SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the Appropriate Box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) [ ]
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The Principled Equity Market Fund
(formerly called the "Principled Equity Index Fund")
(Name of Registrant as Specified in Its Charter)
The Principled Equity Market Fund
(formerly called the "Principled Equity Index Fund")
(Name of Person Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary material
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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May 6, 1999
Dear Shareholder,
We are writing to inform you that a special meeting of the shareholders
of the Principled Equity Market Fund will be held on May 25, 1999. A Proxy
Statement with respect to the meeting accompanies this letter.
The meeting is being held for the sole purpose of re-approving the
Fund's sub-advisory agreement with PanAgora Asset Management Company.
The reapproval is made necessary by a change in ownership of 50% of Pan
Agora's common stock. The Investment Company Act of 1940 provides that such a
transaction terminates the Fund's sub-advisory agreement with PanAgora and
requires that it be re-approved by the Fund's shareholders.
You are, of course, invited to attend the meeting in person. However,
since most mutual fund shareholders generally are unable to attend shareholders'
meetings, we ask you to take a few minutes to fill out the enclosed proxy card
and indicate your preferences with respect to reapproving the contract with
PanAgora, and your intentions with respect to attending the meeting in person.
Even if you plan to attend the meeting it would be wise to execute and return
your proxy so that if, at the last moment, you find you are not able to attend,
your shares still will be represented.
We realize that it will take time to read the proxy statement, but your
vote is important, so please review it, and sign and return your proxy card in
the enclosed pre-addressed envelope. If the Fund does not receive sufficient
proxies to achieve a quorum within a reasonable period of time, representatives
of the Fund may need to contact the shareholders and request that they vote
their shares.
If you execute a proxy and subsequently wish to change it or to vote
your shares in person at the meeting, you may do so any time prior to the
recording of the vote at the meeting.
The Board of Trustees has approved the sub-advisory agreement and
recommends that you vote for this proposal. If you have any questions about this
proxy, please call 1-800-344-3435.
Thank you for participating in this important process.
Sincerely,
David W.C. Putnam
President and Secretary
The Principled Equity Market Fund
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THE PRINCIPLED EQUITY MARKET FUND
Langley Place, 10 Langley Road
Newton Centre, Massachusetts 02459
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on May 25, 1999
To the Shareholders of The Principled Equity Market Fund:
NOTICE IS HEREBY GIVEN That a Special Meeting of Shareholders of The
Principled Equity Market Fund (the "Fund"), a Massachusetts business trust, will
be held at the offices of the Fund on May 25, 1999 at 10:00 a.m. Eastern Time
and any adjournments thereof (collectively the "Special Meeting") for the
following purposes:
1. To approve or disapprove a new investment sub-advisory agreement to be
entered into with PanAgora Asset Management, Inc. with respect to the
Fund.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The Board of Trustees has fixed the close of business on April 27, 1999
as the record date for the determination of shareholders entitled to notice of
and to vote at the Special Meeting or any adjournment thereof.
By order of the Board of Trustees
David W.C. Putnam
Secretary
May 6, 1999
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING ARE REQUESTED TO
COMPLETE, DATE AND SIGN THE ACCOMPANYING PROXY CARD AND TO RETURN IT IN THE
ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES.
INSTRUCTIONS FOR THE PROPER EXECUTION OF THE PROXY CARD ARE SET FORTH ON THE
INSIDE COVER OF THIS NOTICE. IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
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INSTRUCTIONS FOR EXECUTING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and may help to avoid the time and expense to the Series
involved in validating your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in
the Registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the Registration on the
proxy card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of Registration. For
example:
<TABLE>
<CAPTION>
Registration Valid Signature
<S> <C>
Corporate Accounts
(1) ABC Corp...................................................................ABC Corp.
(2) ABC Corp...................................................................John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer...........................................John Doe
(4) ABC Corp. Profit Sharing Plan..............................................John Doe, Trustee
Trust Accounts
(1) ABC Trust..................................................................Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78....................................................Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA.....................................John B. Smith
(2) Estate of John B. Smith....................................................John B. Smith, Jr.,
Executor
</TABLE>
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THE PRINCIPLED EQUITY MARKET FUND
Langley Place, 10 Langley Road
Newton Centre, Massachusetts 02459
SPECIAL MEETING OF SHAREHOLDERS
May 25, 1999
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Trustees (the "Trustees") of The Principled Equity
Market Fund (the "Fund"), for use at a Special Meeting of Shareholders of the
Fund to be held at 10:00 a.m. Eastern Time on May 25, 1999 at the offices of the
Fund, Langley Place, 10 Langley Road, Newton, Massachusetts 02459, and any
adjournments thereof (collectively, the "Special Meeting"). A notice of Special
Meeting of Shareholders and a proxy card accompany this Proxy Statement. This
Proxy Statement and the accompanying proxy card are first being sent or given to
shareholders on or about May 6, 1999. In addition to solicitations of proxies by
mail, beginning on or about May 16, 1999, proxy solicitations may also be made
by telephone, telegraph or personal interviews conducted by officers of the
Fund; regular employees of F.L. Putnam Investment Management Company, the Fund's
manager, (the "Manager"), Cardinal Investment Management Corporation, 579
Pleasant Street, Paxton, Massachusetts 01612, the Fund's administrator, transfer
agent and dividend disbursing agent; or other representatives of the Fund. The
costs of solicitation and the expenses incurred in connection with preparing
this Proxy Statement and its enclosures will be paid by the Fund. The Fund's
most recent annual and semi-annual report are available to shareholders upon
request without charge by writing or by calling the Fund at Langley Place, 10
Langley Road, Newton Centre, Massachusetts 02459 or 1-800- 344-3435.
If the enclosed proxy is properly executed and returned in time to be
voted at the Special Meeting, the shares of beneficial interest ("Shares")
represented by the proxy will be voted in accordance with the instructions
marked therein. Each full Share is entitled to one vote and any fractional Share
is entitled to a fractional vote. Unless instructions to the contrary are marked
on the proxy, it will be voted FOