Fund's portfolio, real estate acquired as a
result of the Fund's ownership of securities);
(6) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue and equal in amount
to, the securities sold short, and unless not more than 10% of the Fund's net
assets (taken at market value) is represented by such securities, or securities
convertible into or exchangeable for such securities, at any one time (the Trust
has no current intention to engage in short selling);
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(7) concentrate its investments in any particular industry (excluding
U.S. Government securities), but if it is deemed appropriate for the achievement
of the Fund's investment objective, up to 25% of its total assets may be
invested in any one industry, except that positions in futures or option
contracts shall not be subject to this restriction; and
(8) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to options and futures, including deposits of initial deposit and
variation margin, are not considered to be the issuance of a senior security for
purposes of this restriction.
NON-FUNDAMENTAL STATE AND FEDERAL RESTRICTIONS--In order to comply with
certain state and federal statutes and policies the Trust, on behalf of the
Balanced Fund will not as a matter of operating policy:
(i)....borrow money (including through dollar roll transactions) for
any purpose in excess of 10% of the Fund's total assets (taken
at cost) (moreover, securities will not be purchased for the
Fund's portfolio at any time at which borrowings exceed 5% of
the Fund's total assets (taken at market value));
(ii)....pledge, mortgage or hypothecate for any purpose in excess of
10% of the Fund's net assets (taken at market value), provided
that collateral arrangements with respect to options and
futures, including deposits of initial deposit and variation
margin, are not considered a pledge of assets for purposes of
this restriction;
(iii)....sell any security which it does not own unless by virtue of
its ownership of other securities it has at the time of sale a
right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities
sold and provided that if such right is conditional the sale
is made upon the same conditions;
(iv)....invest for the purpose of exercising control or management;
(v)....purchase securities issued by any investment company except by
purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase,
though not made in the open market, is part of a plan of
merger or consolidation; provided, however, that securities of
any investment company will not be purchased for the Fund if
such purchase at the time thereof would cause (a) more than
10% of the Fund's total assets (taken at the greater of cost
or market value) to be invested in the securities of such
issuers; (b) more that 5% of the Fund's total assets (taken at
the greater of cost or market value) to be invested in any one
investment company; or (c) more than 3% of the outstanding
voting securities of any such issuer to be held for the
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Fund (the Trust has no current intention of investing the
assets of the Fund in other investment companies);
(vi)....invest more than 15% of the net assets of the Fund (taken at
the greater of cost or market value) in securities that are
illiquid or not readily marketable;
(vii)....invest more than 10% of the Fund's total assets (taken at the
greater of cost or market value) in securities (excluding Rule
144A securities) that are restricted as to resale under the
1933 Act;
(viii).......invest more than 15% of the Fund's total assets (taken at the
greater of cost or market value) in (a) securities (including
Rule 144A securities) that are restricted as to resale under
the 1933 Act, and (b) securities that are issued by issuers
which (including predecessors) have been in operation less
than three years (other than U.S. Government securities),
provided, however, that no more than 5% of the Fund's total
assets are invested in securities issued by issuers which
(including predecessors) have been in operation less than
three years;
(ix)....purchase securities of any issuer if such purchase at the time
thereof would cause the Fund to hold more than 10% of any
class of securities of such issuer, for which purposes all
indebtedness of an issuer shall be deemed a single class and
all preferred stock of an issuer shall be deemed a single
class, except that futures or option contracts shall not be
subject to this restriction;
(x).......purchase or retain in the Fund's portfolio any securities
issued by an issuer any of whose officers, directors, trustees
or security holders is an officer or Trustee of the Trust, or
is an officer or partner of the investment adviser, if after
the purchase of the securities of such issuer for the Fund one
or more of such persons owns beneficially more than 1/2 of 1%
of the shares or securities, or both, all taken at market
value, of such issuer, and such persons owning more than 1/2
of 1% of such shares or securities together own beneficially
more than 5% of such shares or securities, or both, all taken
at market value;
(xi)....invest more than 5% of the Fund's net assets in warrants
(valued at the lower of cost or market), but not more than 2%
of the Fund's net assets may be invested in warrants not
listed on the New York Stock Exchange or the American Stock
Exchange;
(xii)....with respect to 75% of the total assets of the Fund, invest
more than 5% of the total assets of the Fund in the securities
or obligations of any one issuer (other than U.S. Government
obligations) or acquire more than 10% of the outstanding
voting securities of any one issuer;
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(xiii).......with respect to put options written by the Fund, the
obligations underlying such put options shall not exceed 50%
of the Fund's net assets;
(xiv)....the aggregate premiums on all options written or purchased by
the Fund must not exceed 20% of the Fund's total assets;
(xv).......the aggregate margin deposits on all futures or options
thereon must not exceed 5% of the Fund's total assets; and
(xvi)....no more than 5% of the Fund's assets may be invested in
options which are not entered into for hedging purposes, or
the obligations of which are not covered by cash or
securities.
These policies are not fundamental and may be changed without
shareholder approval in response to changes in the various state and federal
requirements.
For purposes of restriction (xvi), hedging purposes includes writing
options whereby the premium received may offset the change in value of
securities covered thereby.
EQUITY FUND AND INDEX PORTFOLIO
Neither the Equity Fund nor the Index Portfolio may:
(1) borrow money, except that as a temporary measure for extraordinary
or emergency purposes either the Fund or the Index Portfolio may borrow an
amount not to exceed 1/3 of the current value of the net assets of the Fund or
the Index Portfolio, respectively, including the amount borrowed (moreover,
neither the Fund nor the Index Portfolio may purchase any securities at any time
at which borrowings exceed 5% of the total assets of the Fund or the Index
Portfolio, respectively, taken in each case at market value) (it is intended
that the Index Portfolio would borrow money only from banks and only to
accommodate requests for the withdrawal of all or a portion of a beneficial
interest in the Index Portfolio while effecting an orderly liquidation of
securities); for additional related restrictions, see clause (i) under the
caption "Non-Fundamental State and Federal Restrictions" below;
(2) purchase any security or evidence of interest therein on margin,
except that either the Fund or the Index Portfolio may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
securities and except that either the Fund or the Index Portfolio may make
deposits of initial deposit and variation margin in connection with the
purchase, ownership, holding or sale of options;
(3) write any put or call option or any combination thereof, provided
that this shall not prevent (i) the purchase, ownership, holding or sale of
warrants where the grantor of the warrants is the issuer of the underlying
securities, or (ii) the purchase, ownership, holding or sale of options on
securities;
(4) underwrite securities issued by other persons, except that the Fund
may invest all or any portion of its assets in the Index Portfolio and except
insofar
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<PAGE>
as either the Fund or the Index Portfolio may technically be deemed an
underwriter under the 1933 Act in selling a security;
(5) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Index Portfolio and provided that any
such loans not exceed 30% of its total assets (taken in each case at market
value), or (b) through the use of repurchase agreements or the purchase of
short-term obligations and provided that not more than 10% of its net assets
will be invested in repurchase agreements maturing in more than seven days; for
additional related restrictions, see paragraph (6) immediately following;
(6) invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days and other than securities which may be resold pursuant to Rule
144A under the 1933 Act if the Board of Trustees determines that a liquid market
exists for such securities) if, as a result thereof, more than 10% of its net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days), except that the Fund may invest
all or any portion of its assets in the Index Portfolio;
(7) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts in
the ordinary course of business (the Fund and Index Portfolio reserve the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities by the Fund or the Index Portfolio);
(8) make short sales of securities or maintain a short position, unless
at all times when a short position is open the Fund or the Index Portfolio, as
applicable, owns an equal amount of such securities or securities convertible
into or exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities sold
short, and unless not more than 5% of the Fund's or the Index Portfolio's, as
applicable, net assets (taken in each case at market value) is held as
collateral for such sales at any one time (it is the present intention of the
Index Portfolio and the Fund to make such sales only for the purpose of
deferring realization of gain or loss for federal income tax purposes);
(9) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating paragraph (1) above;
(10) as to 75% of its assets, purchase securities of any issuer if such
purchase at the time thereof would cause more than 5% of the Index Portfolio's
or the Fund's, as applicable, assets (taken at market value) to be invested in
the securities of such issuer (other than securities or obligations issued or
guaranteed by the United States or any agency or instrumentality of the United
States), except that for purposes of this restriction the issuer of an option
shall not be deemed to be the issuer of the security or securities underlying
such contract and except that the Fund may invest all or any portion of its
assets in the Index Portfolio; and
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<PAGE>
(11) invest more than 25% of its assets in any one industry unless the
stocks in a single industry were to comprise more than 25% of the Social Index,
in which case the Index Portfolio or the Fund, as applicable, will invest more
than 25% of its assets in that industry, and except that the Fund may invest all
of its assets in the Index Portfolio.
NON-FUNDAMENTAL STATE AND FEDERAL RESTRICTIONS: In order to comply with
certain state and federal statutes and regulatory policies, neither the Equity
Fund nor the Index Portfolio will as a matter of operating policy:
(i) borrow money for any purpose in excess of 10% of the total
assets of the Fund or the Index Portfolio, respectively (taken
in each case at cost) (moreover, neither the Fund nor the
Index Portfolio will purchase any securities at any time at
which borrowings exceed 5% of its total assets (taken at
market value));
(ii) pledge, mortgage or hypothecate for any purpose in excess of
10% of the net assets of the Fund or the Index Portfolio,
respectively (taken in each case at market value), provided
that collateral arrangements with respect to options,
including deposits of initial deposit and variation margin,
are not considered a pledge of assets for purposes of this
restriction;
(iii) sell any security which it does not own unless by virtue of
its ownership of other securities it has at the time of sale a
right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities
sold, and provided that if such right is conditional the sale
is made upon the same conditions;
(iv) invest for the purpose of exercising control or management,
except that all of the assets of the Fund may be invested in
the Index Portfolio;
(v) except that the Fund may invest all its assets in the Index
Portfolio, purchase securities issued by any registered
investment company except by purchase in the open market where
no commission or profit to a sponsor or dealer results from
such purchase other than the customary broker's commission, or
except when such purchase, though not made in the open market,
is part of a plan of merger or consolidation; provided,
however, that, except for the Fund's investment in the Index
Portfolio, the Fund and the Index Portfolio will not purchase
the securities of any registered investment company if such
purchase at the time thereof would cause more than 10% of the
total assets of the Fund or the Index Portfolio, respectively
(taken at the greater of cost or market value) to be invested
in the securities of such issuers or would cause more than 3%
of the outstanding voting securities of any such issuer to be
held by the Fund and Index Portfolio, respectively; and
provided, further, that, except for the Fund's investment in
the Index Portfolio, the Fund and the Index Portfolio shall not
purchase securities issued by any open-end investment company;
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<PAGE>
(vi) invest more than 15% of the net assets of the Fund or the
Index Portfolio, respectively (taken at the greater of cost or
market value) in securities that are illiquid or not readily
marketable (defined as a security that cannot be sold in the
ordinary course of business within seven days at approximately
the value at which the Fund or the Index Portfolio,
respectively, has valued the security);
(vii) invest more than 10% of the Fund's or the Index Portfolio's
total assets (taken at the greater of cost or market value) in
securities (excluding Rule 144A securities) that are
restricted as to resale under the 1933 Act;
(viii) invest more than 15% of the Fund's or the Index Portfolio's
total assets (taken at the greater of cost or market value) in
(a) securities (including Rule 144A securities) that are
restricted as to resale under the 1933 Act, and (b) securities
that are issued by issuers which (including predecessors) have
been in operation less than three years (other than U.S.
Government securities), provided, however, that no more than 5%
of the Fund's or the Index Portfolio's total assets are
invested in securities issued by issuers which (including
predecessors) have been in operation less than three years;
(ix) purchase securities of any issuer if such purchase at the time
thereof would cause it to hold more than 10% of any class of
securities of such issuer, for which purposes all indebtedness
of an issuer shall be deemed a single class and all preferred
stock of an issuer shall be deemed a single class, except that
option contracts shall not be subject to this restriction, and
except that the Fund may invest all or any portion of its
assets in the Index Portfolio;
(x) purchase or retain any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust or the Index Portfolio, as the
case may be, or is an officer or director of the Adviser of the
Index Portfolio, if after the purchase of the securities of
such issuer by the Fund or the Index Portfolio, as the case may
be, one or more of such persons owns beneficially more than 1/2
of 1% of the shares or securities, or both, all taken at market
value, of such issuer, and such persons owning more than 1/2 of
1% of such shares or securities together own beneficially more
than 5% of such shares or securities, or both, all taken at
market value, except that the Fund may invest all or any
portion of its assets in the Index Portfolio;
(xi) invest more than 5% of the Index Portfolio's or the Fund's net
assets in warrants (valued at the lower of cost or market),
but not more than 2% of the Index Portfolio's or the Fund's
net assets may be invested in warrants not listed on the New
York Stock Exchange Inc. ("NYSE") or the American Stock
Exchange; and
(xii) make short sales of securities or maintain a short position,
unless at all times when a short position is open the Index
Portfolio or
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the Fund owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any
further consideration, for securities of the same issue and
equal in amount to the securities sold short, and unless not
more than 10% of the Index Portfolio's or the Fund's net
assets (taken at market value) is represented by such
securities, or securities convertible into or exchangeable for
such securities, at any one time (neither the Index Portfolio
nor the Fund has any current intention to engage in short
selling).
These policies are not fundamental and may be changed with respect to
the Fund without approval by the Fund's shareholders or with respect to the
Index Portfolio by the Index Portfolio without the approval of the Fund or its
other investors. The Equity Fund will comply with the state securities laws and
regulations of all states in which it is registered. The Index Portfolio will
comply with the applicable investment limitations found in the state securities
laws and regulations of all states in which the Fund is registered.
PERCENTAGE RESTRICTIONS: If a percentage restriction or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the securities held by a Fund or the Index Portfolio or a later change
in the rating of a security held by a Fund or the Index Portfolio will not be
considered a violation of policy; provided that if at any time the ratio of
borrowings of a Fund to the net asset value of a Fund exceeds the ratio
permitted by Section 18(f) of the 1940 Act, a Fund will take the corrective
action required by Section 18(f).
TRUSTEES, OFFICERS AND ADVISORY BOARD
===============================================================================
The Trustees and officers of the Trust and the Index Portfolio and their
principal occupations during the past five years (although their titles may have
varied during the period) are:
TRUSTEES OF THE TRUST
MINDY S. LUBBER* -- Trustee, Chairperson, President, and Chief Executive
Officer of the Trust (since July, 1991); Environmental Protection Agency (since
May, 1995); President and Director, Green Century Capital Management, Inc. (from
July, 1991 to May, 1995); Director and Treasurer, Green Corps (since 1994);
Director, Massachusetts Public Interest Research Group (since 1990); Director,
The Coalition for Environmentally Responsible Economies (since July, 1991);
Director, Tax Equity Alliance of Massachusetts (since 1987); Fund for Public
Interest Research (from May, 1990 to July, 1991); Press Secretary for Governor
Dukakis, Commonwealth of Massachusetts (from March, 1989 to May, 1990).
^
28
<PAGE>
DAVID J. FINE -- Trustee of the Trust; Attorney, Dangel & Fine (since
August, 1993); Attorney, Fine, Halpern & Strassfeld (from July, 1991 to August,
1993); Attorney, David J. Fine and Associates (from July, 1990 to June, 1991).
DOUGLAS M. HUSID* -- Trustee of the Trust; Attorney, Goulston & Storrs,
P.C. (since October, 1991); Project Director, Gaston & Snow (from November, 1989
to March, 1991); Project Director, Congress Group Ventures (real estate
development) (prior to March, 1991).
STEVEN KADISH -- Trustee of the Trust; Assistant Secretary for
Administration and Finance, Commonwealth of Massachusetts (since June, 1995)
Director of Operations, Medicaid, Department of Public Welfare, Commonwealth of
Massachusetts (from July, 1992 to June, 1995); Deputy Director, Division of
Capital Planning and Operations, Commonwealth of Massachusetts (prior to July,
1992).
STEPHEN MORGAN -- Trustee of the Trust; Chief Operating Officer, EUA, Citizens
Conservation Services, Inc. (since January, 1995); Chief Operating Officer,
Citizens Conservation Corp. (from July, 1991 to January, 1995); Director and
Officer, Community Music Center; Vice President, Technical Development
Corporation (prior to July, 1991).
C. WILLIAM RYAN -- Trustee of the Trust; Director, Brookline Tai Chi
(since March, 1992); Senior Consultant, National Environmental Law Center (from
September, 1991 to March, 1992); Director, Taoist Study Center (since July,
1989); Director, Coalition for Environmentally Responsible Economies (from
August, 1990 to June, 1991); Policy Director, National Environmental Law Center
(from July, 1990 to November, 1990).
JAMES H. STARR -- Trustee of the Trust; Private Attorney (since 1989);
Director, Crested Butte Land Trust (since 1991).
WENDY WENDLANDT* -- Trustee of the Trust; Chairperson of the Board,
Earth Day 2000 (since February, 1991); Senior Staff, Fund for Public Interest
Research (from November, 1989 to present).
OFFICERS OF THE TRUST
KRISTINA A. CURTIS -- Treasurer of the Trust; Treasurer, Director and
Chief Operating Officer, Green Century Capital Management, Inc. (since July,
1991); Financial Adviser, Massachusetts Public Interest Research Group (from
March, 1990 to July, 1991); Finance Director, Massachusetts Public Interest
Research Group (prior to February, 1990).
ADRIENNE M. SHISHKO -- Secretary and Assistant Treasurer of the Trust;
General Counsel, Vice President - Marketing and Director, Green Century Capital
Management, Inc. (since July, 1991); formerly Coordinator for Day Care Issues,
MASSPIRG Education Fund (from December, 1990 to July, 1991).
29
<PAGE>
JOHN R. ELDER -- Assistant Treasurer of the Trust: ^ Vice President of
Signature Financial Group, Inc. (since ^ April, 1995); Treasurer of Phoenix
Family of Mutual Funds (prior to ^ April, 1995).
LINDA T. GIBSON -- Assistant Secretary of the Trust; Legal Counsel and
Assistant Secretary, Signature Financial Group, Inc. (since May, 1992);
Assistant Secretary, Signature (since October, 1992); student, Boston University
School of Law (prior to May, 1992).
^
MOLLY S. MUGLER -- Assistant Secretary of the Trust; Legal Counsel and
Assistant Secretary, Signature Financial Group, Inc. (since December, 1988);
Assistant Secretary, Signature (since April, 1989).
TRUSTEES OF THE INDEX PORTFOLIO
AMY L. DOMINI* -- Chair and Trustee of the Index Portfolio; Officer of
KLD; Trustee, Loring, Wolcott & Coolidge (since 1987).
PHILIP W. COOLIDGE* -- President and Trustee of the Index Portfolio;
Chairman, Chief Executive Officer and President, Signature Financial Group, Inc.
(since December, 1988) and Signature (since April, 1989).
ALLEN M. MAYES -- 7985 Willow Creek Drive, Beaumont, Texas 77707;
Trustee of the Index Portfolio; Senior Associate General Secretary of the
General Board of Pensions of the United Methodist Church (since May, 1982);
Member of the Board of Directors of Investor Responsibility Research Center
(since January, 1989); Member of Board of Trustees of Wiley College (since
November, 1969).
TIMOTHY SMITH -- Interfaith Center for Corporate Responsibility, 475
Riverside Drive, New York, New York 10115; Trustee of the Index Portfolio;
Executive Director of the Interfaith Center on Corporate Responsibility (since
1974).
FREDERICK C. WILLIAMSON -- 5 Roger Williams Green, Providence, Rhode
Island 02904; Trustee of the Index Portfolio; Chairman, Rhode Island Historical
Preservation and Heritage Commission (since 1995); Rhode Island State Historic
Preservation Officer (since 1969); Trustee, National Park Trust, (since ^ 1992);
Trustee, National Parks and Conservation Association (since 1986); ^ President
Emeritus, National Conference of State Historic Preservation Officers; Trustee
Emeritus, National Trust for Historic Preservation; Treasurer and Past Chairman,
^ Rhode Island Black Heritage Society.
*An "interested person" of the Trust or the Index Portfolio as that term
is defined in the 1940 Act.
**Mss. Gibson and Mugler also hold the same positions with the Index
Portfolio as they do for the Trust. MR. ELDER SERVES AS TREASURER OF THE INDEX
FUND.
31
<PAGE>
OFFICERS OF THE INDEX PORTFOLIO**
PETER D. KINDER -- Vice President of the Index Portfolio; Officer of KLD
(since March, 1988).
STEVEN D. LYDENBERG -- Vice President of the Index Portfolio; Director
of Research of KLD (since January, 1990).
^
BARBARA M. O'DETTE -- Assistant Treasurer of the Index Portfolio; Assistant
Treasurer, Signature Financial Group, Inc. (since December, 1988) and Signature
(since April, 1989).
^
Unless otherwise indicated, the mailing address of all of the Trustees
and officers of the Trust is Green Century Funds, 29 Temple Place, Suite 200,
Boston, Massachusetts 02111. The mailing address of all the Trustees and
officers of the Index Portfolio is 6 St. James Avenue, Boston, Massachusetts
02116. ^ Mr. Elder and Mss. Gibson, Mugler and O'Dette are also officers of
other registered investment companies for which Signature or an affiliate serves
as the principal underwriter or as an administrator. The mailing address of ^
Mr. Elder and Mss. Gibson, Mugler and O'Dette is 6 St. James Avenue, Boston,
Massachusetts 02116.
No Trustee of the Trust receives any compensation from the Trust, but
each Trustee who is not an "interested person" of the Trust is reimbursed for
any out-of-pocket expenses incurred in attending meetings of the Board of
Trustees or of any committee thereof. Each Trustee of the Index Portfolio who is
not otherwise affiliated with the Index Portfolio, receives an annual retainer
of $400 plus a meeting fee of $200 for each meeting of the Board of Trustees of
the Index Portfolio attended. For the fiscal years ended July 31, 1994, 1995
and 1996, the Trustees received fees equal to $6,023, $6,847 and $5,379,
respectively.
Trust Trustees
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED TOTAL
AGGREGATE COMPENSATION FROM
COMPENSATION FROM PENSION OR THE TRUST AND THE
THE TRUST FOR THE RETIREMENT ESTIMATED ANNUAL PORTFOLIO FOR THE
YEAR ENDED BENEFITS ACCRUED BENEFITS UPON FISCAL YEAR ENDED
JULY 31, 1996 AS PART OF FUND RETIREMENT JULY 31, 1996
------------- EXPENSES ---------- -------------
<S> <C> <C> <C> <C>
Mindy S. Lubber, None None None None
Trustee
David J. Fine, None None None None
Trustee
Douglas M. Husid None None None None
32
<PAGE>
Steven Kadish, None None None None
Trustee
Stephen Morgan, None None None None
Trustee
C. William Ryan, None None None None
Trustee
James H. Starr, None None None None
Trustee
Wendy Wendlandt, None None None None
Trustee
</TABLE>
Index Portfolio Trustees
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED TOTAL
AGGREGATE PENSION OR COMPENSATION FROM
COMPENSATION FROM RETIREMENT THE TRUST AND THE
THE PORTFOLIO FOR BENEFITS ACCRUED ESTIMATED ANNUAL PORTFOLIO FOR THE
THE YEAR ENDED AS PART OF FUND BENEFITS UPON FISCAL YEAR ENDED
JULY 31, 1995 EXPENSES RETIREMENT JULY 31, 1995
------------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Amy L. Domini, None None None None
Chair and Trustee
Philip W. None None None None
Coolidge,
President and
Trustee
Allen M. Mayes, $1,200 None None $1,200
Trustee
Timothy Smith, $1,200 None None $1,200
Trustee
Frederick C. $1,200 None None $1,200
Williamson,
Trustee
</TABLE>
The Board of Trustees of the Trust has created an Advisory Board as a
resource with respect to the application and refinement of the Trust's
environmental criteria. The members of the Advisory Board are listed in the
Prospectus. The Advisory Board has no other power, authority or responsibility
with respect to the management of the Trust or the conduct of the affairs of the
Trust. No member of the Advisory Board receives any compensation for his or her
services.
As of September 24, 1996 all Trustees and officers of the Trust owned
less than 1% of the outstanding shares of the Balanced Fund and 6.80% of the
outstanding shares of the Equity Fund. As of September 10, 1996, Glyn Mills
Nominees (Lombard Street) Limited A/C 1781 owned 42.58% of the outstanding
shares of the Balanced Fund and Jodie Evans of Santa Monica, California owned
9.55% of the Equity Fund. Shareholders owning 25% or more of the outstanding
33
<PAGE>
shares of a Fund may take actions without the approval of any other investor in
that Fund. ^
INVESTMENT ADVISERS
===============================================================================
Under an Investment Advisory Agreement dated as of August 13, 1991 (the
"Trust's Advisory Agreement") between the Trust, on behalf of the Balanced Fund,
and Green Century Capital Management, Inc. ("Green Century Capital" or the
"Trust's Adviser"), and subject to the general supervision of the Trust's
Trustees and in conformance with the respective stated policies of the Balanced
Fund, Green Century Capital provides general investment advice to the Balanced
Fund. Green Century Capital also helps the Trust design, and instructs the
Balanced Fund's investment subadviser as to how to implement the Trust's
environmental criteria.
For the fiscal years ended June 30, 1994, 1995 and 1996, the Balanced
Fund accrued advisory fees aggregating $23,218, $23,012 and $51,494,
respectively.
Green Century Capital has entered into an Investment Subadvisory
Agreement on behalf of the Balanced Fund dated as of July 1, 1995 (an
"Investment Subadvisory Agreement") with Winslow Management Company ("Winslow"
or the "Subadviser"). Prior to July 1, 1995, Scudder, Stevens & Clark served as
investment subadviser to the Balanced Fund. It is Winslow's responsibility under
the direction of the Trust's Adviser, to make the day-to-day investment
decisions for the Balanced Fund, to place the purchase and sale orders for the
portfolio transactions of the Balanced Fund consistent with the environmental
criteria established by the Trust's Adviser and subject to the general direction
of the Trust's Adviser.
Winslow is a separate operating division of Eaton Vance Management
("Eaton Vance"), a registered investment adviser. Winslow manages equity and
debt investments in environmental and environmentally responsible companies for
its clients. Winslow has been a division of Eaton Vance since June 30, 1993 and
formerly was an independent company. Currently, Winslow has $53 million in
assets under management.
For its services, Green Century Capital has agreed to pay Winslow a fee
equal on an annual basis to 0.40% of the value of the average daily net assets
of the Balanced Fund (the "Base Fee"), such fee shall be accrued daily and
payable at the end of each quarter, and subject to the following adjustment: for
each calendar quarter commencing one year after Winslow begins rendering
services hereunder, the Base Fee shall be adjusted as follows: (i) if the Fund's
total return (calculated in accordance with Rule 482 of Regulation C promulgated
under the 1933 Act) for the immediately prior twelve month period ("Fund Total
Return") is greater than the total return of the Lipper Directors' Analytical
Data Balanced Fund Average (the "Index Total Return") plus 1%, then the Base Fee
for such quarter shall be increased by an amount which is the product of .025%
multiplied by the average daily net assets for such year, (ii) if the Fund Total
Return exceeds the Index Total Return plus 2%, then the Base Fee for such
quarter shall be increased by an amount which is the product of .05% multiplied
by the
34
<PAGE>
average daily net assets for such year, (iii) if the Fund Total Return is less
than the Index Total Return minus 1%, then the Base Fee for such quarter shall
be decreased by an amount which is the product of .025% multiplied by the
average daily net assets for such year, or (iv) if the Fund Total Return is less
than the Index Total Return minus 2%, then the Base Fee for such quarter shall
be reduced by an amount which is the product of .05% multiplied by the average
daily net assets for such year.
For Example:
If, on an annual basis, the Balanced Fund's
Total Return differs from the Index Total Then the Trust's Adviser will
Return by: pay Winslow an annual fee of:
positive 2.00% or more 0.60%
positive 1.00% to positive 1.99% 0.50%
negative 0.99% to positive 0.99% 0.40%
negative 1.00% to negative 1.99% 0.30%
negative 2.00% or more 0.20%
The Board of Trustees believes that the performance adjustments are
appropriate although not within the 10 percentage points per year range
suggested by Release No. 7113 under the 1940 Act. In the event the Lipper
Directors' Analytical Data Balanced Fund Average ceases to become available or
the Trustees determine such Index Total Return is no longer a reasonable
performance benchmark, the Trustees may substitute another performance
benchmark.
The Equity Fund has not retained the services of an investment adviser
or investment subadviser since the Fund seeks to achieve its investment
objective by investing all its assets in the Index Portfolio. The Index
Portfolio has retained the services of KLD, as investment adviser, and of Mellon
Equity as investment manager.
KLD provides advice to the Index Portfolio pursuant to an Investment
Advisory Agreement (the "Index Portfolio's Advisory Agreement"). The services
provided by KLD consist of determination of the stocks to be included in the
Social Index and evaluating, in accordance with KLD's environmental and social
criteria, debt securities which may be purchased by the Index Portfolio. KLD
furnishes at its own expense all facilities and personnel necessary in
connection with providing these services. For its services, KLD receives from
the Index Portfolio a fee accrued daily and paid monthly at an annual rate equal
to 0.05% of the Index Portfolio's average daily net assets, on an annualized
basis for the Index Portfolio's then-current fiscal year. For the fiscal years
ended July 31, ^ 1994 and 1995, KLD voluntarily waived all of its advisory fees.
For the fiscal year ended July 31, 1996, KLD received advisory fees of $38,150.
Mellon Equity manages the assets of the Index Portfolio pursuant to an
Investment Management Agreement (the "Management Agreement"). Prior to November
21, 1994, State Street Bank and Trust Company (the "Former Manager") served as
investment manager to the Index Portfolio. The Investment Manager furnishes at
its own expense all services, facilities and personnel necessary in connection
with managing the Index Portfolio's investments and effecting securities
35
<PAGE>
transactions for the Index Portfolio. The Index Portfolio pays Mellon Equity an
investment management fee equal on an annual basis to the following percentages
of the Index Portfolio's average daily net assets for its then-current fiscal
year: 0.10% of assets up to $50 million; 0.30% of assets between $50 million and
$100 million; 0.20% of assets between $100 million and $500 million; and 0.15%
of assets over $500 million.
For the fiscal years ended July 31, 1994 , 1995 and 1996, respectively,
the Index Portfolio incurred $16,986 , $39,589 and $128,901 in investment
management fees.
The Trust's Advisory Agreement and Investment Subadvisory Agreement and
the Management Agreement will each remain in effect for two years and the Index
Portfolio's Advisory Agreement will remain in effect for sixteen months from the
date of execution and thereafter, but only so long as each such agreement is
specifically approved annually (i) by a vote of the holders of a "majority of
the outstanding voting securities" of a Fund or the Index Portfolio, as the case
may be, or by the Trustees, and (ii) by a vote of a majority of the Trustees of
the Trust or the Index Portfolio, as the case may be, who are not parties to
such agreements or "interested persons" of the Trust or the Index Portfolio, as
the case may be, as defined in the 1940 Act, cast in person at a meeting called
for the purpose of voting on such approval. Each agreement provides that neither
the service provider nor its personnel shall be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in its services, except for wilful misfeasance, bad faith or gross
negligence or reckless disregard of its obligations and duties under the
agreement.
The Trust's Advisory Agreement and the Investment Subadvisory Agreement
will terminate automatically if assigned, and are terminable with respect to the
Balanced Fund at any time without penalty by a vote of a majority of the
Trustees of the Trust, or by a vote of the holders of a "majority of the
outstanding voting securities" of the Balanced Fund.
The Index Portfolio's Advisory Agreement and the Management Agreement
are terminable without penalty on not more than 60 days' nor less than 30 days'
written notice by the Index Portfolio when authorized either by majority vote of
the Equity Fund and of the other investors in the Index Portfolio (with the vote
of each being in proportion to the amount of their investment) or by a vote of a
majority of the Trustees of the Index Portfolio, or by KLD or Mellon Equity, as
the case may be, and each such agreement will automatically terminate in the
event of its assignment.
Under the Trust's Advisory Agreement, the Trust has agreed that the
names "Green Century Funds" and "Green Century" are proprietary to the Trust's
Adviser. The Index Portfolio's Advisory Agreement provides that KLD may permit
other investment companies in addition to the Index Portfolio to use the name
"Domini" or "Domini Social Index" in their names. "Domini" and "Domini Social
Index" are service marks of KLD. Pursuant to an agreement with the Index
Portfolio, if KLD ceases to be the investment adviser of the Index Portfolio,
the Index Portfolio will be required to discontinue the use of such service
marks.
36
<PAGE>
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN, AND EXPENSES
===============================================================================
Pursuant to an Administrative Services Agreement, Green Century Capital,
as the Trust's administrator (the "Administrator of the Trust"), provides the
Trust with general office facilities and supervises the overall administration
of the Trust, including, among other responsibilities, the negotiation of
contracts and fees with, and the monitoring of performance and billings of, the
Trust's independent contractors and agents; the preparation and filing of all
documents required for compliance by the Trust with applicable laws and
regulations; and arranging for the maintenance of books and records of the
Trust. As described in the Prospectus, the Administrator of the Trust also pays,
pursuant to the administrative services agreement, all the operating expenses of
each Fund other than the Funds' investment advisory fees, if any, fees under the
Distribution Plan, if any, interest, taxes, brokerage costs and other capital
expenses, expenses of the non-interested Trustees of the Funds (including
counsel fees) and any extraordinary expenses. Pursuant to a subadministration
agreement with the Administrator of the Trust, Signature provides certain
day-to-day administrative services to the Trust, under the supervision and
direction of the Administrator of the Trust.
For the fiscal years ended June 30, 1994, 1995 and 1996, the
Balanced Fund accrued administrative services fees aggregating $46,387,
$46,032 and $102,989, respectively.
Pursuant to an Administrative Services Agreement, Signature provides the
Index Portfolio with general office facilities and supervises the overall
administration of the Index Portfolio, including, among other responsibilities,
the negotiation of contracts and fees with, and the monitoring of performance
and billings of, the independent contractors and agents of the Index Portfolio;
the preparation and filing of all documents required for compliance by the Index
Portfolio with applicable laws and regulations; and arranging for the
maintenance of books and records of the Index Portfolio.
The administrative services agreements of the Trust and the Index
Portfolio provide that the administrators may render administrative services to
others. The agreements terminate automatically if assigned and may be terminated
without penalty by majority vote of the respective Fund or the investors of the
Index Portfolio, as the case may be, or by a party to the agreement on not less
than 30 days' written notice under the Trust's agreement and on not more than 60
days' nor less than 30 days' written notice under the Index Portfolio's
agreement. The administrative services agreements also provide that neither the
administrator, nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the administration or management of
the Funds or the Index Portfolio, as the case may be, except for wilful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the respective agreement.
The Trust and the Index Portfolio have entered into a transfer agency
agreement with Investors Bank & Trust Company ("IBT") pursuant to which IBT acts
as transfer agent for the Trust and the Index Portfolio (the "Transfer Agent").
37
<PAGE>
IBT maintains an account for each shareholder of each Fund and each investor in
the Index Portfolio, performs other transfer agency functions and acts as
dividend disbursing agent for each Fund and the Index Portfolio, respectively.
Pursuant to a Custodian Agreement with each of the Trust and the Index
Portfolio, IBT also acts as the custodian of the Funds' assets (i.e., cash and
securities or, in the case of the Equity Fund, its interest in the Index
Portfolio) and as the custodian of the Index Portfolio's assets (the
"Custodian"). The Custodian's responsibilities include safeguarding and
controlling the Funds' and the Index Portfolio's cash and securities, handling
the receipt and delivery of securities, determining income and collecting
interest on the Funds' and the Index Portfolio's investments, maintaining books
of original entry for portfolio and fund accounting and other required books and
accounts, and calculating the daily net asset value of shares and interests in
the Fund and the Index Portfolio, respectively. Securities held by the Funds and
the Index Portfolio may be deposited into certain securities depositaries. The
Custodian does not determine the investment policies of the Funds or the Index
Portfolio nor does the Custodian decide which securities the Funds or the Index
Portfolio will buy or sell. The Index Portfolio may, however, invest in
securities of the Custodian and may deal with the Custodian as a principal in
securities transactions. For its services, IBT will receive such compensation as
may from time to time be agreed upon by it and the Funds and the Index
Portfolio, as the case may be.
Green Century Capital pays for each Fund's operating expenses (exclusive
of interest, taxes, brokerage expenses and other capital items, and
extraordinary expenses) which in any year exceed the limits prescribed by any
state in which a Fund's shares are qualified for sale. The Trust believes that
currently the most restrictive expense ratio limitation imposed by any state is
that of California which has an expense limitation of 2 1/2% of the first $30
million of a Fund's average net assets for its then-current fiscal year, 2% of
the next $70 million of such assets, and 1 1/2% of such assets in excess of $100
million. The expenses incurred by the Balanced Fund for distribution purposes
pursuant to the Distribution Plan are included within such operating expenses
only to the extent required by any state in which the respective Fund's shares
are qualified for sale. For example, in California, since the Balanced Fund does
not have a sales charge, the distribution fees of the Fund do not count toward
the expense limitation. The Trust may elect not to qualify a Fund's shares for
sale in every state.
DISTRIBUTION PLAN
===============================================================================
The Trust has adopted a Distribution Plan with respect to the Balanced
Fund in accordance with Rule 12b-1 under the 1940 Act after concluding that
there is a reasonable likelihood that the Distribution Plan will benefit the
Fund and its shareholders. The Trust has not adopted a Distribution Plan with
respect to the Equity Fund. The Distribution Plan provides that the Balanced
Fund shall pay a fee to Signature, as the distributor of shares of the Balanced
Fund (the "Distributor"), at an annual rate not to exceed 0.25% of the Fund's
average daily net assets in anticipation of, or as reimbursement for expenses
(i) of compensating broker-dealers with trail or maintenance commissions and
(ii) of
38
<PAGE>
printing prospectuses and reports used for sales purposes, expenses of the
preparation and printing of sales literature and other such distribution-related
expenses.
For the fiscal years ended June 30, 1994, 1995 and 1996, the Balanced
Fund accrued distribution fees aggregating $7,739, $7,671 and $17,165,
respectively.
The Distribution Plan will continue in effect indefinitely if such
continuance is specifically approved at least annually by a vote of both a
majority of the Trustees and a majority of the Trustees who are not "interested
persons" (as defined in the 1940 Act) of the Trust and who have no direct or
indirect financial interest in the operation of the Distribution Plan or in any
agreement related to the Plan ("Qualified Trustees"). The Distribution Plan
requires that the Trust shall provide to its Board of Trustees, and its Board of
Trustees shall review, at least quarterly, a written report of the amounts
expended (and the purposes therefor) under the Distribution Plan. The
Distribution Plan further provides that the selection and nomination of the
Qualified Trustees shall be committed to the discretion of the disinterested
Trustees then in office. The Distribution Plan may be terminated at any time by
a vote of a majority of the Qualified Trustees or by a vote of the shareholders
of the Balanced Fund. The Distribution Plan may not be amended to increase
materially the amount of permitted expenses thereunder without the approval of
shareholders and may not be materially amended in any case without a vote of the
majority of both the Trustees and Qualified Trustees. The Distributor will
preserve copies of any plan, agreement or report made pursuant to the
Distribution Plan for a period of not less than six years from the date of the
Plan, and for the first two years the Distributor will preserve such copies in
an easily accessible place.
Signature acts as the agent of the Trust in connection with the offering
of shares of the Balanced Fund and the Equity Fund pursuant to a Distribution
Agreement. After the prospectuses and periodic reports have been prepared, set
in type and mailed to existing shareholders, the Distributor pays for the
printing and distribution of copies thereof which are used in connection with
the offering of shares of the Funds to prospective investors.
NET ASSET VALUE; REDEMPTION IN KIND
================================================================================
The net asset value of each Fund's shares is determined each day the New
York Stock Exchange is open for trading ("Fund Business Day"). (As of the date
of this Statement of Additional Information, such Exchange is open for trading
every weekday except for the following holidays: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.) This determination of net asset value of shares of the Fund
is made once during each such day as of the close of the New York Stock Exchange
(currently 4:00 p.m., Eastern time) in the case of the Funds by deducting the
amount of the Fund's liabilities from the value of its assets and dividing the
difference by the number of shares of the Fund outstanding at the time the
determination is made.
39
<PAGE>
VALUATION PROCEDURES: BALANCED FUND--In valuing the Balanced Fund's
assets, a security listed on the New York Stock Exchange (and not subject to
restrictions against sale by a Fund on such Exchange) will be valued at its last
sale price on such Exchange. Lacking any sales, the security will be valued at
the mean between the closing asked price and the closing bid price. Securities
listed on other exchanges (and not subject to restriction against sale by a Fund
on such exchanges) will be similarly valued, using quotations on the exchange on
which the security is traded most extensively. Unlisted securities which are
quoted on the NASD National Market System, for which there have been sales of
such securities, will be valued at the last sale price reported on such system.
If there are no such sales, the value will be the high or "inside" bid, which is
the bid supplied by the NASD on its NASDAQ System for such securities in the
over-the-counter market. The value of such securities quoted on the NASDAQ
System, but not listed on the National Market System, will be valued at the high
or "inside" bid. Unlisted securities which are not quoted on the NASDAQ System
and for which over-the-counter market quotations are readily available will be
valued at the mean between the current bid and asked prices for such securities
in the over-the-counter market. Other unlisted securities (and listed securities
subject to restriction on sale) will be valued at their fair value as determined
in good faith by the Trustees although the actual calculation may be done by
others. Short-term corporate investments with remaining maturities of sixty days
or less are valued at amortized cost. Open futures contracts are valued at the
most recent settlement price, unless such price does not reflect the fair value
of the contract, in which case such positions will be valued by or under the
direction of the Trustees.
Subject to the Trust's compliance with applicable regulations, the Trust
has reserved the right to pay the redemption price of shares of the Balanced
Fund, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Trust has elected, however, to be governed by Rule 18f-1 under the
1940 Act, as a result of which the Trust is obligated with respect to any one
investor during any 90 day period to redeem shares of the Balanced Fund solely
in cash up to the lesser of $250,000 or 1% of the Fund's net assets at the
beginning of such 90 day period.
VALUATION PROCEDURES: EQUITY FUND AND INDEX PORTFOLIO--The value of the
Index Portfolio's net assets (i.e., the value of its securities and other assets
less its liabilities, including expenses payable or accrued) is determined at
the same time and on the same day as the Equity Fund determines its net asset
value per share. The net asset value of the Equity Fund's investment in the
Index Portfolio is equal to the Fund's pro rata share of the total investment of
the Fund and of other investors in the Index Portfolio less the Fund's pro rata
share of the Index Portfolio's liabilities. Equity securities held by the Index
Portfolio are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues, or
at the last quoted bid price for securities in which there were no sales during
the day or for unlisted securities not reported on the NASDAQ system. If the
Index Portfolio purchases option contracts, such option contracts which are
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traded on commodities or securities exchanges are normally valued at the
settlement price on the exchange on which they are traded. Short-term
obligations with remaining maturities of less than sixty days are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees of the Index Portfolio. Index Portfolio securities (other than
short-term obligations with remaining maturities of less than sixty days) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Index Portfolio's Board
of Trustees.
PERFORMANCE ADVERTISING
================================================================================
EQUITY FUND AND BALANCED FUND--The average annual total rate of return
of the Funds will be calculated for any period by (a) dividing (i) the sum of
the aggregate net asset value per share on the last day of the period of shares
purchased with a $1,000 payment on the first day of the period and the aggregate
net asset value per share on the last day of the period of shares purchasable
with dividends and capital gains distributions declared during such period with
respect to shares purchased on the first day of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
$1,000, (b) raising the quotient to a power equal to 1 divided by the number of
years in the period, and (c) subtracting 1 from the result.
The total rate of return of the Funds for any specified period will be
calculated by (a) dividing (i) the sum of the aggregate net asset value per
share on the last day of the period of shares purchased with a $1,000 payment on
the first day of the period and the aggregate net asset value per share on the
last day of the period of shares purchasable with dividends and capital gains
distributions declared during such period with respect to shares purchased on
the first day of such period and with respect to shares purchased with such
dividends and capital gains distributions, by (ii) $1,000, and (b) subtracting 1
from the result.
For the period March 18, 1992 (commencement of operations) through June
30, 1996, the average annualized total return of the Balanced Fund was 7.8%. For
the fiscal year ended June 30 1996, the average annualized total return of the
Balanced Fund was 21.98%.
The Equity Fund's total rate of return for the fiscal year ended July
31, 1996 was 14.16%. The Fund's annualized total rate of return for the three
years ended July 31, 1996 was 13.17%. The Fund's annualized total rate of return
for the fiscal periods since the Index Portfolio's commencement of investment
operations (June 3, 1991) through July 31, 1996 was 11.62%. The Equity Fund,
which commenced investment operations on September 13, 1995, invests all of its
Assets in the Index Portfolio, a separate registered investment company which
commenced operations on August 10, 1990 and commenced investment operations on
June 3, 1991. Consistent with applicable regulatory guidance, performance for
the period from June 3, 1991 to the commencement of operations of the Equity
Fund will reflect the investment performance of the Index Portfolio. The
performance for this prior period reflects the deduction
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of the charges and expenses of the Equity Fund set forth in the Expense Table in
the Prospectus.
Total rate of return and yield information with respect to the Social
Index will be computed in the same fashion as set forth above with respect to
the Equity Fund, except that for purposes of this computation an investment will
be assumed to have been made in a portfolio consisting of all of the stocks
comprising the Social Index weighted in accordance with the weightings of the
stocks comprising the Social Index. Performance information with respect to the
Social Index will not take into account brokerage commission and other
transaction costs which will be incurred by the Index Portfolio.
The total rate of return should not be considered a representation of
the total rate of return of the respective Fund or the Index Portfolio in the
future since the total rate of return is not fixed. Actual total rates of return
will depend on changes in the market value of, and dividends and interest
received from, the investments held by the Funds or Index Portfolio and expenses
of the Funds and the Index Portfolio during the period.
Total rate of return information may be useful for reviewing the
performance of a Fund or the Index Portfolio and for providing a basis for
comparison with other investment alternatives. However, unlike bank deposits or
other investments which pay a fixed yield for a stated period of time, total
rate of return fluctuates, and this should be considered when reviewing
performance or making comparisons.
Any current "yield" quotation of the Funds shall consist of an
annualized historical yield, carried to at least the nearest hundredth of one
percent, based on a 30 calendar day or one-month period and shall be calculated
by (a) raising to the sixth power the sum of 1 plus the quotient obtained by
dividing the Fund's net investment income earned during the period by the
product of the average daily number of shares outstanding during the period that
were entitled to receive dividends and the maximum offering price per share on
the last day of the period, (b) subtracting 1 from the result, and (c)
multiplying the result by 2.
FEDERAL TAXES
================================================================================
Each year, the Trust intends to qualify each Fund and elect that each
Fund be treated as a separate "regulated investment company" under Subchapter M
of the Internal Revenue Code of 1986, as amended (the "Code"). Under Subchapter
M of the Code each Fund will not be subject to federal income taxes on amounts
distributed to shareholders. As long as each Fund qualifies as a "regulated
investment company" under the Code, the Fund will not be required to pay
Massachusetts income or excise taxes.
Qualification as a regulated investment company under the Code requires,
among other things, that (a) at least 90% of a Fund's annual gross income,
without offset for losses from the sale or other disposition of securities, be
derived from interest, payments with respect to securities loans, dividends and
gains from the sale or other disposition of securities or other income derived
with respect to its business of investing in such securities; (b) less than 30%
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of a Fund's annual gross income is derived from gains (without offset for
losses) from the sale or other disposition of securities held for less than
three months; and (c) the holdings of a Fund are diversified so that, at the end
of each quarter of its taxable year, (i) at least 50% of the market value of a
Fund's assets is represented by cash, U.S. Government securities and other
securities limited in respect of any one issuer to an amount not greater than 5%
of the Fund's assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of a Fund's assets is invested
in the securities of any one issuer (other than U.S. Government securities). In
addition, in order not to be subject to federal income tax, at least 90% of a
Fund's net investment income and net short-term capital gains earned in each
year must be distributed to the Fund's shareholders. If a Fund should fail to
qualify as a "regulated investment company" in any year, the Fund would incur a
regular corporate federal income tax upon its taxable income and Fund
distributions would generally be taxable as ordinary dividend income to the
shareholders.
Shareholders of the Funds will normally have to pay federal income taxes
and any state or local income taxes on the dividends and capital gain
distributions they receive from the Fund. Dividends from ordinary income and any
distributions from net short-term capital gains are taxable to shareholders as
ordinary income for federal income tax purposes, whether the distributions are
made in cash or in additional shares. A portion of the Funds' ordinary income
(but none of the Funds' capital gains) dividends is normally eligible for the
dividends received deduction for corporations if the recipient otherwise
qualifies for that deduction with respect to its holding of Fund shares.
Availability of the deduction for a particular corporate shareholder is subject
to certain limitations, and deducted amounts may be subject to the alternative
minimum tax and result in certain basis adjustments. Distributions of net
capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses), whether made in cash or in additional shares, are
taxable to shareholders as long-term capital gains for federal income tax
purposes without regard to the length of time the shareholders have held their
shares. Any Fund dividend that is declared in October, November, or December of
any calendar year, that is payable to shareholders of record in such a month,
and that is paid the following January will be treated as if received by the
shareholders on December 31 of the year in which the divided is declared. The
Funds will notify shareholders regarding the federal tax status of its
distributions after the end of each calendar year.
Gains or losses on sales of securities for the Funds will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year except in certain cases where a put has been acquired or a
call has been written thereon for the Fund. Other gains or losses on the sale of
securities will be short-term capital gains or losses.
OPTIONS--Gains and losses on the sale, lapse or other termination of
options on securities will generally be treated as gains and losses from the
sale of securities. If an option written for the Balanced Fund or the Index
Portfolio lapses or is terminated through a closing transaction, such as a
repurchase for the Balanced Fund or the Index Portfolio of the option from its
holder, the Balanced Fund or the Index Portfolio may realize a short-term
capital gain or loss, depending on whether the premium income is greater or less
than the amount
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paid in the closing transaction. If securities are sold for the Balanced Fund or
the Index Portfolio pursuant to the exercise of a call option written for it,
the premium received will be added to the sale price of the securities delivered
in determining the amount of gain or loss on the sale. The requirement that less
than 30% of the Balanced Fund's or the Index Portfolio's gross income be derived
from gains from the sale of securities held for less than three months may limit
the ability of the Balanced Fund or the Index Portfolio to write options and
engage in transactions involving stock index futures.
Certain options contracts held for the Balanced Fund and the Index
Portfolio at the end of each fiscal year will be required to be "marked to
market" for federal income tax purposes; that is, treated as having been sold at
market value. Sixty percent of any gain or loss recognized on these deemed sales
and on actual dispositions will be treated as long-term capital gain or loss,
and the remainder will be treated as short-term capital gain or loss regardless
of how long the Balanced Fund or the Index Portfolio has held such options. The
Balanced Fund or the Index Portfolio may be required to defer the recognition of
losses on stock or securities to the extent of any unrecognized gain on
offsetting positions held for it.
REDEMPTION OF SHARES--Any gain or loss realized on the redemption of
Fund shares by a shareholder who is not a dealer in securities will be treated
as long-term capital gain or loss if the shares have been held for more than one
year, and otherwise as short-term capital gain or loss. However, any loss
realized by a shareholder upon the redemption of Fund shares held one year or
less will be treated as a long-term capital loss to the extent of any long-term
capital gains distributions received by the shareholder with respect to such
shares. Additionally, any loss realized on a redemption or exchange of Fund
shares will be disallowed to the extent the shares disposed of are replaced
within a period of 61 days beginning 30 days before such disposition, such as
pursuant to reinvestment of a dividend or capital gains distribution in Fund
shares.
INVESTMENT ACTIVITIES--The Balanced Fund's and Index Portfolio's
activities in options may be restricted by the requirements of the Internal
Revenue Code for qualification as a regulated investment company. In addition,
the Balanced Fund's and the Index Portfolio's activities involving futures
contracts and forward contracts may be limited by the requirements of Subchapter
M of the Internal Revenue Code for qualification as a regulated investment
company.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
===============================================================================
The Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest (par value
$0.01 per share) of each series and to divide or combine the shares into a
greater or lesser number of shares of that series without thereby changing the
proportionate beneficial interests in that series. The Funds are the only
current series of shares of the Trust, and the Trust has reserved the right to
create and issue additional series of shares. Each share of a series represents
an equal proportionate interest in that series with each other share of that
series. The shares of each series participate equally in the earnings, dividends
and assets
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of the particular series. Shares of each series are entitled to vote separately
to approve advisory agreements or changes in investment policy, but shares of
all series may vote together in the election or selection of Trustees, principal
underwriters and accountants. Upon liquidation or dissolution of a series,
shareholders of that series would be entitled to share pro rata in the net
assets of that series available for distribution to shareholders.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. The Trust is not required and has no present
intention to hold annual meetings of shareholders, but the Trust will hold
special meetings of shareholders when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. Shareholders
have under certain circumstances (i.e., upon application and submission of
certain specified documents to the Trustees by a specified number of
shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees. Shareholders also have under certain circumstances the right to
remove one or more Trustees without a meeting by a declaration in writing by a
specified number of shareholders. No material amendment may be made to the
Trust's Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each series affected by the amendment.
(See "Investment Objectives, Policies and Restrictions--Investment
Restrictions".) Shares have no preference, preemptive, conversion or similar
rights. Shares, when issued, are fully paid and nonassessable, except as set
forth below. The Fund may be terminated (i) upon sale of its assets, if approved
by the vote of the holders of two thirds of its outstanding shares, except that
if the Board of Trustees recommends such sale of assets, the approval by vote of
the majority of the Fund's outstanding shares will be sufficient, or (ii) by the
vote of the holders of the majority of the Fund's outstanding shares, or (iii)
by the Trustees of the Trust by written notice to the shareholders. If not so
terminated, each Fund will continue indefinitely.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust also provides that the Trust shall 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 covering possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Declaration of Trust further provides that obligations of the Trust
are not binding upon the Trustees individually but only upon the property of the
Trust and that the Trustees will not be liable for any action or failure to act,
but nothing in the Declaration of Trust protects a Trustee against any liability
to which he would otherwise be subject by reason of wilful misfeasance, bad
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<PAGE>
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office.
Each investor in the Index Portfolio, including the Equity Fund, may add
to or reduce its investment in the Index Portfolio on each Fund Business Day. At
the close of each such business day, the value of each investor's interest in
the Index Portfolio will be determined by multiplying the net asset value of the
Index Portfolio by the percentage representing that investor's share of the
aggregate beneficial interests in the Index Portfolio effective for that day.
Any additions or withdrawals, which are to be effected as of the close of
business on that day, will then be effected. The investor's percentage of the
aggregate beneficial interests in the Index Portfolio will then be re-computed
as the percentage equal to the fraction (i) the numerator of which is the value
of such investor's investment in the Index Portfolio as of the close of business
on such day plus or minus, as the case may be, the amount of any additions to or
withdrawals from the investor's investment in the Index Portfolio effected as of
the close of business on such day, and (ii) the denominator of which is the
aggregate net asset value of the Index Portfolio as of the close of business on
such day plus or minus, as the case may be, the amount of the net additions to
or withdrawals from the aggregate investments in the Index Portfolio by all
investors in the Index Portfolio. The percentage so determined will then be
applied to determine the value of the investor's interest in the Index Portfolio
as of the close of business on the following Fund Business Day.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
================================================================================
BALANCED FUND
Specific decisions to purchase or sell securities for the Fund are made
by a portfolio manager who is an employee of the Subadviser and who is appointed
and supervised by its senior officers. Changes in the Fund's investments are
reviewed by the Board of Trustees. The Fund's portfolio manager may serve other
clients of the respective Subadviser in a similar capacity.
Decisions concerning the execution of portfolio security transactions of
the Balanced Fund, including the selection of the market and the broker-dealer
firm, are made by the Subadviser. The Subadviser is also responsible for the
execution of transactions for all other accounts managed by it.
The Subadviser places the security transactions of the Balanced Fund and
of all other accounts managed by it for execution with many broker-dealer firms.
The Subadviser uses its best efforts to obtain execution of portfolio
transactions at prices which are advantageous to the Fund and (when a disclosed
commission is being charged) at reasonably competitive commission rates. In
seeking such execution, the Subadviser will use its best judgement in evaluating
the terms of a transaction, and will give consideration to various relevant
factors, including without limitation the size and type of the transaction, the
general execution and operational capabilities of the broker-dealer, the nature
and character of the market for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
reliability, experience and financial condition of the broker-dealer, the value
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<PAGE>
and quality of services rendered by the broker-dealer in other transactions, and
the reasonableness of the commission, if any. Transactions on United States
stock exchanges and other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among different
broker-dealer firms, and a particular broker-dealer may charge different
commissions according to such factors as the difficulty and size of the
transaction and the volume of business done with such broker-dealer.
Transactions in foreign securities usually involve the payment of fixed
brokerage commissions, which are generally higher than those in the United
States. There is generally no stated commission in the case of securities traded
in the over-the-counter markets, but the price paid or received by the Fund
usually includes an undisclosed dealer markup or markdown. In an underwritten
offering the price paid by the Fund often includes a disclosed fixed commission
or discount retained by the underwriter or dealer. Although commissions paid on
portfolio security transactions will, in the judgement of the Subadviser, be
reasonable in relation to the value of the services provided, commissions
exceeding those which another firm might charge may be paid to broker-dealers
who were selected to execute transactions on behalf of the Fund and the
Subadviser's other clients in part for providing brokerage and research services
to the Subadviser.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Balanced
Fund may receive a commission which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if
the Subadviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided. This
determination may be made on the basis of either that particular transaction or
on the basis of the overall responsibilities which the Subadviser and its
affiliates have for accounts over which they exercise investment discretion. In
making any such determination, the Subadviser will not attempt to place a
specific dollar value on the brokerage and research services provided or to
determine what portion of the commission should be related to such services.
Brokerage and research services may include advice as to the value of
securities, the advisability of investing in, purchasing, or selling securities,
and the availability of securities or purchasers or sellers of securities;
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement); and the "Research Services" referred
to in the next paragraph.
It is a common practice in the investment advisory industry for the
advisers of investment companies, institutions and other investors to receive
research, statistical and quotation services, data, information and other
services, products and materials which assists such advisers in the performance
of their investment responsibilities ("Research Services") from broker-dealer
firms which execute portfolio transactions for the clients of such advisers and
from third parties with which these broker-dealers have arrangements. Consistent
with this practice, the Subadviser receives Research Services from many
broker-dealer firms with which the Subadviser places the Fund transactions and
from third parties which with these broker-dealers have arrangements. These
Research Services include such matters as general economic and market reviews,
industry and company
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<PAGE>
reviews, evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by the Subadviser in
connection with client accounts other than those accounts which pay commissions
to such broker-dealer. Any such Research Service may be broadly useful and of
value to the Subadviser in rendering investment advisory services to all or a
significant portion of its clients, or may be relevant and useful for the
management of only one client's account or of a few clients' accounts, or may be
useful for the management of merely a segment of certain clients' accounts,
regardless of whether any such account or accounts paid commissions to the
broker-dealer through which such Research Service was obtained. The advisory fee
paid by the Index Portfolio is not reduced because the Subadviser receives such
Research Services. The Subadviser evaluates the nature and quality of the
various Research Services obtained through broker-dealer firms and attempts to
allocate sufficient commissions to such firms to ensure the continued receipt of
Research Services which the Subadviser believes are useful or of value to it
rendering investment advisory services to its clients.
Subject to the requirement that the Subadviser shall use its best
efforts to seek to execute Fund security transactions at advantageous prices and
at reasonably competitive commission rates or spreads, the Subadviser is
authorized to consider as a factor in the selection of any broker-dealer firm
with whom Fund orders may be placed the fact that such firm has sold or is
selling shares of investment companies sponsored by the Subadviser or Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc., which provides that no firm which is a member of
the Association shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.
Securities considered as investments for the Balanced Fund may also be
appropriate for other investment accounts managed by the Subadviser or its
affiliates. The Subadviser will attempt to allocate equitably portfolio security
transactions among the Fund and the portfolios of its other investment accounts
whenever decisions are made to purchase or sell securities by the Fund and one
or more of such other accounts simultaneously. In making such allocations, the
main factors to be considered are the respective investment objectives of the
Fund and such other accounts, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment by the
Fund and such accounts, the size of investment commitments generally held by the
Fund and such accounts and the opinions of the persons responsible for
recommending investments to the Fund and such accounts. While this procedure
could have a detrimental effect on the price or amount of the securities
available to the Fund from time to time, it is the opinion of the Trustees of
the Trust and the Fund that the benefits available from the Subadviser
organization outweigh any disadvantage that may arise from exposure to
simultaneous transactions.
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For the fiscal years ended June 30, 1994, 1995 and 1996, the Balanced
Fund accrued brokerage commissions aggregating $1,290, $905 and $21,408,
respectively.
The portfolio turnover rate is the ratio of the lesser of sales or
purchases to the monthly average value of the portfolio (excluding from both the
numerator and the denominator all securities with maturities at the time of
acquisition of one year or less). Higher levels of Fund activity result in
higher transaction costs and may also result in taxes on realized capital gains
to be borne by the Fund's shareholders. Purchases and sales are made for the
Fund whenever necessary, in management's opinion, to meet the Fund's objective.
The portfolio turnover rate of the Balanced Fund for the fiscal years ended
June 30, 1995 and 1996 was 16% and 136%, respectively .
EQUITY FUND AND INDEX PORTFOLIO
Specific decisions to purchase or sell securities for the Index
Portfolio are made by a portfolio manager who is an employee of Mellon Equity
and who is appointed and supervised by its senior officers. Changes in the Index
Portfolio's investments are reviewed by its Board of Trustees. The portfolio
manager of the Index Portfolio may serve other clients of Mellon Equity in a
similar capacity.
Frequent changes in the Index Portfolio's holdings may result from the
policy of attempting to correlate the Index Portfolio's securities holdings with
the composition of the Social Index, and the frequency of such changes will
increase as the rate and volume of purchases and redemptions of shares of the
Index Portfolio increases. The annual portfolio turnover rates of the Index
Portfolio for the fiscal years ended July 31, 1995 and 1996 were 6% and 5%,
respectively.
The Index Portfolio's primary consideration in placing securities
transactions with broker-dealers for execution is to obtain and maintain the
availability of execution at the most favorable prices and in the most effective
manner possible. Mellon Equity attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Index Portfolio and
other clients of Mellon Equity on the basis of their professional capability,
the value and quality of their brokerage services, and the level of their
brokerage commissions. In the case of securities traded in the over-the-counter
market (where no stated commissions are paid but the prices include a dealer's
markup or markdown), Mellon Equity normally seeks to deal directly with the
primary market makers, unless in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to Mellon
Equity on the tender of the Index Portfolio's securities in so-called tender or
exchange offers. Such soliciting dealer fees are in effect recaptured for the
Index Portfolio by Mellon Equity. At present no other recapture arrangements are
in effect. Consistent with the foregoing primary consideration, the Rules of
Fair Practice of the National Association of Securities Dealers, Inc. and such
other policies as the Trustees of the Index Portfolio may determine, Mellon
Equity may consider sales of shares of the Equity Fund and of securities of
other investors in the Index
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<PAGE>
Portfolio as a factor in the selection of broker-dealers to execute the Index
Portfolio's securities transactions. Neither the Index Portfolio nor the Equity
Fund will engage in brokerage transactions with the Adviser of the Index
Portfolio, the Investment Manager or the Administrator of the Index Portfolio or
any of their respective affiliates or any affiliate of the Equity Fund or the
Index Portfolio.
Under the Management Agreement and as permitted by Section 28(e) of the
Securities Exchange Act of 1934, Mellon Equity may cause the Index Portfolio to
pay a broker-dealer acting on an agency basis which provides brokerage and
research services to Mellon Equity or KLD an amount of commission for effecting
a securities transaction for the Index Portfolio in excess of the amount other
broker-dealers would have charged for the transaction if Mellon Equity
determines in good faith that the greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of either a particular transaction or Mellon
Equity's or KLD's overall responsibilities to the Index Portfolio or to its
other clients. Not all of such services are useful or of value in advising the
Index Portfolio.
The term "brokerage and research services" includes advice as to the
value of securities, the advisability of investing in, purchasing, or selling
securities, and the availability of securities or of purchasers or sellers of
securities; furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement. However, because of the
Index Portfolio's policy of investing in accordance with the Social Index,
Mellon Equity and KLD currently intend to make only a limited use of such
brokerage and research services.
Although commissions paid on every transaction will, in the judgment of
Mellon Equity, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Index Portfolio and Mellon Equity's or KLD's other clients in part for
providing advice as to the availability of securities or of purchasers or
sellers of securities and services in effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
Certain broker-dealers may be willing to furnish statistical, research and other
factual information or services to Mellon Equity or KLD for no consideration
other than brokerage or underwriting commissions.
Mellon Equity and KLD attempt to evaluate the quality of research
provided by brokers. Mellon Equity and KLD sometimes use evaluations resulting
from this effort as a consideration in the selection of brokers to execute
portfolio transactions. However, neither Mellon Equity nor KLD is able to
quantify the amount of commissions which are paid as a result of such research
because a substantial number of transactions are effected through brokers which
provide research but which are selected principally because of their execution
capabilities.
50
<PAGE>
The fees that the Index Portfolio pays to Mellon Equity and KLD will not
be reduced as a consequence of the Index Portfolio's receipt of brokerage and
research services. To the extent the Index Portfolio's securities transactions
are used to obtain brokerage and research services, the brokerage commissions
paid by the Index Portfolio will exceed those that might otherwise be paid for
such portfolio transactions and research, by an amount which cannot be presently
determined. Such services may be useful and of value to Mellon Equity or KLD in
serving both the Index Portfolio and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients may be
useful to Mellon Equity or KLD in carrying out its obligations to the Index
Portfolio. While such services are not expected to reduce the expenses of Mellon
Equity or KLD, Mellon Equity or KLD would, through use of the services, avoid
the additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff. For the fiscal years ended July
31, 1994, 1995 and 1996 the Index Portfolio paid brokerage commissions of
$13,000, $15,222 and $45.018 .
In certain instances there may be securities which are suitable for the
Index Portfolio as well as for one or more of Mellon Equity's or KLD's other
clients. Investment decisions for the Index Portfolio and for Mellon Equity's or
KLD's other clients are made with a view to achieving their respective
investment objectives. It may develop that a particular security is bought or
sold for only one client even though it might be held by, or bought or sold for,
other clients. Likewise, a particular security may be bought for one or more
clients when one or more clients are selling that same security. Some
simultaneous transactions are inevitable when several clients receive investment
advice from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or more
clients are simultaneously engaged in the purchase or sale of the same security,
the securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the Index
Portfolio is concerned. However, it is believed that the ability of the Index
Portfolio to participate in volume transactions will produce better executions
for the Index Portfolio.
INDEPENDENT ACCOUNTANTS AND EXPERTS
================================================================================
KPMG Peat Marwick LLP are the independent auditors of the Balanced
Fund, the Equity Fund and the Index Portfolio, providing audit services and
assistance and consultation with respect to the preparation of filings with the
SEC. Prior to July 1, 1995, Tait, Weller & Baker served as independent
certified public accountants of the Balanced Fund. The financial statements of
the Funds included herein have been so included in reliance upon the report of
KPMG Peat Marwick LLP as experts in accounting and auditing. The financial
statements of the Index Portfolio included herein have been so included in
reliance upon the report of KPMG Peat Marwick LLP as experts in accounting and
auditing.
51
<PAGE>
ADDITIONAL INFORMATION
================================================================================
A shareholder's right to receive payment with respect to any redemption
may be suspended or the payment of the redemption proceeds postponed: (i) during
periods when the New York Stock Exchange is closed for other than weekends and
holidays or when trading on such Exchange is restricted as determined by the SEC
by rule or regulation, (ii) during periods in which an emergency exists which
causes disposal of, or evaluation of the net asset value of, the Funds'
portfolio securities to be unreasonable or impracticable, or (iii) for such
other periods as the SEC may permit.
With respect to the securities offered by the Funds' Prospectus, this
Statement of Additional Information and the Prospectus do not contain all the
information included in the Registration Statement filed with the SEC under the
1933 Act. Pursuant to the rules and regulations of the SEC, certain portions
have been omitted. The Registration Statement including the exhibits filed
therewith may be examined at the office of the SEC in Washington, D.C.
Statements contained in this Statement of Additional Information and the
Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement. Each such statement is qualified in all respects by such reference.
FINANCIAL STATEMENTS
================================================================================
The financial statements of the Funds and the Portfolio as of July 31,
1996 have been filed as part of each of the Fund's annual report with the
Securities and Exchange Commission pursuant to Section 30(b) of the 1940 Act and
Rule 30b2-1 thereunder, are hereby incorporated herein by reference from such
report, and are included herein in reliance upon the report of KPMG Peat Marwick
LLP, independent auditors, as experts in accounting and auditing. A copy of such
report will be provided, without charge, to each person receiving this Statement
of Additional Information.
52
<PAGE>
APPENDIX - DESCRIPTION OF SECURITIES RATINGS1
================================================================================
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt-
edged". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuations of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA: Bonds which are rated Baa are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safe-guarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
<PAGE>
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate 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 the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
SHORT-TERM DEBT
Moody's short term debt ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
one year.
Issuers rated PRIME-1 or P-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 or P-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges and
high internal cash generation.
- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 or P-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S CORPORATE BOND RATINGS:
INVESTMENT GRADE
AAA: Debt rated AAA has the highest rating assigned by S&P's to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
<PAGE>
SPECULATIVE GRADE
Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B: Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal.
The B rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
C1: The Rating C1 is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>
NR: Bonds may lack a S&P's rating because no public rating has been requested,
because there is insufficient information on which to base a rating, or because
S&P's does not rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER
A: S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt considered short-term in the relevant market.
A-1: This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1 ".
A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
FITCH INVESTORS SERVICE, INC.
INVESTMENT GRADE BOND RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated "AAA". Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated "F-1+".
A: Bonds considered to be investment grade and of high credit quality. The
obligors ability to pay interest and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligors ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
HIGH YIELD BOND RATINGS
BB: Bonds are considered speculative. The obligors ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
<PAGE>
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligors limited margin of safety
and the need for reasonable business and economic activity throughout the life
of the issue.
CCC: Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D: Bonds are in default of interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and "D" represents
the lowest potential for recovery.
PLUS (+) OR MINUS (-): The ratings from AA to C may be modified by the addition
of a plus or minus sign to indicate the relative position of a credit within the
rating category.
NR: Indicates that Fitch does not rate the specific issue.
CONDITIONAL: A conditional rating is premised on the successful completion of a
project or the occurrence of a specific event.
INVESTMENT GRADE SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1: Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as the
"F-1+" and "F-1 " categories.
F-3: Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could cause these securities to be rated below
investment grade.
<PAGE>
DUFF & PHELPS
INVESTMENT GRADE BOND RATINGS
AAA: Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AND AA-: High credit quality. Protection factors are strong. Risk is
modest but may vary slightly from time to time because of economic conditions.
A+, A, AND A-: Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, AND BBB-: Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
HIGH YIELD BOND RATINGS
BB+, BB, AND BB-: Below investment grade but deemed likely to meet obligations
when due. Present or prospective financial protection factors fluctuate
according to industry conditions or company fortunes. Overall quality may move
up or down frequently within this category.
B+, B, AND B-: Below investment grade and possessing risk that obligations will
not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC: Well below investment grade securities. Considerable uncertainty exists as
to timely payment of principal interest or preferred dividends. Protection
factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
Preferred stocks are rated on the same scale as bonds but the preferred rating
gives weight to its more junior position in the capital structure. Structured
Financings are also rated on this scale.
COMMERCIAL PAPER/CERTIFICATES OF DEPOSIT
CATEGORY 1: TOP GRADE
DUFF 1 PLUS: Highest certainty of timely payment. Short-term liquidity including
internal operating factors and/or ready access to alternative sources of funds,
is outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations.
DUFF 1: Very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are minor.
DUFF 1 MINUS: High certainty of timely payment. Liquidity factors are strong and
supported by good fundamental protection factors. Risk factors are very small.
<PAGE>
CATEGORY 2: GOOD GRADE
DUFF 2: Good certainty of timely payment. Liquidity factors and company
fundamentals are sound. Although ongoing funding needs may enlarge total
financing requirements, access to capital markets is good. Risk factors are
small.
CATEGORY 3: SATISFACTORY GRADE
DUFF 3: Satisfactory liquidity and other protection factors qualify issue as to
investment grade. Risk factors are larger and subject to more variation.
Nevertheless timely payment is expected.
No ratings are issued for companies whose paper is not deemed to be of
investment grade.
* * * * *
NOTES:
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this Statement of Additional Information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings indicated
do not necessarily represent ratings which would be given to these
securities on the date of the Fund's fiscal year end.
Bonds which are unrated expose the investor to risks with respect to capacity to
pay interest or repay principal which are similar to the risks of lower-rated
bonds. The Balanced Fund is dependent on the investment adviser's or investment
subadviser's judgment, analysis and experience in the evaluation of such bonds.
Investors should note that the assignment of a rating to a bond by a rating
service may not reflect the effect of recent developments on the issuer's
ability to make interest and principal payments.
<PAGE>
EI7061G
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
Financial Statements included in the Prospectus constituting
Part A of this Registration Statement:
Financial Highlights
Financial Statements included in the Statement of Additional
Information constituting Part B of this Registration
Statement:
BALANCED FUND
Portfolio of Investments, June 30, 1996
Statement of Assets and Liabilities, June 30, 1996
Statement of Operations for the fiscal year ended
June 30, 1996
Statements of Changes in Net Assets for the fiscal
years ended June 30, 1995 AND 1996
Financial Highlights for the fiscal periods ended
June 30, 1992, 1993, 1994 , 1995 AND 1996
Notes to Financial Statements, June 30, 1996
Independent Auditors' Report
EQUITY FUND
Statement of Assets and Liabilities, July 31, 1996
Statement of Operations for the period September 13,
1995 to July 31, 1996
Statement of Changes in Net Assets for the period
September 13, 1995 to July 31, 1996
Financial Highlights for the period September 13,
1995 to July 31, 1996
Notes to Financial tatements, July 31, 1996
Independent Auditors' Report
DOMINI SOCIAL INDEX PORTFOLIO
Portfolio of Investments, July 31, 1996
Statement of Assets and Liabilities, July 31, 1996
Statement of Operations for the fiscal year ended
July 31, 1996
Statements of Changes in Net Assets for the fiscal
years ended July 31, 1995 AND 1996
Financial Highlights for the fiscal years ended
July 31, 1992, 1993, 1994, 1995 AND 1996
Notes to Financial Statements
Independent Auditors' Report
(b) EXHIBITS:
1(a) Declaration of Trust.8
1(b) First Amended and Restated Establishment and Designation of
Series of the Trust.8
1(c) Second Amended and Restated Establishment and Designation of
Series of the Trust.8
1(d) Third Amended and Restated Establishment and Designation of
Series of the Trust.8
2 By-Laws of the Trust.8
3 Inapplicable.
4 Specimen share certificate.4
5(a) Investment Advisory Agreement.8
5(b) Investment Subadvisory Agreement.2
5(c) Investment Subadvisory Agreement with respect to the Green
Century Balanced Fund.8
6 Amended and Restated Distribution Agreement.6
7 Inapplicable.
8(a) Custodian Agreement.6
8(b) Transfer Agency and Services Agreement.6
9(a) Amended and Restated Administrative Services Agreement.6
9(b) Accounting Services Agreement.2
9(c) Shareholder Services Agreement.2
10 Inapplicable.
11 Consents of independent accountants.8
12 Inapplicable.
13 Investment representation letters of initial shareholder.4
14 Inapplicable.
15 Amended and Restated Distribution Plan pursuant to Rule 12b-l
under the Investment Company Act of 1940 (the "1940 Act").5
16 Schedule for Computation of Performance Quotations with
respect to the Green Century Growth Fund.6
17 Financial Data Schedule.8
18(a) Powers of Attorney.2
18(b) Power of Attorney of Michael Brennan.3
18(c) Power of Attorney with respect to Domini Social Index
Portfolio.7
1Incorporated herein by reference from the Registrant's initial
Registration Statement on Form N-1A, as filed with the Securities and Exchange
Commission ("SEC") on July 12, 1991.
2Incorporated herein by reference from Pre-Effective Amendment No. 1 to
this Registration Statement as filed with the SEC on November 29, 1991.
3Incorporated herein by reference from Pre-Effective Amendment No. 2 to
this Registration Statement as filed with the SEC on January 14, 1992.
4Incorporated herein by reference from Pre-Effective Amendment No. 3 to
this Registration Statement as filed with the SEC on January 31, 1992.
5Incorporated herein by reference from Post-Effective Amendment No. 3
to this Registration Statement as filed with the SEC on October 29, 1993.
6Incorporated herein by reference from Post-Effective Amendment No. 6
to this Registration Statement as filed with the SEC on June 28, 1995.
7Incorporated herein by reference from Post-Effective Amendment No. 7
to this Registration Statement as filed with the SEC on September 11, 1995.
8Filed herein.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE TRUST.
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Number of Record Holders
TITLE OF CLASS (AS OF SEPTEMBER 10, 1996)
Green Century Balanced Fund 573
Green Century Equity Fund 203
(formerly Growth Fund)
<PAGE>
ITEM 27. INDEMNIFICATION.
Reference is made to Article V of the Trust's Declaration of Trust,
filed as Exhibit 1 to this Registration Statement.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to Trustees,
officers and controlling persons of the Trust pursuant to the Trust's
Declaration of Trust, or otherwise, the Trust has been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Trust of expenses incurred or paid by a
Trustee, officer or controlling person of the Trust 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 Trust will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER AND
INVESTMENT SUBADVISER.
Reference is made to the Form ADV (File No. 801-39630) of Green Century
Capital Management, Inc. and the Form ADV (File No. 801-15930) of Eaton Vance
Management last filed with SEC on June 7, 1993. The information required by Item
28 hereof is included in Schedule D of the respective Form ADV and such
information is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS.
I.(a) Signature Broker-Dealer Services, Inc. is the Distributor
(the "Distributor") for the shares of the Green Century Equity
Fund and the Green Century Balanced Fund. The Distributor also
serves as the principal underwriter or placement agent for
other registered investment companies.
(b) The following are the directors and officers of the
Distributor. The principal business address of these
individuals is 6 St. James Avenue, Boston, MA 02116 unless
otherwise noted.
<PAGE>
<TABLE>
<S> <C> <C>
Position and Offices Position and Offices
NAME WITH THE DISTRIBUTOR WITH THE REGISTRANT
Philip W. Coolidge Chief Executive
Officer, President
and Director --
Barbara M. O'Dette Assistant Treasurer --
Linwood C. Downs Treasurer --
Molly S. Mugler Assistant Secretary Assistant Secretary
Linda T. Gibson Assistant Secretary Assistant Secretary
Susan Jakuboski Assistant Treasurer --
Position and Offices Position and Offices
NAME WITH THE DISTRIBUTOR WITH THE REGISTRANT
Robert Davidoff Director --
CMNY Capital, L.P
135 East 57th Street
New York, NY 10022
Donald Chadwick Director --
Scarborough & Company
110 East 42nd Street
New York, NY 10017
Leeds Hackett Director --
Hackett Associates Ltd.
159 East 69th Street
New York, NY 10021
Laurence E. Levine Director --
Blair Corporation
527 Madison Avenue
New York, NY 10022
</TABLE>
(c) Inapplicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
Green Century Capital Management, Inc.
29 Temple Place
Boston, MA 02111
(investment adviser and administrator)
Winslow Management Company
24 Federal Street
<PAGE>
Boston, MA 02110
(investment subadviser for the Balanced Fund)
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, MA 02116
(subadministrator and distributor)
Investors Bank & Trust Company
89 South Street
Boston, MA 02111
(custodian)
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) The Registrant undertakes to comply with Section 16(c) of the
1940 Act as though such provisions of the 1940 Act were
applicable to the Registrant except that the request referred
to in the third full paragraph thereof may only be made by 10%
of the outstanding shares of the Registrant, regardless of the
net asset value or value of shares held by such requesting
shareholders.
(b) If the information called for by Item 5A of Form N-1A is
contained in the latest annual report to shareholders, the
Registrant shall furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report
to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "1933
Act") and the Investment Company Act of 1940, the Registrant certifies that it
meets all the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and that it has duly
caused this Amendment to its Registration Statement on Form N-1A to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Boston and the Commonwealth of Massachusetts on the 30th day of September, 1996.
GREEN CENTURY FUNDS
By /s/ MINDY S. LUBBER
Mindy S. Lubber
President
Pursuant to the requirements of the 1933 Act, this Registration
Statement on Form N-1A has been signed below by the following persons in the
capacities indicated on September 30, 1996.
SIGNATURE TITLE
/s/ MINDY S. LUBBER
Mindy S. Lubber President, Chief Executive Officer
and Trustee
/s/ KRISTINA A. CURTIS
Kristina A. Curtis Treasurer, Principal Financial Officer
and Principal Accounting Officer
DOUGLAS M. HUSID* Trustee
Douglas M. Husid
DAVID J. FINE* Trustee
David J. Fine
STEVEN KADISH* Trustee
Steven Kadish
STEPHEN MORGAN* Trustee
Stephen Morgan
C. WILLIAM RYAN* Trustee
C. William Ryan
JAMES H. STARR* Trustee
James H. Starr
WENDY WENDLANDT* Trustee
Wendy Wendlandt
*By /s/ MINDY S. LUBBER
Mindy S. Lubber, as Attorney-in-fact
*Pursuant to Power of Attorney previously filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the "1933
Act") and the Investment Company Act of 1940, the Registrant has duly caused
this Amendment to its Registration Statement on Form N-1A to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston
and the Commonwealth of Massachusetts on the 27th day of September, 1996.
DOMINI SOCIAL INDEX PORTFOLIO
By /s/ PHILIP W. COOLIDGE
Philip W. Coolidge
President
Pursuant to the requirements of the 1933 Act, this Registration
Statement on Form N-1A has been signed below by the following persons in the
capacities indicated on September 27, 1996.
SIGNATURE TITLE
/s/ PHILIP W. COOLIDGE
PHILIP W. COOLIDGE President and Trustee of Domini
Social Index Portfolio
/s/ JOHN R. ELDER
JOHN R. ELDER Treasurer, Principal Financial
Officer and Principal Accounting Officer
of Domini Social Index Portfolio
AMY L. DOMINI* Trustee of
AMY L. DOMINI Domini Social Index Portfolio
ALLEN M. MAYES* Trustee of
ALLEN M. MAYES Domini Social Index Portfolio
FREDERICK C. WILLIAMSON* Trustee of
FREDERICK C. WILLIAMSON Domini Social Index Portfolio
TIMOTHY SMITH* Trustee of
TIMOTHY SMITH Domini Social Index Portfolio
*By /s/ PHILIP W. COOLIDGE
Philip W. Coolidge
*Pursuant to power of attorney herewith filed.
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EXHIBIT INDEX
EXHIBIT
1(a) Declaration of Trust
1(b) First Amended and Restated Establishment and
Designation of Series of the Trust
1(c) Second Amended and Restated Establishment and
Designation of Series of the Trust
1(d) Third Amended and Restated Establishment and
Designation of Series of the Trust
2 Bylaws
5(a) Investment Advisory Agreement
5(c) Investment Subadvisory Agreement with respect to Green Century
Balanced Fund
11 Consents of independent accountants
17 Financial Data Schedule
EI7008
GREEN CENTURY FUNDS
DECLARATION OF TRUST
Dated as of July 1, 1991
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TABLE OF CONTENTS
PAGE
ARTICLE I--Name and Definitions 1
Section 1.1 Name 1
Section 1.2 Definitions 1
ARTICLE II--Trustees 3
Section 2.1 Number of Trustees 3
Section 2.2 Term of Office of Trustees 3
Section 2.3 Resignation and Appointment of Trustees 3
Section 2.4 Vacancies 4
Section 2.5 Delegation of Power to Other Trustees 4
ARTICLE III--Powers of Trustees 4
Section 3.1 General 4
Section 3.2 Investments 5
Section 3.3 Legal Title 6
Section 3.4 Issuance and Repurchase of Securities 6
Section 3.5 Borrowing Money; Lending Trust Property 6
Section 3.6 Delegation; Committees 6
Section 3.7 Collection and Payment 6
Section 3.8 Expenses 7
Section 3.9 Manner of Acting; By-Laws 7
Section 3.10 Miscellaneous Powers 7
Section 3.11 Principal Transactions 7
Section 3.12 Trustees and Officers as Shareholders 8
ARTICLE IV--Investment Adviser, Distributor, Administrator, Transfer
Agent and Shareholder Servicing Agents 8
Section 4.1 Investment Adviser 8
Section 4.2 Distributor 9
Section 4.3 Administrator 9
Section 4.4 Transfer Agent and Shareholder Servicing Agents 9
Section 4.5 Parties to Contract 9
ARTICLE V--Limitations of Liability of Shareholders, Trustees and Others 10
Section 5.1 No Personal Liability of Shareholders,
Trustees, etc. 10
Section 5.2 Non-Liability of Trustees, etc. 10
Section 5.3 Mandatory Indemnification; Insurance 11
Section 5.4 No Bond Required of Trustees 12
Section 5.5 No Duty of Investigation; Notice in Trust
Instruments, etc. 12
Section 5.6 Reliance on Experts, etc. 13
i
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ARTICLE VI--Shares of Beneficial Interest 13
Section 6.1 Beneficial Interest 13
Section 6.2 Rights of Shareholders 13
Section 6.3 Trust Only 13
Section 6.4 Issuance of Shares 14
Section 6.5 Register of Shares 14
Section 6.6 Transfer of Shares 14
Section 6.7 Notices 15
Section 6.8 Voting Powers 15
Section 6.9 Series Designation 15
ARTICLE VII--Redemptions 18
Section 7.1 Redemptions 18
Section 7.2 Suspension of Right of Redemption 18
Section 7.3 Redemption of Shares; Disclosure of Holding 18
Section 7.4 Redemptions of Accounts of Less than
Minimum Amount 19
ARTICLE VIII--Determination of Net Asset Value, Net Income and
Distributions 19
ARTICLE IX--Duration; Termination of Trust; Amendment; Mergers, etc. 19
--------------------------------------------------------
Section 9.1 Duration 19
Section 9.2 Termination of Trust 20
Section 9.4 Merger, Consolidation and Sale of Assets 22
Section 9.5 Incorporation, Reorganization 22
Section 9.6 Incorporation or Reorganization of Series 22
ARTICLE X--Reports to Shareholders and Shareholder Communications 23
------------------------------------------------------
ARTICLE XI--Miscellaneous 23
Section 11.1 Filing 23
Section 11.2 Governing Law 23
Section 11.3 Counterparts 23
Section 11.4 Reliance by Third Parties 23
Section 11.5 Provisions in Conflict with Law or Regulations 24
Section 11.6 Principal Office 24
APPENDIX I -- Series Designation 26
iii
<PAGE>
EI7008
DECLARATION OF TRUST
OF
GREEN CENTURY FUNDS
Dated as of July 1, 1991
WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto; and
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable Shares of Beneficial Interest (par value
$0.01 per share) ("Shares") issued in one or more series as hereinafter
provided; and
NOW THEREFORE, the Trustees hereby declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of holders, from time to time, of the Shares issued
hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is "Green
Century Funds".
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "Administrator" means a party furnishing services to the
Trust pursuant to any contract described in Section 4.3 hereof.
(b) "By-Laws" means the By-laws referred to in Section 3.9 hereof, as
from time to time amended.
(c) "Commission" has the meaning given that term in the 1940 Act.
(d) "Custodian" means a party employed by the Trust to furnish services
as described in Article X of the By-Laws.
(e) "Declaration" means this Declaration of Trust as amended from time
to time. Reference in this Declaration of Trust to "Declaration", "hereof",
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2
"herein", and "hereunder" shall be deemed to refer to this Declaration rather
than the article or section in which such words appear.
(f) "Distributor" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.2 hereof.
(g) "Interested Person" has the meaning given that term in the 1940
Act.
(h) "Investment Adviser" means a party furnishing services to the Trust
pursuant to any contract described in Section 4.1 hereof.
(i) "Majority Shareholder Vote" has the same meaning as the phrase
"vote of a majority of the outstanding voting securities" as defined in the 1940
Act, except that such term may be used herein with respect to the Shares of the
Trust as a whole or the Shares of any particular series, as the context may
require.
(j) "1940 Act" means the Investment Company Act of 1940 and the Rules
and Regulations thereunder, as amended from time to time.
(k) "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.
(l) "Shareholder" means a record owner of outstanding Shares.
(m) "Shares" means the Shares of Beneficial Interest into which the
beneficial interest in the Trust shall be divided from time to time or, when
used in relation to any particular series of Shares established by the Trustees
pursuant to Section 6.9 hereof, equal proportionate transferable units into
which such series of Shares shall be divided from time to time. The term
"Shares" includes fractions of Shares as well as whole Shares.
(n) "Shareholder Servicing Agent" means a party furnishing services to
the Trust pursuant to any shareholder servicing contract described in Section
4.4 hereof.
(o) "Transfer Agent" means a party furnishing services to the Trust
pursuant to any transfer agency contract described in Section 4.4 hereof.
(p) "Trust" means the trust created hereby.
(q) "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, including, without limitation, any and all property
allocated or belonging to any series of Shares pursuant to Section 6.9 hereof.
(r) "Trustees" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms hereof, and
all other persons who may from time to time be duly elected or appointed,
qualified and serving as Trustees in accordance with the provisions hereof, and
reference
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3
herein to a Trustee or the Trustees shall refer to such person or persons in
their capacity as trustees hereunder.
ARTICLE II
TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three nor more than 15.
Section 2.2. Term of Office of Trustees. Subject to the provisions of
Section 16(a) of the 1940 Act, the Trustees shall hold office during the
lifetime of this Trust and until its termination as hereinafter provided; except
that (a) any Trustee may resign his trust (without need for prior or subsequent
accounting) by an instrument in writing signed by him and delivered to the other
Trustees, which shall take effect upon such delivery or upon such later date as
is specified therein; (b) any Trustee may be removed with cause, at any time by
written instrument signed by at least two-thirds of the remaining Trustees,
specifying the date when such removal shall become effective; (c) any Trustee
who has attained a mandatory retirement age established pursuant to any written
policy adopted from time to time by at least two thirds of the Trustees shall,
automatically and without action of such Trustee or the remaining Trustees, be
deemed to have retired in accordance with the terms of such policy, effective as
of the date determined in accordance with such policy; (d) any Trustee who has
become incapacitated by illness or injury as determined by a majority of the
other Trustees, may be retired by written instrument signed by a majority of the
other Trustees, specifying the date of his retirement; and (e) a Trustee may be
removed at any meeting of Shareholders by a vote of two thirds of the
outstanding Shares of each series. For purposes of the foregoing clause (b), the
term "cause" shall include, but not be limited to, failure to comply with such
written policies as may from time to time be adopted by at least two thirds of
the Trustees with respect to the conduct of Trustees and attendance at meetings.
Upon the resignation, retirement or removal of a Trustee, or his otherwise
ceasing to be a Trustee, he shall execute and deliver such documents as the
remaining Trustees shall require for the purpose of conveying to the Trust or
the remaining Trustees any Trust Property held in the name of the resigning,
retiring or removed Trustee. Upon the incapacity or death of any Trustee, his
legal representative shall execute and deliver on his behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
Section 2.3. Resignation and Appointment of Trustees. In case of the
declination, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of an increase in number, or for
any other reason, exist, the remaining Trustees shall fill such vacancy by
appointing such other individual as they in their discretion shall see fit. Such
appointment shall be evidenced by a written instrument signed by a majority of
the Trustees in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of appointment shall
have accepted in writing such appointment and agreed in writing to be bound by
the terms of the Declaration. Within twelve months of such appointment, the
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4
Trustees shall cause notice of such appointment to be mailed to each Shareholder
at his address as recorded on the books of the Trustees. An appointment of a
Trustee may be made by the Trustees then in office and notice thereof mailed to
Shareholders as aforesaid in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of
Trustees. The power of appointment is subject to the provisions of Section 16
(a) of the 1940 Act.
Section 2.4. Vacancies. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, 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 the Declaration. A written instrument certifying the existence of
such vacancy signed by a majority of the Trustees shall be conclusive evidence
of the existence of such vacancy.
Section 2.5. Delegation of Power to Other Trustees. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six months at
any one time to any other Trustee or Trustees; provided that in no case shall
fewer than two Trustees personally exercise the powers granted to the Trustees
under the Declaration except as herein otherwise expressly provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as the Trustees deem necessary, proper or desirable in order to
promote the interests of the Trust although such things are not herein
specifically mentioned. 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 the Declaration, the presumption shall be in favor of a grant of
power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
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5
Section 3.2. Investments. (a) The Trustees shall have the power:
(i) to conduct, operate and carry on the business of an investment
company;
(ii) to subscribe for, invest in, reinvest in, purchase or otherwise
acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of U.S. and foreign currencies, any form of gold
or other precious metal, commodity contracts, any form of option contract,
contracts for the future acquisition or delivery of fixed income or other
securities, shares of, or any other interest in, any investment company as
defined in the Investment Company Act of 1940, and securities and related
derivatives 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,
(A) states, territories and possessions of the United States and the
District of Columbia and any political subdivision, agency or instrumentality of
any such Person,
(B) the U.S. Government, any foreign government, any political
subdivision or any agency or instrumentality of the U.S. Government, any foreign
government or any political subdivision of the U.S. Government or any foreign
government,
(C) any international or supranational instrumentality,
(D) any bank or savings institution, or
(E) any corporation, trust, partnership or other organization organized
under the laws of the United States or of any state, territory or possession
thereof, or under any foreign law; or in "when issued" contracts for any such
securities, to retain Trust assets in cash and from time to time to change the
securities or obligations in which the assets of the Trust are invested; 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 investments; and
(iii) to carry on any other business in connection with or incidental
to any of the foregoing powers, to do everything necessary, proper or desirable
for the accomplishment of any purpose or the attainment of any object or the
furtherance of any power hereinbefore set forth, and to do every other act or
thing incidental or appurtenant to or connected with the aforesaid purposes,
objects or powers.
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6
(b) The Trustees shall not be limited to investing in securities or
obligations maturing before the possible termination of the Trust, nor shall the
Trustees be limited by any law limiting the investments which may be made by
fiduciaries.
(c) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by shareholders to either invest all or a portion of the
Trust Property, or sell all or a portion of the Trust Property and invest the
proceeds of such sales, in another investment company that is registered under
the 1940 Act.
Section 3.3. Legal Title. Legal title to all Trust Property shall be
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 or 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, such Trustee shall automatically
cease to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed and
delivered.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares and,
subject to the provisions set forth in Articles VII, VIII and IX and Section 6.9
hereof, to apply to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds of the Trust or other Trust Property whether
capital or surplus or otherwise, to the full extent now or hereafter permitted
by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 3.5. Borrowing Money; Lending Trust Property. The Trustees
shall have power to borrow money or otherwise obtain credit and to secure the
same by mortgaging, pledging or otherwise subjecting as security the Trust
Property, to endorse, guarantee, or undertake the performance of any obligation,
contract or engagement of any other Person and to lend Trust Property.
Section 3.6. Delegation; Committees. The Trustees shall have power to
delegate from time to time to such of their number or to officers, employees or
agents of the Trust the doing of such things and the execution of such
instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient.
Section 3.7. Collection and Payment. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay all
claims, including taxes, against the Trust Property; to prosecute, defend,
compromise or abandon any claims relating to the Trust Property; to foreclose
any
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7
security interest securing any obligations, by virtue of which any property is
owed to the Trust; and to enter into releases, agreements and other instruments.
Section 3.8. Expenses. Subject to Section 6.9 hereof, the Trustees
shall have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation of all officers,
employees and Trustees.
Section 3.9. Manner of Acting; By-Laws. Except as otherwise provided
herein or in the By-Laws, any action to be taken by the Trustees may be taken by
a majority of the Trustees present at a meeting of Trustees at which a quorum is
present, including any meeting held by means of a conference telephone circuit
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, or by written consents of a majority of the
Trustees. The Trustees may adopt By-Laws not inconsistent with this Declaration
to provide for the conduct of the business of the Trust and may amend or repeal
such By-Laws to the extent such power is not reserved to the Shareholders.
Section 3.10. Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, the Administrator, Trustees,
officers, employees, agents, the Investment Adviser, the Distributor, selected
dealers or independent contractors of the Trust against all claims arising by
reason of holding any such position or by reason of any action taken or omitted
by any such Person in such capacity, whether or not constituting negligence, or
whether or not the Trust would have the power to indemnify such Person against
such liability; (e) establish pension, profit-sharing, Share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees or
agents of the Trust; (f) to the extent permitted by law, indemnify any person
with whom the Trust has dealings, including any Investment Adviser,
Administrator, Custodian, Distributor, Transfer Agent, Shareholder Servicing
Agent and any dealer, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, provided, that the absence of such
seal shall not impair the validity of any instrument executed on behalf of the
Trust.
Section 3.11. Principal Transactions. Except in transactions permitted
by the 1940 Act, or any order of exemption issued by the Commission, the
Trustees shall not, on behalf of the Trust, buy any securities (other than
Shares) from or sell any securities (other than Shares) to, or lend any assets
of the Trust to, any Trustee or officer of the Trust or any firm of which any
such Trustee or
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8
officer is a member acting as principal, or have any such dealings with any
Investment Adviser, Administrator, Shareholder Servicing Agent, Custodian,
Distributor or Transfer Agent or with any Interested Person of such Person; but
the Trust may, upon customary terms, employ any such Person, or firm or company
in which such Person is an Interested Person, as broker, legal counsel,
registrar, transfer agent, dividend disbursing agent or custodian.
Section 3.12. Trustees and Officers as Shareholders. Except as
hereinafter provided, no officer, Trustee or member of any advisory board of the
Trust, and no member, partner, officer, director or trustee of the Investment
Adviser, Administrator or of the Distributor, and no Investment Adviser,
Administrator or Distributor of the Trust, shall take long or short positions in
the securities issued by the Trust. The foregoing provision shall not prevent:
(a) The Distributor from purchasing Shares from the Trust if such
purchases are limited (except for reasonable allowances for clerical errors,
delays and errors of transmission and cancellation of orders) to purchases for
the purpose of filling orders for Shares received by the Distributor and
provided that orders to purchase from the Trust are entered with the Trust or
the Custodian promptly upon receipt by the Distributor of purchase orders for
Shares, unless the Distributor is otherwise instructed by its customer;
(b) The Distributor from purchasing Shares as agent for the account of
the Trust;
(c) The purchase from the Trust or from the Distributor of Shares by
any officer, Trustee or member of any advisory board of the Trust or by any
member, partner, officer, director or trustee of the Investment Adviser or of
the Distributor at a price not lower than the net asset value of the Shares at
the moment of such purchase, provided that any such sales are only to be made
pursuant to a uniform offer described in the current prospectus or statement of
additional information for the Shares being purchased; or
(d) The Investment Adviser, the Distributor, the Administrator, or any
of their officers, partners, directors or trustees from purchasing Shares prior
to the effective date of the Trust's Registration Statement under the Securities
Act of 1933, as amended, relating to the Shares.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, ADMINISTRATOR, TRANSFER AGENT
AND SHAREHOLDER SERVICING AGENTS
Section 4.1. Investment Adviser. Subject to a Majority Shareholder Vote
of the Shares of each series affected thereby, the Trustees may in their
discretion from time to time enter into one or more investment advisory or
management contracts whereby the other party to each such contract shall
undertake to furnish the Trust such management, investment advisory, statistical
and research facilities and services, promotional activities, and such other
facilities and services, if any, with respect to one or more series of Shares,
as the Trustees shall from time to time consider desirable and all upon such
terms and conditions as the Trustees may in their discretion determine.
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9
Notwithstanding any provision of the Declaration, the Trustees may delegate to
the Investment Adviser authority (subject to such general or specific
instructions as the Trustees may from time to time adopt) to effect purchases,
sales, loans or exchanges of assets of the Trust on behalf of the Trustees or
may authorize any officer, employee or Trustee to effect such purchases, sales,
loans or exchanges pursuant to recommendations of the Investment Adviser (and
all without further action by the Trustees). Any of such purchases, sales, loans
or exchanges shall be deemed to have been authorized by all the Trustees. Such
services may be provided by one or more Persons.
Section 4.2. Distributor. The Trustees may in their discretion from
time to time enter into one or more distribution contracts providing for the
sale of Shares whereby the Trust may either agree to sell the Shares to the
other party to any such contract or appoint any such other party its sales agent
for such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of the Declaration
or the By-Laws; and such contract may also provide for the repurchase or sale of
Shares by such other party as principal or as agent of the Trust and may provide
that such other party may enter into selected dealer and sales agreements with
registered securities dealers and depository institutions to further the purpose
of the distribution or repurchase of the Shares. Such services may be provided
by one or more Persons.
Section 4.3. Administrator. The Trustees may in their discretion from
time to time enter into one or more administrative services contracts whereby
the other party to each such contract shall undertake to furnish such
administrative services to the Trust as the Trustees shall from time to time
consider desirable and all upon such terms and conditions as the Trustees may in
their discretion determine, provided that such terms and conditions are not
inconsistent with the provisions of this Declaration or the By-Laws. Such
services may be provided by one or more Persons.
Section 4.4. Transfer Agent and Shareholder Servicing Agents. The
Trustees may in their discretion from time to time enter into one or more
transfer agency and shareholder servicing contracts whereby the other party to
each such contract shall undertake to furnish such transfer agency and/or
shareholder services to the Trust or to shareholders of the Trust as the
Trustees shall from time to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine, provided that such
terms and conditions are not inconsistent with the provisions of this
Declaration or the By-Laws. Such services may be provided by one or more
Persons. Except as otherwise provided in the applicable shareholder servicing
contract, a Shareholder Servicing Agent shall be deemed to be the record owner
of outstanding Shares beneficially owned by customers of such Shareholder
Servicing Agent for whom it is acting pursuant to such shareholder servicing
contract.
Section 4.5. Parties to Contract. Any contract of the character
described in Section 4.1, 4.2, 4.3 or 4.4 of this Article IV or any Custodian
contract as described in Article X of the By-Laws may be entered into with any
Person, although one or more of the Trustees or officers of the Trust may be an
officer,
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10
partner, director, trustee, shareholder, or member of such other party to the
contract, and no such contract shall be invalidated or rendered voidable by
reason of the existence of any such relationship; nor shall any Person holding
such relationship be liable merely by reason of such relationship for any loss
or expense to the Trust under or by reason of any such contract or accountable
for any profit realized directly or indirectly therefrom, provided that the
contract when entered into was not inconsistent with the provisions of this
Article IV or the By-Laws. The same Person may be the other party to contracts
entered into pursuant to Sections 4.1, 4.2, 4.3 and 4.4 above or any Custodian
contract as described in Article X of the By-Laws, and any individual may be
financially interested or otherwise affiliated with Persons who are parties to
any or all of the contracts mentioned in this Section 4.5.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. No Trustee, officer, employee or agent of the Trust shall be subject to
any personal liability whatsoever to any Person, other than the Trust or its
Shareholders, in connection with Trust Property or the affairs of the Trust,
save only that arising from bad faith, wilful misfeasance, gross negligence or
reckless disregard for his duty to such Person; and all such Persons shall look
solely to the Trust Property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee, officer,
employee, or agent, as such, of the Trust, is made a party to any suit or
proceeding to enforce any such liability, he shall not, on account thereof, be
held to any personal liability. The Trust shall indemnify and hold each
Shareholder harmless from and against all claims and liabilities to which such
Shareholder may become subject by reason of his being or having been a
Shareholder, and shall reimburse such Shareholder for all legal and other
expenses reasonably incurred by him in connection with any such claim or
liability. The rights accruing to a Shareholder under this Section 5.1 shall not
exclude any other right to which such Shareholder may be lawfully entitled, nor
shall anything herein contained restrict the right of the Trust to indemnify or
reimburse a Shareholder in any appropriate situation even though not
specifically provided herein. Notwithstanding any other provision of this
Declaration to the contrary, no Trust Property shall be used to indemnify or
reimburse any Shareholder of any Shares of any series other than Trust Property
allocated or belonging to that series.
Section 5.2. Non-Liability of Trustees, etc. No Trustee, officer,
employee or agent of the Trust shall be liable to the Trust or to any
Shareholder, Trustee, officer, employee, or agent thereof for any action or
failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, wilful misfeasance, gross negligence or reckless disregard of his
duties.
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Section 5.3. Mandatory Indemnification; Insurance. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is or has been a Trustee or officer of the Trust
shall be indemnified by the Trust, to the fullest extent permitted by law
(including the 1940 Act) as currently in effect or as hereafter amended, against
all liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim", "action", "suit", or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal, administrative or
other, including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Trustee or
officer:
(i) against any liability to the Trust or the Shareholders by reason of
a final adjudication by the court or other body before which the proceeding was
brought that he engaged in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office;
(ii) with respect to any matter as to which he shall have been finally
adjudicated not to have acted in good faith in the reasonable belief that his
action was in the best interest of the Trust; or
(iii) in the event of a settlement involving a payment by a Trustee or
officer or other disposition not involving a final adjudication as provided in
paragraph (b) (i) or (b) (ii) above resulting in a payment by a Trustee or
officer, unless there has been either a determination that such Trustee or
officer did not engage in wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office by the
court or other body approving the settlement or other disposition or by a
reasonable determination, based upon a review of readily available facts (as
opposed to a full trial-type inquiry) that he did not engage in such conduct:
(A) by vote of a majority of the Disinterested Trustees acting on the
matter (provided that a majority of the Disinterested Trustees then in office
act on the matter); or
(B) by written opinion of independent legal counsel.
(c) Subject to the provisions of the 1940 Act, the Trust may maintain
insurance for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability (whether or not the Trust would have
the power to indemnify such Persons against such liability), and such other
insurance as the Trustees in their sole judgment shall deem advisable.
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(d) The rights of indemnification herein provided shall be severable,
shall not affect any other rights to which any Trustee or officer may now or
hereafter be entitled, shall continue as to a Person who has ceased to be such a
Trustee or officer and shall inure to the benefit of the heirs, executors and
administrators of such Person. Nothing contained herein shall affect any rights
to indemnification to which personnel other than Trustees and officers may be
entitled by contract or otherwise under law.
(e) Expenses of preparation and presentation of a defense to any claim,
action, suit, or proceeding of the character described in paragraph (a) of this
Section 5.3 shall be advanced by the Trust prior to final disposition thereof
upon receipt of an undertaking by or on behalf of the recipient to repay such
amount if it is ultimately determined that he is not entitled to indemnification
under this Section 5.3, provided that either:
(i) such undertaking is secured by a surety bond or some other
appropriate security or the Trust shall be insured against losses arising out of
any such advances; or
(ii) a majority of the Disinterested Trustees acting on the matter
(provided that a majority of the Disinterested Trustees then in office act on
the matter) or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 5.3 a "Disinterested Trustee" is one (i) who is
not an "Interested Person" of the Trust (including anyone who has been exempted
from being an "Interested Person" by any rule, regulation or order of the
Commission), and (ii) against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the same or similar
grounds is then or had been pending.
Section 5.4. No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 5.5. No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender, Shareholder Servicing Agent, Transfer Agent or other
Person dealing with the Trustees or any officer, employee or agent of the Trust
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent or
be liable for the application of money or property paid, loaned, or delivered to
or on the order of the Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other security of the
Trust or undertaking, and every other act or thing whatsoever executed in
connection with the Trust shall be conclusively presumed to have been executed
or done by the executors thereof only in their capacity as Trustees under the
Declaration or in their capacity as officers, employees or agents of the Trust.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees shall recite
that the same is executed or made by them not individually, but as Trustees
under the
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Declaration, and that the obligations of any such instrument are not binding
upon any of the Trustees or Shareholders individually, but bind only the trust
estate, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind any of
the Trustees or Shareholders individually. The Trustees shall at all times
maintain insurance for the protection of the Trust Property, Shareholders,
Trustees, officers, employees and agents in such amount as the Trustees shall
deem adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
Section 5.6. Reliance on Experts, etc. Each Trustee and officer or employee
of the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by the Investment Adviser, the Distributor,
Transfer Agent, any Shareholder Servicing Agent, selected dealers, accountants,
appraisers or other experts or consultants selected with reasonable care by the
Trustees, officers or employees of the Trust, regardless of whether such counsel
or expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the beneficiaries
hereunder may be divided into transferable Shares, which may be divided into one
or more series as provided in Section 6.9 hereof. Each such series shall have
such class or classes of Shares as the Trustees may from time to time determine.
The number of Shares authorized hereunder is unlimited. All Shares issued
hereunder including, without limitation, Shares issued in connection with a
dividend in Shares or a split of Shares, shall be fully paid and non-assessable.
Section 6.2. Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Trust nor can they be called
upon to assume any losses of the Trust or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights specifically set forth in the Declaration. The Shares
shall not entitle the holder to preference, pre-emptive, appraisal, conversion
or exchange rights, except as the Trustees may determine with respect to any
series of Shares.
Section 6.3. Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and the
Shareholders. 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 the Declaration
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shall be construed to make the Shareholders, either by themselves or with the
Trustees, partners or members of a joint stock association.
Section 6.4. Issuance of Shares. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares, in addition to
the then issued and outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration, including cash
or property, and on such terms as the Trustees may deem best, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection, with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares. The
Trustees may from time to time divide or combine the Shares of any series into a
greater or lesser number without thereby changing their proportionate beneficial
interests in Trust Property allocated or belonging to such series. Contributions
to the Trust may be accepted for, and Shares shall be redeemed as, whole Shares
and/or fractions of a Share.
Section 6.5. Register of Shares. A register or registers shall be kept
at the principal office of the Trust or at an office of the Transfer Agent or
any one or more Shareholder Servicing Agents which register or registers, taken
together, shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register or registers shall be conclusive as to who are the
holders of the Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-Laws
provided, until he has given his address to the Transfer Agent, the Shareholder
Servicing Agent which is the agent of record for such Shareholder, or such other
officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of Share
certificates and promulgate appropriate rules and regulations as to their use.
Section 6.6. Transfer of Shares. Shares shall be transferable on the
records of the Trust only by the record holder thereof or by his agent thereunto
duly authorized in writing, upon delivery to the Trustees, the Transfer Agent or
the Shareholder Servicing Agent which is the agent of record for such
Shareholder, of a duly executed instrument of transfer, together with any
certificate or certificates (if issued) for such Shares and such evidence of the
genuineness of each such execution and authorization and of other matters as may
reasonably be required. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder and
neither the Trustees nor any Transfer Agent, Shareholder Servicing Agent or
registrar nor any officer, employee or agent of the Trust shall be affected by
any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees, the Transfer
Agent or
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the Shareholder Servicing Agent which is the agent of record for such
Shareholder; but until such record is made, the Shareholder of record shall be
deemed to be the holder of such Shares for all purposes hereunder and neither
the Trustees nor any Transfer Agent, Shareholder Servicing Agent or registrar
nor any officer or agent of the Trust shall be affected by any notice of such
death, bankruptcy or incompetence, or other operation of law.
Section 6.7. Notices. Any and all notices to which any Shareholder may
be entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his last
known address as recorded on the register of the Trust.
Section 6.8. Voting Powers. The Shareholders shall have power to vote
only (i) for the removal of Trustees as provided in Section 2.2 hereof, (ii)
with respect to any investment advisory or management contract as provided in
Section 4.1 hereof, (iii) with respect to termination of the Trust as provided
in Section 9.2 hereof, (iv) with respect to any amendment of this Declaration to
the extent and as provided in Section 9.3 hereof, (v) with respect to any
merger, consolidation or sale of assets as provided in Sections 9.4 and 9.6
hereof, (vi) with respect to incorporation of the Trust or any series to the
extent and as provided in Sections 9.5 and 9.6 hereof, (vii) 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, and (viii) with respect to such additional matters relating to the
Trust as may be required by the Declaration, 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, except that Shares
held in the treasury of the Trust shall not be voted. Shares shall be voted by
individual series on any matter submitted to a vote of the Shareholders of the
Trust except as provided in Section 6.9(g) hereof. There shall be no cumulative
voting in the election of Trustees. Until Shares are issued, the Trustees may
exercise all rights of Shareholders and may take any action required by law, the
Declaration or the By-Laws to be taken by Shareholders. At any meeting of
Shareholders of the Trust or of any series of the Trust, a Shareholder Servicing
Agent may vote any shares as to which such Shareholder Servicing Agent is the
agent of record and which are not otherwise represented in person or by proxy at
the meeting, proportionately in accordance with the votes cast by holders of all
shares otherwise represented at the meeting in person or by proxy as to which
such Shareholder Servicing Agent is the agent of record. Any shares so voted by
a Shareholder Servicing Agent will be deemed represented at the meeting for
quorum purposes. The By-Laws may include further provisions for Shareholder
votes and meetings and related matters.
Section 6.9. Series Designation. As set forth in Appendix I hereto, the
Trustees have authorized the division of Shares into series, as designated and
established pursuant to the provisions of Appendix I and this Section 6.9. The
Trustees, in their discretion, may authorize the division of Shares into one or
more additional series, and the different series shall be established and
designated, and the variations in the relative rights, privileges and
preferences
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as between the different series shall be fixed and determined by the Trustees
upon and subject to the following provisions:
(a) All Shares shall be identical except that there may be such
variations as shall be fixed and determined by the Trustees between different
series as to purchase price, right of redemption and the price, terms and manner
of redemption, and special and relative rights as to dividends and on
liquidation.
(b) The number of authorized Shares and the number of Shares of each
series that may be issued shall be unlimited. The Trustees may classify or
reclassify any unissued Shares or any Shares previously issued and reacquired of
any series into one or more series that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or some
other series), reissue for such consideration and on such terms as they may
determine, or cancel any Shares of any series reacquired by the Trust at their
discretion from time to time.
(c) All consideration received by the Trust for the issuance or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income and earnings thereon,
profits therefrom, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income, earnings, profits,
proceeds, funds or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them to and among any one or
more of the series established and designated from time to time in such manner
and on such basis as the Trustees, in their sole discretion, deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and binding
upon the Shareholders of all series for all purposes. No Shareholder of any
particular series shall have any claim on or right to any assets allocated or
belonging to any other series of Shares.
(d) The assets belonging to each particular series shall be charged
with the liabilities of the Trust in respect of that series and all expenses,
costs, charges and reserves attributable to that series, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are not
readily identifiable as belonging to any particular series shall be allocated
and charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such basis as
the Trustees, in their sole discretion, deem fair and equitable. Each allocation
of liabilities, expenses, costs, charges and reserves by the Trustees shall be
conclusive and binding upon the Shareholders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with the
1940 Act, to determine which items shall be treated as income and which items as
capital; and each such determination and allocation shall be conclusive and
binding upon the Shareholders. Under no circumstances shall the assets allocated
or belonging to any particular series be charged with liabilities, expenses,
costs, charges or reserves attributable to any other series. All Persons who
have extended credit which has been allocated to a particular series, or who
have
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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.
(e) The power of the Trustees to invest and reinvest the Trust Property
allocated or belonging to any particular series shall be governed by Section 3.2
hereof unless otherwise provided in the instrument of the Trustees establishing
such series which is hereinafter described.
(f) Each Share of a series shall represent a beneficial interest in the
net assets allocated or belonging to such series only, and such interest shall
not extend to the assets of the Trust generally. Dividends and distributions on
Shares of a particular series may be paid with such frequency as the Trustees
may determine, which may be monthly or otherwise, pursuant to a standing vote or
votes adopted only once or with such frequency as the Trustees may determine, to
the Shareholders of that series only, from such of the income and capital gains,
accrued or realized, from the assets belonging to that series, as the Trustees
may determine, after providing for actual and accrued liabilities belonging to
that series. All dividends and distributions on Shares of a particular series
shall be distributed pro rata to the Shareholders of that series in proportion
to the number of Shares of that series held by such Shareholders at the date and
time of record established for the payment of such dividends or distributions.
Shares of any particular series of the Trust may be redeemed solely out of Trust
Property allocated or belonging to that series. Upon liquidation or termination
of a series of the Trust, Shareholders of such series shall be entitled to
receive a pro rata share of the net assets of such series only.
(g) Notwithstanding any provision hereof to the contrary, on any matter
submitted to a vote of the Shareholders of the Trust, all Shares then entitled
to vote shall be voted by individual series, except that (i) when required by
the 1940 Act to be voted in the aggregate, Shares shall not be voted by
individual series, and (ii) when the Trustees have determined that the matter
affects only the interests of Shareholders of one or more series, only
Shareholders of such series shall be entitled to vote thereon.
(h) The establishment and designation of any series of Shares shall be
effective upon the execution by a majority of the Trustees of an instrument
setting forth such establishment and designation and the relative rights and
preferences of such series, or as otherwise provided in such instrument. At any
time that there are no Shares outstanding of any particular series previously
established and designated, the Trustees may by an instrument executed by a
majority of their number abolish that series and the establishment and
designation thereof. Each instrument referred to in this paragraph shall have
the status of an amendment to this Declaration.
(i) Notwithstanding anything in this Declaration to the contrary, the
Trustees may, in their discretion, authorize the division of Shares of any
series into Shares of one or more classes or subseries of such series. All
Shares of a class or a subseries shall be identical with each other and with the
Shares of each other class or subseries of the same series except for such
variations between classes or subseries as may be approved by the Board of
Trustees and be
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permitted under the 1940 Act or pursuant to any exemptive order issued by the
Commission.
ARTICLE VII
REDEMPTIONS
Section 7.l Redemptions. In case any Shareholder at any time desires to
dispose of his Shares, he may deposit his certificate or certificates therefor,
duly endorsed in blank or accompanied by an instrument of transfer executed in
blank, or if the Shares are not represented by any certificate, a written
request or other such form of request as the Trustees may from time to time
authorize, at the office of the Transfer Agent, the Shareholder Servicing Agent
which is the agent of record for such Shareholder, or at the office of any bank
or trust company, either in or outside of the Commonwealth of Massachusetts,
which is a member of the Federal Reserve System and which the said Transfer
Agent or the said Shareholder Servicing Agent has designated in writing for that
purpose, together with an irrevocable offer in writing in a form acceptable to
the Trustees to sell the Shares represented thereby to the Trust at the net
asset value per Share thereof, next determined after such deposit as provided in
Section 8.1 hereof. Payment for said Shares shall be made to the Shareholder
within seven days after the date on which the deposit is made, unless (i) the
date of payment is postponed pursuant to Section 7.2 hereof, or (ii) the
receipt, or verification of receipt, of the purchase price for the Shares to be
redeemed is delayed, in either of which events payment may be delayed beyond
seven days.
Section 7.2 Suspension of Right of Redemption. The Trust may declare a
suspension of the right of redemption or postpone the date of payment of the
redemption proceeds for the whole or any part of any period (i) during which the
New York Stock Exchange is closed other than customary week-end and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which disposal
by the Trust of securities owned by it is not reasonably practicable or it is
not reasonably practicable for the Trust fairly to determine the value of its
net assets, or (iv) during which the Commission for the protection of
Shareholders by order permits the suspension of the right of redemption or
postponement of the date of payment of the redemption proceeds; provided that
applicable rules and regulations of the Commission shall govern as to whether
the conditions prescribed in (ii), (iii) or (iv) exist. Such suspension shall
take effect at such time as the Trust shall specify but not later than the close
of business on the business day next following the declaration of suspension,
and thereafter there shall be no right of redemption or payment of the
redemption proceeds until the Trust shall declare the suspension at an end,
except that the suspension shall terminate in any event on the first day on
which said stock exchange shall have reopened or the period specified in (ii) or
(iii) shall have expired (as to which, in the absence of an official ruling by
the Commission, the determination of the Trust shall be conclusive). In the case
of a suspension of the right of redemption, a Shareholder may either withdraw
his request for redemption or receive payment based on the net asset value
existing after the termination of the suspension.
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Section 7.3. Redemption of Shares; Disclosure of Holding. If the Trustees
shall, at any time and in good faith, be of the opinion that direct or indirect
ownership of Shares has or may become concentrated in any Person to an extent
which would disqualify the Trust, or any series of the Trust, as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"), then the Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a number of
Shares of the Trust, or such series of the Trust, sufficient to maintain or
bring the direct or indirect ownership of Shares of the Trust, or such series of
the Trust, into conformity with the requirements for such qualification, and
(ii) to refuse to transfer or issue Shares of the Trust, or such series of the
Trust, to any Person whose acquisition of the Shares of the Trust, or such
series of the Trust, would result in such disqualification. The redemption shall
be effected at the redemption price and in the manner provided in Section 7.l
hereof.
The Shareholders of the Trust shall upon demand disclose to the Trustees in
writing such information with respect to direct and indirect ownership of Shares
of the Trust as the Trustees deem necessary to comply with the provisions of the
Code, or to comply with the requirements of any other authority. Upon the
failure of a Shareholder to disclose such information and to comply with such
demand of the Trustees, the Trust shall have the power to redeem such Shares at
a redemption price determined in accordance with Section 7.1 hereof.
Section 7.4 Redemptions of Accounts of Less than Minimum Amount. The
Trustees shall have the power, and any Shareholder Servicing Agent with whom the
Trust has so agreed (or a subcontractor of such Shareholder Servicing Agent)
shall have the power, at any time to redeem Shares of any Shareholder at a
redemption price determined in accordance with Section 7.l hereof if at such
time the aggregate net asset value of the Shares owned by such Shareholder is
less than a minimum amount as determined from time to time and disclosed in a
prospectus of the Trust or in the Shareholder Servicing Agent's (or sub-
contractor's) agreement with its customer. A Shareholder shall be notified that
the aggregate value of his Shares is less than such minimum amount and allowed
60 days to make an additional investment before redemption is processed.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
The Trustees, in their absolute discretion, may prescribe and shall set
forth in the By-Laws or in a duly adopted vote or votes of the Trustees such
bases and times for determining the per Share net asset value of the Shares or
net income, or the declaration and payment of dividends and distributions, as
they may deem necessary or desirable.
ARTICLE IX
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
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Section 9.2. Termination of Trust. (a) The Trust may be terminated (i) by a
Majority Shareholder Vote of its Shareholders, or (ii) by the Trustees by
written notice to the Shareholders. Any series of the Trust may be terminated
(i) by a Majority Shareholder Vote of the Shareholders of that series, or (ii)
by the Trustees by written notice to the Shareholders of that series. Upon the
termination of the Trust or any series of the Trust:
(i) The Trust or series of the Trust shall carry on no business except
for the purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust or
series of the Trust and all the powers of the Trustees under this Declaration
shall continue until the affairs of the Trust or series of the Trust shall have
been wound up, including the power to fulfill or discharge the contracts of the
Trust, collect the assets of the Trust or series of the Trust, sell, convey,
assign, exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property of the Trust or series of the Trust to one or more
Persons at public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind, discharge or pay
the liabilities of the Trust or series of the Trust, and to do all other acts
appropriate to liquidate the business of the Trust or series of the Trust;
provided, that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all of the Trust Property of the Trust or
series of the Trust shall require Shareholder approval in accordance with
Section 9.4 or 9.6 hereof, respectively; and
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property of the Trust or series of the Trust, in
cash or in kind or partly in cash and partly in kind, among the Shareholders of
the Trust or series of the Trust according to their respective rights.
(b) After termination of the Trust or series of the Trust and distribution
to the Shareholders of the Trust or series of the Trust as herein provided, a
majority of the Trustees shall execute and lodge among the records of the Trust
an instrument in writing setting forth the fact of such termination, and the
Trustees shall thereupon be discharged from all further liabilities and duties
hereunder with respect to the Trust or series of the Trust, and the rights and
interests of all Shareholders of the Trust or series of the Trust shall
thereupon cease.
Section 9.3. Amendment Procedure. (a) This Declaration may be amended
by a Majority Shareholder Vote of the Shareholders or by any instrument in
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than a majority of the Shares of the Trust. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders to designate series in accordance with Section 6.9 hereof, to
change the name of the Trust, to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or to
conform this Declaration to the requirements of applicable federal laws or
regulations or the requirements of the regulated investment company provisions
of the Internal Revenue Code of 1986, as amended, or to (i) change the state or
other jurisdiction designated herein as the state or other jurisdiction whose
laws
<PAGE>
21
shall be the governing law hereof, (ii) effect such changes herein as the
Trustees find to be necessary or appropriate (A) to permit the filing of this
Declaration under the laws of such state or other jurisdiction applicable to
trusts or voluntary associations, (B) to permit the Trust to elect to be treated
as a "regulated investment company" under the applicable provisions of the
Internal Revenue Code of 1986, as amended, or (C) to permit the transfer of
shares (or to permit the transfer of any other beneficial interests or shares in
the Trust, however denominated), and (iii) in conjunction with any amendment
contemplated by the foregoing clause (i) or the foregoing clause (ii) to make
any and all such further changes or modifications to this Declaration as the
Trustees find to be necessary or appropriate, any finding of the Trustees
referred to in the foregoing clause (ii) or clause (iii) to be conclusively
evidenced by the execution of any such amendment by a majority of the Trustees,
but the Trustees shall not be liable for failing so to do.
(b) No amendment which the Trustees have determined would affect the
rights, privileges or interests of holders of a particular series of Shares, but
not the rights, privileges or interests of holders of all series of Shares
generally, and which would otherwise require a Majority Shareholder Vote under
paragraph (a) of this Section 9.3, may be made except with the vote or consent
by a Majority Shareholder Vote of Shareholders of such series.
(c) Notwithstanding any other provision of this Declaration to the
contrary, the Trustees shall have the power in their discretion without any
requirement of approval by shareholders to either invest all or a portion of the
Trust Property, or sell all or a portion of the Trust Property and invest the
proceeds of such sales, in another investment company that is registered under
the 1940 Act.
(d) Notwithstanding any other provision hereof, no amendment may be
made under this Section 9.3 which would change any rights with respect to the
Shares, or any series of Shares, by reducing the amount payable thereon upon
liquidation of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the Majority Shareholder Vote of the Shares or
that series of Shares. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
(e) A certificate signed by a majority of the Trustees setting forth an
amendment and reciting that it was duly adopted by the Shareholders or by the
Trustees as aforesaid, and executed by a majority of the Trustees, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust.
(f) Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of Shares of the Trust shall have become effective,
this Declaration may be amended in any respect by the affirmative vote of a
majority of the Trustees or by an instrument signed by a majority of the
Trustees.
<PAGE>
22
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust may
merge or consolidate with any other corporation, association, trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property (or all or substantially all of the Trust Property allocated or
belonging to a particular series of the Trust) including its good will, upon
such terms and conditions and for such consideration when and as authorized at
any meeting of Shareholders called for such purpose by the vote of the holders
of two-thirds of the outstanding Shares of all series of the Trust voting as a
single class, or of the affected series of the Trust, as the case may be, or by
an instrument or instruments in writing without a meeting, consented to by the
vote of the holders of two-thirds of the outstanding Shares of all series of the
Trust voting as a single class, or of the affected series of the Trust, as the
case may be; provided, however, that if such merger, consolidation, sale, lease
or exchange is recommended by the Trustees, the vote or written consent by
Majority Shareholder Vote shall be sufficient authorization; and any such
merger, consolidation, sale, lease or exchange shall be deemed for all purposes
to have been accomplished under and pursuant to the statutes of the Commonwealth
of Massachusetts. Nothing contained herein shall be construed as requiring
approval of Shareholders for any sale of assets in the ordinary course of the
business of the Trust.
Section 9.5. Incorporation, Reorganization. With the approval of the
holders of a majority of the Shares outstanding and entitled to vote, the
Trustees may cause to be organized or assist in organizing a corporation or
corporations under the laws of any jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization to take over
all of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. Subject to Section 9.4 hereof, the Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to the
extent permitted by law. Nothing contained in this Section 9.5 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
Section 9.6. Incorporation or Reorganization of Series. With the
approval of a Majority Shareholder Vote of any series, the Trustees may sell,
lease or exchange all of the Trust Property allocated or belonging to that
series, or cause to be organized or assist in organizing a corporation or
corporations under the laws of any other jurisdiction, or any other trust, unit
investment trust, partnership, association or other organization, to take over
all of the Trust Property allocated or belonging to that series and to sell,
convey and transfer such Trust Property to any such corporation, trust, unit
investment trust, partnership, association, or other organization in exchange
for the shares or securities thereof or otherwise.
<PAGE>
23
ARTICLE X
REPORTS TO SHAREHOLDERS AND SHAREHOLDER COMMUNICATIONS
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report of the transactions of the Trust, including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XI
MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other place or places as may be required under the laws of the
Commonwealth of Massachusetts and may also be filed or recorded in such other
places as the Trustees deem appropriate. Each amendment so filed shall state or
be accompanied by a certificate signed and acknowledged by a Trustee stating
that such action was duly taken in the manner provided herein, and unless such
amendment or such certificate sets forth some later time for the effectiveness
of such amendment, such amendment shall be effective upon its filing. A restated
Declaration, integrating into a single instrument all of the provisions of the
Declaration which are then in effect and operative, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of this original
Declaration and the various amendments thereto.
Section 11.2. Governing Law. This Declaration is executed by the
Trustees and delivered in the Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 11.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, is a Trustee hereunder
certifying to: (i) the number or identity of Trustees or Shareholders, (ii) the
due authorization of the execution of any instrument or writing, (iii) the form
of any vote passed at a meeting of Trustees or Shareholders, (iv) the fact that
the number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (v) the form
of any By-Laws adopted by or the identity of any officers elected by the
Trustees, or (vi) the existence of any fact or facts which in any manner relates
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
<PAGE>
24
Section 11.5. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any such provision is in conflict
with the 1940 Act, the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, or with other applicable laws and regulations,
the conflicting provision shall be deemed never to have constituted a part of
this Declaration; provided however, that such determination shall not affect any
of the remaining provisions of this Declaration or render invalid or improper
any action taken or omitted prior to such determination.
Section 11.6. Principal Office. The principal office of the Trust is
29 Temple Place, Boston, Massachusetts, 02111.
(b) If any provision of this Declaration 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 in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the 1st day of July, 1991.
/s/JAMES B. CRAVER
James B. Craver
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
/s/CYNTHIA J. COLITTI
Cynthia J. Colitti
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
/s/THOMAS M. LENZ
Thomas M. Lenz
as Trustee
and not individually
6 St. James Avenue
Boston, Massachusetts
EI7008
<PAGE>
25
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, SS.
July 1, 1991
Then personally appeared James B. Craver, Cynthia J. Colitti and Thomas M.
Lenz, who severally acknowledged the foregoing instrument to be their free act
and deed.
Before me,
/s/MARK PIETKIEWICZ
Notary Public
My commission expires: January 24, 1997
<PAGE>
EI7008 Appendix I
GREEN CENTURY FUNDS
Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.01 per share)
Pursuant to Section 6.9 of the Declaration of Trust, dated as of July
1, 1991 (the "Declaration of Trust"), of Green Century Funds (the "Trust"), the
Trustees of the Trust hereby establish and designate two series of Shares (as
defined in the Declaration of Trust) (the "Funds") to have the following special
and relative rights:
1. The Funds shall be designated as follows:
Green Century Money Market Fund
Green Century Balanced Fund
2. The Funds shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of a Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to that Fund, and shall
be entitled to receive its pro rata share of the net assets of that Fund upon
liquidation of that Fund, all as provided in Section 6.9 of the Declaration of
Trust. The proceeds of sales of Shares of a Fund, together with any income and
gain thereon, less any diminution or expenses thereof, shall irrevocably belong
to that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of the Funds now or hereafter created, or otherwise to
change the special and relative rights of the Funds.
EI7008 Appendix I
GREEN CENTURY FUNDS
First Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.01 per share)
Pursuant to Section 6.9 of the Declaration of Trust, dated as of July
1, 1991 (the "Declaration of Trust"), of Green Century Funds (the "Trust"), the
Trustees of the Trust hereby amend and restate the Establishment and Designation
of Series appended to the Declaration of Trust to establish and designate one
additional series of Shares (as defined in the Declaration of Trust), such
additional series of Shares together with the two existing series of Shares
totalling three series of Shares (the "Funds") to have the following special and
relative rights:
1. The Funds shall be designated as follows:
Green Century Money Market Fund
Green Century Balanced Fund
Green Century Growth Fund
2. The Funds shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of a Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to that Fund, and shall
be entitled to receive its pro rata share of the net assets of that Fund upon
liquidation of that Fund, all as provided in Section 6.9 of the Declaration of
Trust. The proceeds of sales of Shares of a Fund, together with any income and
gain thereon, less any diminution or expenses thereof, shall irrevocably belong
to that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of the Funds now or hereafter created, or otherwise to
change the special and relative rights of the Funds.
<PAGE>
IN WITNESS WHEREOF, the undersigned Trustees have executed this
instrument this 7th day of April, 1995.
Signature Title
/s/MINDY S. LUBBER President, Chief Executive Officer
Mindy S. Lubber and Trustee
/S/MICHAEL BRENNAN Trustee
Michael Brennan
/S/GINA COLLINS Trustee
Gina Collins
/S/PAMELA B. GILBER Trustee
Pamela B. Gilbert
/S/DOUGLAS M. HUSID Trustee
Douglas M. Husid
/S/DAVID J. FINE Trustee
David J. Fine
/S/STEVEN KADISH Trustee
Steven Kadish
/S/STEPHEN MORGAN Trustee
Stephen Morgan
/S/C. WILLIAM RYAN Trustee
C. William Ryan
/S/JAMES H. STARR Trustee
James H. Starr
/S/WENDY WENDLANDT Trustee
Wendy Wendlandt
EI7008 Appendix I
GREEN CENTURY FUNDS
Second Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.01 per share)
Pursuant to Section 6.9 of the Declaration of Trust, dated as of July 1,
1991 (the "Declaration of Trust"), of Green Century Funds (the "Trust"), the
Trustees of the Trust hereby amend and restate the Establishment and Designation
of Series appended to the Declaration of Trust to change the name of the Green
Century Growth Fund to the Green Century Equity Fund, one series of Shares (as
defined in the Declaration of Trust) of the three series of Shares (each a
"Fund" and collectively the "Funds") of the Trust.
1. The Funds shall be designated as follows:
Green Century Money Market Fund
Green Century Balanced Fund
Green Century Equity Fund
2. The Funds shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of a Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to that Fund, and shall
be entitled to receive its pro rata share of the net assets of that Fund upon
liquidation of that Fund, all as provided in Section 6.9 of the Declaration of
Trust. The proceeds of sales of Shares of a Fund, together with any income and
gain thereon, less any diminution or expenses thereof, shall irrevocably belong
to that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
<PAGE>
to change the designation of the Funds now or hereafter created, or otherwise to
change the special and relative rights of the Funds.
IN WITNESS WHEREOF, the undersigned Trustees have executed this
instrument this 7th day of September, 1995.
Signature Title
President, Chief Executive Officer
/s/MINDY S. LUBBER and Trustee
Mindy S. Lubber
/s/GINA COLLINS Trustee
Gina Collins
/s/DOUGLAS M. HUSID Trustee
Douglas M. Husid
/s/DAVID J. FINE Trustee
David J. Fine
/s/STEVEN KADISH Trustee
Steven Kadish
/s/STEPHEN MORGAN Trustee
Stephen Morgan
/s/C. WILLIAM RYAN Trustee
C. William Ryan
/s/JAMES H. STARR Trustee
James H. Starr
/S/WENDY WENDLANDT Trustee
Wendy Wendlandt
Principal Contact: Linda T. Gibson
Green Century Funds
c/o Signature Financial Group, Inc.
6 St. James Avenue
Boston, MA 02116
(617) 423-0800
EI7008 Appendix I
GREEN CENTURY FUNDS
Third Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.01 per share)
Pursuant to Section 6.9 of the Declaration of Trust, dated as of July 1,
1991 (the "Declaration of Trust"), of Green Century Funds (the "Trust"), the
Trustees of the Trust hereby amend and restate the Establishment and Designation
of Series appended to the Declaration of Trust to terminate the Green Century
Money Market Fund and amend and restate the establishment and designation of
series of Shares (as defined in the Declaration of Trust) to remove the name of
such fund and to reduce the number of series of Shares (as defined in the
Declaration of Trust) to two series of Shares (the "Funds") to have the
following special and relative rights:
1. The Funds shall be designated as follows:
Green Century Balanced Fund
Green Century Equity Fund
2. The Funds shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of a Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to that Fund, and shall
be entitled to receive its pro rata share of the net assets of that Fund upon
liquidation of that Fund, all as provided in Section 6.9 of the Declaration of
Trust. The proceeds of sales of Shares of a Fund, together with any income and
gain thereon, less any diminution or expenses thereof, shall irrevocably belong
to that Fund, unless otherwise required by law.
3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.
4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.
5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of the Funds now or hereafter created, or otherwise to
change the special and relative rights of the Funds.
<PAGE>
IN WITNESS WHEREOF, the undersigned Trustees have executed this
instrument this 29th day of September, 1995.
Signature Title
President, Chief Executive Officer
/S/MINDY S. LUBBER and Trustee
Mindy S. Lubber
/S/GINA COLLINS Trustee
Gina Collins
/S/DOUGLAS M. HUSID Trustee
Douglas M. Husid
/S/DAVID J. FINE Trustee
David J. Fine
/S/STEVEN KADISH Trustee
Steven Kadish
/S/STEPHEN MORGAN Trustee
Stephen Morgan
/S/C. WILLIAM RYAN Trustee
C. William Ryan
/S/JAMES H. STARR Trustee
James H. Starr
/S/WENDY WENDLANDT Trustee
Wendy Wendlandt
<PAGE>
Green Century Funds
29 Temple Place, 5th Floor
Boston, Massachusetts 02111
(617) 292-4800
Initial Trustee Residence
James B. Craver, Esq. 42 Miller Hill Road
Post Office Box 811
Dover, MA 02030
(508) 785-0171
Ms. Cynthia J. Colitti 55 West 76th Street, No. 6A
New York, NY 10023
(212) 644-1400
Thomas M. Lenz, Esq. 96 Brown Street
Weston, MA 02193
(617) 237-7835
Principal Contact: Thomas M. Lenz, Esq.
Green Century Funds
c/o Signature Financial Group, Inc.
6 St. James Avenue
Boston, MA 02116
(617) 423-0800
EI7008
BY-LAWS
OF
GREEN CENTURY FUNDS
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment Adviser",
"Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares", "Transfer
Agent", "Trust", "Trust Property" and "Trustees" have the respective meanings
given them in the Declaration of Trust of Green Century Funds dated as of July
1, 1991.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the principal
office of the Trust in the Commonwealth of Massachusetts shall be at 29 Temple
Place, in the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other places
without as well as within the Commonwealth as the Trustees may from time to time
determine.
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. A meeting of Shareholders may be called at any
time by a majority of the Trustees and shall be called by any Trustee upon
written request, which shall specify the purpose or purposes for which such
meeting is to be called, of Shareholders holding in the aggregate not less than
10% of the outstanding Shares entitled to vote on the matters specified in such
written request. Any such meeting shall be held within or without the
Commonwealth of Massachusetts on such day and at such time as the Trustees shall
designate. The holders of a majority of outstanding Shares entitled to vote
present in person or by proxy shall constitute a quorum at any meeting of the
Shareholders. In the absence of a quorum, a majority of outstanding Shares
entitled to vote present in person or by proxy may adjourn the meeting from time
to time until a quorum shall be present.
Section 2. Notice of Meetings Notice of all meetings of Shareholders,
stating the time, place and purposes of the meeting, shall be given by the
Trustees by mail to each Shareholder entitled to vote at such meeting at his
<PAGE>
2
address as recorded on the register of the Trust, mailed at least 10 days and
not more than 60 days before the meeting. Only the business stated in the notice
of the meeting shall be considered at such meeting. Any adjourned meeting may be
held as adjourned without further notice. No notice need be given to any
Shareholder who shall have failed to inform the Trust of his current address or
if a written waiver of notice, executed before or after the meeting by the
Shareholder or his attorney thereunto authorized, is filed with the records of
the meeting.
Section 3. Record Date. For the purpose of determining the Shareholders
who are entitled to notice of and to vote at any meeting, or to participate in
any distribution, or for the purpose of any other action, the Trustees may from
time to time close the transfer books for such period, not exceeding 30 days, as
the Trustees may determine; or without closing the transfer books the Trustees
may fix a date not more than 60 days prior to the date of any meeting of
Shareholders or distribution or other action as a record date for the
determination of the persons to be treated as Shareholders of record for such
purpose.
Section 4. Proxies. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Pursuant to a vote of a majority of the Trustees, proxies may be solicited in
the name of the Trust or one or more Trustees or officers of the Trust. Only
Shareholders of record shall be entitled to vote. Each full Share shall be
entitled to one vote and fractional Shares shall be entitled to a vote of such
fraction. When any Share is held jointly by several persons, any one of them may
vote at any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy, and
such joint owners or their proxies so present disagree as to any vote to be
cast, such vote shall not be received in respect of such Share. A proxy
purporting to be executed by or on behalf of a Shareholder shall be deemed valid
unless challenged at or prior to its exercise, and the burden of proving
invalidity shall rest on the challenger. If the holder of any such Share is a
minor or a person of unsound mind, and subject to guardianship or to the legal
control of any other person as regards the charge or management of such Share,
such Share may be voted by such guardian or such other person appointed or
having such control, and such vote may be given in person or by proxy.
Section 5. Inspection of Records. The records of the Trust shall be open to
inspection by Shareholders to the same extent as is permitted shareholders of a
Massachusetts business corporation.
Section 6. Action without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the 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.
<PAGE>
3
ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the Chairperson
or by any Trustee. Notice of the time and place of each meeting other than
regular or stated meetings shall be given by the Secretary or an Assistant
Secretary or by the officer or Trustee calling the meeting and shall be mailed
to each Trustee at least two days before the meeting, or shall be telegraphed,
cabled, or sent by facsimile transmission to each Trustee at his business
address, or personally delivered to him at least one day before the meeting.
Notice of a meeting need not be given to any Trustee if a written waiver of
notice, executed by him before or after the meeting, is filed with the records
of the meeting, or to any Trustee who attends the meeting without protesting
prior thereto or at its commencement the lack of notice to him. A notice or
waiver of notice need not specify the purpose of any meeting. The Trustees may
meet by means of a telephone conference circuit or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, which telephone conference meeting shall be deemed to have been held
at a place designated by the Trustees at the meeting. Participation in a
telephone conference meeting shall constitute presence in person at such
meeting. Any action required or permitted to be taken at any meeting of the
Trustees may be taken by the Trustees without a meeting if all the Trustees
consent to the action in writing and the written consents are filed with the
records of the Trustees' meetings. Such consents shall be treated as a vote for
all purposes.
Section 2. Quorum and Manner of Acting. A majority of the Trustees
present in person at any regular or special meeting of the Trustees shall
constitute a quorum for the transaction of business at such meeting and (except
as otherwise required by law, the Declaration or these By-Laws) the act of a
majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE V
COMMITTEES AND ADVISORY BOARD
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three Trustees to hold office at the
pleasure of the Trustees. While the Trustees are not in session, the Executive
Committee shall have the power to conduct the current and ordinary business of
the Trust, including the purchase and sale of securities and the designation of
securities to be delivered upon redemption of Shares of the Trust, and such
other powers of the Trustees as the Trustees may, from time to time, delegate to
the Executive Committee except those powers which by law, the Declaration or
these
<PAGE>
4
By-Laws the Trustees are prohibited from so delegating. The Trustees may also
elect from their own number other Committees from time to time, the number
composing such Committees, the powers conferred upon the same (subject to the
same limitations as with respect to the Executive Committee) and the term of
membership on such Committees to be determined by the Trustees. The Trustees may
designate a chairman of any such Committee. In the absence of such designation a
Committee may elect its own chairman.
Section 2. Meeting, Quorum and Manner of Acting. The Trustees may (i)
provide for stated meetings of any Committee, (ii) specify the manner of calling
and notice required for special meetings of any Committee, (iii) specify the
number of members of a Committee required to constitute a quorum and the number
of members of a Committee required to exercise specified powers delegated to
such Committee, (iv) authorize the making of decisions to exercise specified
powers by written assent of the requisite number of members of a Committee
without a meeting, and (v) authorize the members of a Committee to meet by means
of a telephone conference circuit.
Each Committee shall keep regular minutes of its meetings and records
of decisions taken without a meeting and cause them to be recorded in a book
designated for that purpose and kept in the office of the Trust.
Section 3. Advisory Board. The Trustees may appoint an Advisory Board
to consist in the first instance of not less than three members. Members of such
Advisory Board shall not be Trustees or officers and need not be Shareholders. A
member of such Advisory Board shall hold office for such period as the Trustees
may by vote provide and may resign therefrom by a written instrument signed by
him which shall take effect upon its delivery to the Trustees. The Advisory
Board shall have no legal powers and shall not perform the functions of Trustees
in any manner, such Advisory Board being intended merely to act in an advisory
capacity. Such Advisory Board shall meet at such times and upon such notice as
the Trustees may by vote provide.
Section 4. Chairperson. The Trustees may, by a majority vote of all the
Trustees, elect from their own number a Chairperson, to hold office until his
successor shall have been duly elected and qualified. The Chairperson shall not
hold any other office. The Chairperson may be, but need not be, a Shareholder.
The Chairperson shall preside at all meetings of the Trustees and shall have
such other duties as from time to time may be assigned to him by the Trustees.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, each of whom shall be elected by the
Trustees. The Trustees may elect or appoint such other officers or agents as the
business of the Trust may require, including one or more Vice Presidents, one or
more Assistant Treasurers, and one or more Assistant Secretaries. The Trustees
may delegate to any officer or committee the power to appoint any subordinate
officers or agents.
<PAGE>
5
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration or these By-Laws, the President, the Treasurer
and the Secretary shall hold office until his respective successor shall have
been duly elected and qualified, and all other officers shall hold office at the
pleasure of the Trustees. The Secretary and Treasurer may be the same person. A
Vice President and the Treasurer or a Vice President and the Secretary may be
the same person, but the offices of Vice President, Secretary and Treasurer
shall not be held by the same person. The President shall not hold any other
office. Except as above provided, any two offices may be held by the same
person. Any officer may be, but does not need be, a Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer with or without cause by a vote of a
majority of the Trustees. Any officer or agent appointed by any officer or
committee may be removed with or without cause by such appointing officer or
committee.
Section 4. Powers and Duties of the President. The President, unless a
Chairperson is so elected by the Trustees, shall be the principal executive
officer of the Trust. Subject to the control of the Trustees and any committee
of the Trustees, the President shall at all times exercise a general supervision
and direction over the affairs of the Trust. The President shall have the power
to employ attorneys and counsel for the Trust and to employ such subordinate
officers, agents, clerks and employees as he may find necessary to transact the
business of the Trust. The President shall also have the power to grant, issue,
execute or sign such powers of attorney, proxies or other documents as may be
deemed advisable or necessary in the furtherance of the interests of the Trust.
The President shall have such other powers and duties as, from time to time, may
be conferred upon or assigned to him by the Trustees.
Section 5. Powers and Duties of Vice Presidents. In the absence or
disability of the President, the Vice President or, if there are more than one
Vice President, any Vice President designated by the Trustees shall perform all
the duties and may exercise any of the powers of the President, subject to the
control of the Trustees. Each Vice President shall perform such other duties as
may be assigned to him from time to time by the Trustees or the President.
Section 6. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. The Treasurer shall
deliver all funds of the Trust which may come into his hands to such custodian
as the Trustees may employ pursuant to Article X hereof. The Treasurer shall
render a statement of condition of the finances of the Trust to the Trustees as
often as they shall require the same and shall in general perform all the duties
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him by the Trustees. The Treasurer shall give a bond for the
faithful discharge of his duties, if required to do so by the Trustees, in such
sum and with such surety or sureties as the Trustees shall require.
Section 7. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Shareholders in proper books provided for
that purpose; shall keep the minutes of all meetings of the Trustees; shall have
custody of the seal of the Trust; and shall have charge of the Share transfer
<PAGE>
6
books, lists and records unless the same are in the charge of the Transfer
Agent. The Secretary shall attend to the giving and serving of all notices by
the Trust in accordance with the provisions of these By-Laws and as required by
law; and subject to these By-Laws, shall in general perform all the duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the Trustees.
Section 8. Powers and Duties of Assistant Treasurers. In the absence or
disability of the Treasurer, any Assistant Treasurer designated by the Trustees
shall perform all the duties, and may exercise any of the powers, of the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him by the Trustees. Each Assistant Treasurer shall
give a bond for the faithful discharge of his duties, if required to do so by
the Trustees, in such sum and with such surety or sureties as the Trustees shall
require.
Section 9. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all of the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him by the Trustees.
Section 10. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable law or provision of the Declaration,
the compensation of the officers and Trustees and members of the Advisory Board
shall be fixed from time to time by the Trustees or, in the case of officers, by
any committee of officers upon whom such power may be conferred by the Trustees.
No officer shall be prevented from receiving such compensation as such officer
by reason of the fact that he is also a Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall be determined by the Trustees,
provided, however, that the Trustees may from time to time change the fiscal
year.
ARTICLE VIII
SEAL
The Trustees shall adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
<PAGE>
7
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice is required to be given by law, the Declaration or
these By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent thereto. A notice shall be deemed to have been telegraphed
or cabled for the purposes of these By-Laws when it has been delivered to a
representative of any telegraph or cable company with instruction that it be
telegraphed or cabled. Any notice shall be deemed to be given at the time when
the same shall be mailed, telegraphed, cabled or sent by facsimile transmission.
ARTICLE X
CUSTODIAN
Section 1. Appointment and Duties. The Trustees shall at all
times employ a bank or trust company having a capital, surplus and undivided
profits of at least $5,000,000 as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in the Declaration, these By-Laws and the 1940 Act:
(i) to hold the securities owned by the Trust and deliver the
same upon written order;
(ii) to receive and receipt for any monies due to the
Trust and deposit the same in its own banking department or
elsewhere as the trustees may direct;
(iii) to disburse such funds upon orders or vouchers;
(iv) if authorized by the Trustees, to keep the books and
accounts of the Trust and furnish clerical and accounting
services; and
(v) if authorized by the Trustees, to compute the net income
of the Trust and the net asset value of Shares;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees. Subject to the
approval of the Trustees, the custodian may enter into arrangements with
securities depositories. All such custodial, sub-custodial and depository
arrangements shall be subject to, and comply with, the provisions of the 1940
Act and the rules and regulations promulgated thereunder.
Section 2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or
<PAGE>
8
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or with such other person as may be permitted
by the Commission, or otherwise in accordance with the 1940 Act, pursuant to
which system all securities of any particular class or series of any issuer
deposited within the system are treated as fungible and may be transferred or
pledged by bookkeeping entry without physical delivery of such securities,
provided that all such deposits shall be subject to withdrawal only upon the
order of the Trust or its custodian.
Section 3. Acceptance of Receipts in Lieu of Certificates. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
Section 4. Provisions of Custodian Contract. The following provisions
shall apply to the employment of a custodian pursuant to this Article X and to
any contract entered into with the custodian so employed:
(a) The Trustees shall cause to be delivered to the custodian all
securities owned by the Trust or to which it may become entitled, and shall
order the same to be delivered by the custodian only upon completion of a sale,
exchange, transfer, pledge, or other disposition thereof, and upon receipt by
the custodian of the consideration therefor or a certificate of deposit or a
receipt of an issuer or of its Transfer Agent, all as the Trustees may generally
or from time to time require or approve, or to a successor custodian; and the
Trustees shall cause all funds owned by the Trust or to which it may become
entitled to be paid to the custodian, and shall order the same disbursed only
for investment against delivery of the securities acquired, or in payment of
expenses, including management compensation, and liabilities of the Trust,
including distributions to Shareholders, or to a successor custodian; provided,
however, that nothing herein shall prevent delivery of securities for
examination to the broker purchasing the same in accord with the "street
delivery" custom whereby such securities are delivered to such broker in
exchange for a delivery receipt exchanged on the same day for an uncertified
check of such broker to be presented on the same day for certification.
(b) In case of the resignation, removal or inability to serve of any
such custodian, the Trust shall promptly appoint another bank or trust company
meeting the requirements of this Article X as successor custodian. The agreement
with the custodian shall provide that the retiring custodian shall, upon receipt
of notice of such appointment, deliver all Trust Property in its possession to
and only to such successor, and that pending appointment of a successor
custodian, or a vote of the Shareholders to function without a custodian, the
custodian shall not deliver any Trust Property to the Trust, but may deliver all
or any part of the Trust Property to a bank or trust company doing business in
Boston, Massachusetts, of its own selection, having an aggregate capital,
surplus and undivided profits (as shown in its last published report) of at
least
<PAGE>
9
$5,000,000; provided that arrangements are made for the Trust
Property to be held under terms similar to those on which they were held by the
retiring custodian.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or
new By-Laws may be adopted (a) by the Shareholders by a Majority Shareholder
Vote, or (b) by the Trustees, provided, however, that no By-Law may be amended,
adopted or repealed by the Trustees if such amendment, adoption or repeal
requires, pursuant to law, the Declaration or these By-Laws, a vote of the
Shareholders.
EI7014A
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT, dated as of August 13, 1991, by and
between GREEN CENTURY CAPITAL MANAGEMENT, INC., a Massachusetts corporation
having its principal place of business in Boston, Massachusetts (the "Adviser"),
and GREEN CENTURY FUNDS, a Massachusetts business trust created pursuant to a
Declaration of Trust dated as of July 1, 1991, as amended from time to time (the
"Trust").
WHEREAS, the Trust has been organized to operate as an open-end
diversified management investment company registered under the Investment
Company Act of 1940, as amended, (the "1940 Act"); and
WHEREAS, the shares of beneficial interest (par value $0.01 per share)
of the Trust are divided into two initial separate series, Green Century Money
Market Fund (the "Money Market Fund") and Green Century Balanced Fund (the
"Balanced Fund") (each, along with any series which may in the future be
established, a "Series"); and
WHEREAS, the Trust desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser and to
have an investment adviser perform for it various investment advisory and
research services and other management services; and
WHEREAS, the Adviser has been organized to operate as an investment
adviser registered under the Investment Advisers Act of 1940, as amended, and
desires to provide investment advisory services to the Trust;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. EMPLOYMENT OF THE ADVISER. The Trust hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Series subject to
the control and direction of the Trust's Board of Trustees, for the period and
on the terms hereinafter set forth. The Adviser hereby accepts such employment
and agrees during such period to render the services and to assume the
obligations herein set forth for the compensation herein provided. The Adviser
shall for all purposes herein be deemed to be an independent contractor and
shall, except as expressly provided or authorized (whether herein or otherwise),
have no authority to act for or represent the Trust in any way or otherwise be
deemed an agent of the Trust.
2. OBLIGATIONS AND SERVICES TO BE PROVIDED BY THE ADVISER. In providing
the services and assuming the obligations set forth herein, the Adviser may, at
its expense, employ one or more subadvisers. References herein to the Adviser
shall include any subadviser employed by the Adviser. Any agreement between the
Adviser and a subadviser shall be subject to the renewal, termination and
amendment provisions of paragraph 9 hereof. The Adviser undertakes to provide
the following services and to assume the following obligations:
<PAGE>
2
a. The Adviser shall manage the investment and reinvestment of the assets
of each Series, subject to and in accordance with the respective investment
objectives and policies of each Series and any directions which the Trust's
Board of Trustees may issue from time to time. In pursuance of the foregoing,
the Adviser shall make all determinations with respect to the investment of the
assets of each Series and the purchase and sale of portfolio securities and
shall take such steps as may be necessary to implement the same. Such
determination and services shall also include determining the manner in which
voting rights, rights to consent to corporate action and any other rights
pertaining to the portfolio securities shall be exercised. The Adviser shall
render regular reports to the Trust's Board of Trustees concerning the Trust's
investment activities.
b. The Adviser shall, in the name of the respective Series, place orders
for the execution of each Series' portfolio transactions in accordance with the
policies with respect thereto set forth in the Trust's registration statements
under the 1940 Act and the Securities Act of 1933, as such registration
statements may be amended from time to time. In connection with the placement of
orders for the execution of each Series' portfolio transactions, the Adviser
shall create and maintain all necessary brokerage records of the Trust in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act. All records shall
be the property of the Trust and shall be available for inspection and use by
the Securities and Exchange Commission (the "SEC"), the Trust or any person
retained by the Trust. Where applicable, such records shall be maintained by the
Adviser for the periods and in the places required by Rule 31a-2 under the 1940
Act.
c. The Adviser shall bear its expenses of providing services to the Trust
pursuant to this Agreement except such expenses as are undertaken by the Trust.
In addition, the Adviser shall pay the salaries and fees, if any, of all
Trustees, executive officers and employees of the Trust who are affiliated
persons, as defined in Section 2(a)(3) of the 1940 Act, of the Adviser.
3. COMPENSATION OF ADVISER.
a. As compensation for the services rendered and obligations assumed
hereunder by the Adviser, the Trust shall pay to the Adviser monthly a fee from
the respective Series equal on an annual basis to 0.35% of the average daily net
assets of the Money Market Fund and 0.75% of the average daily net assets of the
Balanced Fund (and with respect to future Series, such percentages as the Trust
and the Adviser may agree to from time to time). Such fee shall be computed and
accrued daily. If Green Century Capital Management, Inc. serves as investment
adviser for less than the whole of any period specified in this Section 3a, the
compensation
<PAGE>
3
to Green Century Capital Management, Inc., as Adviser, shall be prorated.
For purposes of calculating the Adviser's fee, the daily value of each Series'
net assets shall be computed by the same method as the Trust uses to compute the
value of that Series' net assets in connection with the determination of net
asset value of that Series' shares.
b. The Adviser reserves the right to waive all or a part of its fee.
4. ACTIVITIES OF THE ADVISER. The services of the Adviser to the Trust
hereunder are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others. It is understood that the Trustees and
officers of the Trust are or may become interested in the Adviser as
stockholders, officers or otherwise, and that stockholders and officers of the
Adviser are or may become similarly interested in the Trust, and that the
Adviser may become interested in the Trust as a shareholder or otherwise.
5. USE OF NAMES. The Trust shall not use the name of the Adviser in any
prospectus, sales literature or other material relating to the Trust in any
manner not approved prior thereto by the Adviser; provided, however, that the
Adviser shall approve all uses of its name which merely refer in accurate terms
to its appointment hereunder or which are required by the SEC or a state
securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Adviser shall not use the name of the
Trust in any material relating to the Adviser in any manner not approved prior
thereto by the Trust; provided, however, that the Trust shall approve all uses
of its name which merely refer in accurate terms to the appointment of the
Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
The Trustees of the Trust acknowledge that, in consideration of the
Adviser's assumption of certain organization expenses of the Trust and of the
Series, the Adviser has reserved for itself the rights to the names "Green
Century Funds", "Green Century Money Market Fund" and "Green Century Balanced
Fund" (or any similar names) and that use by the Trust of such names shall
continue only with the continuing consent of the Adviser, which consent may be
withdrawn at any time, effective immediately, upon written notice thereof to the
Trust.
6. LIMITATION OF LIABILITY OF THE ADVISER. Absent willful misfeasance,
bad faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Trust or to any shareholder of a Series for any act or omission
in the course of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of any security.
As used in this Section 6, the term "Adviser" shall include Green Century
Capital Management, Inc. and/or any of its affiliates and the Directors,
officers and employees of Green Century Capital Management, Inc. and/or of its
affiliates.
<PAGE>
4
7. LIMITATION OF TRUST'S LIABILITY. The Adviser acknowledges that it
has received notice of and accepts the limitations upon the Trust's liability
set forth in its Declaration of Trust. The Adviser agrees that the Trust's
obligations hereunder in any case shall be limited to the Trust and to its
assets and that the Adviser shall not seek satisfaction of any such obligation
from the shareholders of the Series nor from any Trustee, officer, employee or
agent of the Trust.
8. FORCE MAJEURE. The Adviser shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot, or
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Adviser shall take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
9. RENEWAL, TERMINATION AND AMENDMENT. This Agreement shall continue in
effect, unless sooner terminated as hereinafter provided, for a period of two
years from the date hereof and indefinitely thereafter, with respect to each
Series, if its continuance after such two-year period shall be specifically
approved at least annually by vote of the holders of a majority of the
outstanding voting securities of that Series or by vote of a majority of the
Trust's Board of Trustees; and further provided that such continuance is also
approved annually by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of the Adviser, cast in person at a
meeting called for the purpose of voting on such approval. Except for the first
two-year period, if such approval is not obtained, this Agreement shall
terminate on the date which is 15 months from the last such approval. This
Agreement may be terminated at any time, with respect to a Series, without
payment of any penalty, by the Trust's Board of Trustees or by a vote of the
majority of the outstanding voting securities of that Series upon 60 days' prior
written notice to the Adviser and by the Adviser upon 60 days' prior written
notice to the Trust. This agreement may be amended at any time by the parties
hereto, subject to approval by the Trust's Board of Trustees and, if required by
applicable SEC rules and regulations, a vote of the majority of the outstanding
voting securities of any Series affected by such change. This Agreement shall
terminate automatically in the event of its assignment. The terms "assignment"
and "majority of the outstanding voting securities" shall have the meaning set
forth for such terms in the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
11. MISCELLANEOUS. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the purposes
hereof. This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts. The captions in this
Agreement are included for convenience only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction or effect.
<PAGE>
5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
Pursuant to the Trust's Declaration of Trust, dated as of July 1, 1991, the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of the Trust individually, but bind only the Trust estate.
GREEN CENTURY FUNDS
BY /S/MINDY S. LUBBER
Mindy S. Lubber
President
GREEN CENTURY CAPITAL MANAGEMENT, INC.
BY /S/MINDY S. LUBBER
Mindy S. Lubber
President
EI7014A
EI7085B
INVESTMENT SUBADVISORY AGREEMENT
INVESTMENT SUBADVISORY AGREEMENT, dated as of July 1, 1995, by and
among GREEN CENTURY CAPITAL MANAGEMENT, INC., a Massachusetts corporation having
its principal place of business in Boston, Massachusetts (the "Adviser"),
WINSLOW MANAGEMENT COMPANY, a separate operating division of Eaton Vance
Management, a Massachusetts business trust, (the "Subadviser"), and GREEN
CENTURY FUNDS, a Massachusetts business trust (the "Trust") on behalf of Green
Century Balanced Fund.
WHEREAS, the Adviser has been organized to operate as an investment
adviser registered under the Investment Advisers Act of 1940 and has been
retained by the Trust to provide investment advisory services to the Trust, an
open-end, diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the shares of beneficial interest (par value $0.01 per share)
of the Trust are divided into two initial separate series, Green Century Money
Market Fund (the "Money Market Fund) and Green Century Balanced Fund (the
"Balanced Fund"); and
WHEREAS, the Adviser desires to retain the Subadviser to furnish it
with portfolio management services in connection with the Adviser's investment
advisory activities on behalf of the Balanced Fund (the "Fund"), and the
Subadviser is willing to furnish such services to the Adviser and the Trust;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. EMPLOYMENT OF THE SUBADVISER. In accordance with and subject to the
Investment Advisory Agreement between the Trust and the Adviser, attached hereto
as Exhibit A (the "Advisory Agreement"), the Adviser hereby appoints the
Subadviser to perform the portfolio management services described herein for the
investment and the reinvestment of the assets of the Fund, subject to the
control and direction of the Adviser and the Trust's Board of Trustees, for the
period and on the terms hereinafter set forth. The Subadviser accepts such
employment and agrees to furnish the services hereinafter set forth for the
compensation herein provided. The Subadviser shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly provided
or authorized (whether herein or otherwise), have no authority to act for or
represent the Trust or the Adviser in any way or otherwise be deemed an agent of
the Trust or the Adviser.
2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE SUBADVISER.
(a) The Subadviser undertakes to provide the following services and to
assume the following obligations with respect to the Fund:
<PAGE>
(1) The Subadviser, subject to and in accordance with the
Fund's investment objective, policies and
restrictions as stated in the Trust's Registration
Statement(s) under the Securities Act of 1933 (the
"1933 Act"), as it may be amended from time to time
and as adopted by the Trust's Board of Trustees from
time to time and the overall supervision of the
Trust's Board of Trustees and the Adviser, shall
maintain a continuing investment program for the
Fund, including investment research and management
with respect to the investment and reinvestment of
the assets of the Fund, and shall take such steps as
may be reasonably necessary to implement the same.
The Subadviser shall insure that all trades it makes
for the Fund, its other actions as related to the
Fund, and the portfolio of the Fund are at all times
in compliance with the 1933 Act, the 1940 Act, and
all applicable laws and regulations. The Subadviser
shall apply the environmental and other screening
criteria developed by the Adviser and the Trust and
communicated to the Subadviser in writing in
accordance with the investment research of the
Subadviser with respect to such criteria.
(2) In connection with the purchase and sale of portfolio
investments of the Fund, the Subadviser shall arrange
for the transmission to the Adviser and the Trust's
portfolio accountant, on a daily basis, of such
confirmations, trade tickets or other documentation
as may be necessary to enable the Adviser to perform
its advisory and administrative responsibilities. The
Subadviser shall render such reports to the Adviser,
any subadministrator and/or to the Trust's Board of
Trustees concerning compliance, the investment
activities and portfolio composition of the Fund, in
such forms and at such intervals, as the Adviser or
the Trust's Board of Trustees may from time to time
reasonably require.
(3) The Subadviser shall have the authority and
discretion to select brokers and dealers to execute
the Fund's portfolio transactions and for the
selection of the markets on or in which the
transaction will be executed. In connection with the
placement of orders for the execution of portfolio
transactions, and subject to the direction and
supervision of the Adviser and the Trust's Board of
Trustees, the Subadviser shall create and maintain
all necessary brokerage records of the Trust in
accordance with all applicable laws, rules and
regulations, including but not limited to records
required by Section 31(a) of the 1940 Act. All
records shall be the property of the Trust and shall
be available for inspection and use by the Securities
and Exchange Commission (the "SEC"), the Trust or any
person retained by the Trust. Where applicable, such
records shall be maintained by the Subadviser for the
periods and in the places required by Rule 31a-2
under the 1940 Act.
(4) The Subadviser shall not have any responsibility for
determining the manner in which voting rights shall
be exercised.
<PAGE>
(5) All transactions will be consummated by payment to or
delivery by the Custodian for the Fund or such
depositories or agents as may be designated by the
Custodian of all cash and/or securities due to or
from the Fund, and the Subadviser shall not have
possession or custody thereof or any responsibility
or liability with respect thereto. The Subadviser
shall advise the Trust's custodian (the "Custodian"),
the Trust's portfolio accounting agent and the
Adviser daily of all investments placed by it with
broker/dealers pursuant to procedures agreed upon by
the Subadviser and the Adviser. The Adviser and the
Trust shall issue to the Custodian such instructions,
and hereby authorize the Subadviser to issue to the
Custodian such instructions, as may be appropriate in
connection with the settlement of transactions
initiated by the Subadviser.
3. EXPENSES. During the terms of this Agreement, the Subadviser will pay
all expenses incurred by it in connection with its activities under this
Agreement.
4. COMPENSATION. (a) The Adviser agrees to pay the Subadviser as full
compensation for the services to be rendered and expenses to be borne by the
Subadviser a fee equal on an annual basis to 0.40% of the value of the average
daily net assets of the Fund (the "Base Fee"), such fee shall be accrued daily
and payable at the end of each quarter, and subject to the adjustment specified
in paragraph (b) immediately below.
(b) For each calendar quarter commencing one year after the subadviser
begins rendering services hereunder, the Base Fee shall be adjusted as follows:
(i) if the Fund's total return (calculated in accordance with Rule 482 of
Regulation C promulgated under the Securities Act of 1933, as amended) for the
immediately prior twelve month period ("Fund Total Return") is greater than the
total return of the Lipper Directors' Analytical Data Balanced Fund Average (the
"Index Total Return") plus 1%, then the Base Fee for such quarter shall be
increased by an amount which is the product of .025% multiplied by the average
daily net assets for such year, (ii) if the Fund Total Return exceeds the Index
Total Return plus 2%, then the Base Fee for such quarter shall be increased by
an amount which is the product of .05% multiplied by the average daily net
assets for such year, (iii) if the Fund Total Return is less than the Index
Total Return minus 1%, then the Base Fee for such quarter shall be decreased by
an amount which is the product of .025% multiplied by the average daily net
assets for such year, or (iv) if the Fund Total Return is less than the Index
Total Return minus 2%, then the Base Fee for such quarter shall be reduced by an
amount which is the product of .05% multiplied by the average daily net assets
for such year. In the event the Lipper Directors' Analytical Data Balanced Fund
Average ceases to become available or the Trustees determine such Average is no
longer a reasonable performance benchmark, the Trustees may substitute another
performance benchmark.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of the close of regular trading on
the New York Stock Exchange (currently, 4:00 p.m. Eastern Time) on each day on
which the net asset value of the Trust is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act. The value of the net assets of the
Fund shall always be determined pursuant to the applicable provisions of the
Declaration of
<PAGE>
Trust and the Fund's then current prospectus. If the determination of net asset
value does not take place for any particular day, then for the purposes of this
section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of regular trading on
the New York Stock Exchange (currently 4:00 p.m. Eastern Time), or as of such
other time as the value of the net assets of the Fund's portfolio may be
lawfully determined on that day. If the Trust determines the value of the net
assets of the Fund more than once on any day, then the last such determination
thereof on that day shall be deemed to be the sole determination thereof on that
day for the purposes of this section 4.
5. RENEWAL AND TERMINATION. This Agreement shall continue in effect
with respect to the Fund, unless sooner terminated as hereinafter provided, for
a period of two years from the date hereof and indefinitely thereafter if its
continuance after such two-year period shall be specifically approved at least
annually by vote of the holders of a majority of the outstanding voting
securities of the Fund or by vote of a majority of the Trust's Board of
Trustees; and further provided that such continuance is also approved annually
by the vote of a majority of the Trustees who are not parties to the Agreement
or interested persons of the parties hereto, cast in person at a meeting called
for the purpose of voting on such approval. This Agreement may be terminated at
any time, with respect to the Fund, without payment of any penalty, (i) by the
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Fund, upon 60 days, prior written notice to the Adviser and
Subadviser or (ii) by any party hereto, upon 60 days' written notice to the
other. This Agreement will terminate automatically upon any termination of the
Advisory Agreement between the Trust and the Adviser or in the event of its
assignment. The terms "interested person" and "majority of the voting
securities" shall have the meanings set forth for such terms in the 1940 Act.
6. STANDARD OF CARE. The Subadviser may rely on information reasonably
believed by it to be accurate and reliable. Neither the Subadviser nor its
officers, directors, employees or agents shall be subject to any liability for
any act or omission, error of judgment or mistake of law or for any loss
suffered by the Trust, the Fund or the Adviser in the course of, connected with,
or arising out of any services to be rendered hereunder or for any losses that
may be sustained in the purchase, holding or sale of any security except by
reason of willful misfeasance, bad faith or gross negligence on the part of the
Subadviser in the performance of its duties or by reason of reckless disregard
on the part of the Subadviser of its obligations and duties under this
Agreement.
7. USE OF NAMES. The Trustees of the Trust and the Subadviser
acknowledge that, in consideration of the Adviser's assumption of organization
expenses of the Trust and of the Fund, the Adviser has reserved for itself the
right to the names "Green Century Funds", "Green Century Money Market Fund" and
"Green Century Balanced Fund" (or any similar names) and that use by the Trust
of such names shall continue only with the continuing consent of the Adviser,
which consent may be withdrawn at any time, effective immediately, upon written
notice thereof to the Trust.
8. ASSIGNMENT, AMENDMENT OF THIS AGREEMENT. This Agreement may not be
transferred, assigned, sold or in any manner hypothecated or pledged by any
party hereto, except as permitted under the 1940 Act. No provision of this
Agreement may be changed, waived, discharged or terminated orally, but only by
<PAGE>
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective, with respect to the Fund, until approved by vote
of the holders of a majority of the outstanding voting securities of the Fund,
if such shareholder approval is required by SEC regulation.
9. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
10. MISCELLANEOUS. Each party agrees to perform such further acts and to
execute further documents as are necessary to effectuate the acts and execute
such purposes hereof. The Agreement shall be construed and enforced in
accordance with and governed by the laws of the Commonwealth of Massachusetts.
The captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
Pursuant to the Trust's Declaration of Trust, dated as of July 1, 1991, the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of the Trust individually, but bind only the Trust estate. Pursuant
to Eaton Vance Management's Declaration of Trust, the obligations of this
Agreement are not binding upon any of Eaton Vance Management's Trustees,
officers, agents or shareholders of Eaton Vance Management individually, but
bind only the Eaton Vance Management estate.
GREEN CENTURY CAPITAL MANAGEMENT, INC.
BY /s/ KRISTINA CURTIS
Kristina Curtis
Treasurer
WINSLOW MANAGEMENT COMPANY, A
SEPARATE OPERATING DIVISION OF EATON
VANCE MANAGEMENT
BY /s/ JACKSON W. ROBINSON
Jackson W. Robinson
President
GREEN CENTURY FUNDS
BY /s/ KRISTINA CURTIS
Kristina Curtis
Treasurer
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 Green Century Funds
and to the inclusion of our report dual dated July 14, 1995 and August 3, 1995
to the Trustees of Green Century Funds and the Shareholders of the Green Century
Balanced Fund.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
September 25, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees
Green Century Funds:
We consent to the use of our report, dated August 23, 1996, incorporated herein
by reference and to the references to our firm under the captions "FINANCIAL
HIGHLIGHTS" and "ORGANIZATION AND MANAGEMENT OF THE FUNDS" in the prospectus,
incorporated herein by reference, and "INDEPENDENT ACCOUNTANTS AND EXPERTS" in
the statement of additional information, included herein.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
September 30, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees
Domini Social Index Portfolio:
We consent to the use of our report, dated August 23, 1996, incorporated herein
by reference and to the references to our firm under the captions "FINANCIAL
HIGHLIGHTS" and "ORGANIZATION AND MANAGEMENT OF THE FUNDS" in the prospectus,
incorporated herein by reference, and "INDEPENDENT ACCOUNTANTS AND EXPERTS" in
the statement of additional information, included herein.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
September 30, 1996
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This document contains summary financial information extracted from the July 31,
1996 Green Century Funds Annual Report and is qualified in its entirety to such
Annual Report.
</LEGEND>
<CIK> 0000877232
<NAME> GREEN CENTURY FUNDS
<SERIES>
<NUMBER> 3
<NAME> GREEN CENTURY EQUITY FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> SEP-13-1995
<PERIOD-END> JUL-31-1996
<INVESTMENTS-AT-COST> 880,013
<INVESTMENTS-AT-VALUE> 880,013
<RECEIVABLES> 410
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 880,423
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 696
<TOTAL-LIABILITIES> 696
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 875,742
<SHARES-COMMON-STOCK> 79,698
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 395
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,672
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 918
<NET-ASSETS> 879,727
<DIVIDEND-INCOME> 6,867
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 5,165
<NET-INVESTMENT-INCOME> 1,702
<REALIZED-GAINS-CURRENT> 2,672
<APPREC-INCREASE-CURRENT> 918
<NET-CHANGE-FROM-OPS> 5,292
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,307
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 87,374
<NUMBER-OF-SHARES-REDEEMED> 4,777
<SHARES-REINVESTED> 101
<NET-CHANGE-IN-ASSETS> 879,727
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,165
<AVERAGE-NET-ASSETS> 325,699
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.020
<PER-SHARE-GAIN-APPREC> 1.040
<PER-SHARE-DIVIDEND> 0.020
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.04
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from the June
30, 1996 Green Century Funds Annual Report and is qualified in its entirety
by reference to such Annual Report.
</LEGEND>
<CIK> 0000877232
<NAME> GREEN CENTURY FUNDS
<SERIES>
<NUMBER> 2
<NAME> BALANCED FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 7,495,688
<INVESTMENTS-AT-VALUE> 8,112,048
<RECEIVABLES> 515,842
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,628,545
<PAYABLE-FOR-SECURITIES> 393,443
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 19,911
<TOTAL-LIABILITIES> 413,354
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,658,294
<SHARES-COMMON-STOCK> 615,690
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 615
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 934,151
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 622,131
<NET-ASSETS> 8,215,191
<DIVIDEND-INCOME> 30,819
<INTEREST-INCOME> 199,172
<OTHER-INCOME> 0
<EXPENSES-NET> 171,889
<NET-INVESTMENT-INCOME> 58,102
<REALIZED-GAINS-CURRENT> 1,045,400
<APPREC-INCREASE-CURRENT> 271,529
<NET-CHANGE-FROM-OPS> 1,316,929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 58,633
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,331,903
<NUMBER-OF-SHARES-REDEEMED> 774,466
<SHARES-REINVESTED> 50,833
<NET-CHANGE-IN-ASSETS> 3,608,270
<ACCUMULATED-NII-PRIOR> 1,146
<ACCUMULATED-GAINS-PRIOR> (111,249)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 51,494
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 171,889
<AVERAGE-NET-ASSETS> 6,865,924
<PER-SHARE-NAV-BEGIN> 11.03
<PER-SHARE-NII> .095
<PER-SHARE-GAIN-APPREC> 2.313
<PER-SHARE-DIVIDEND> .098
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.34
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
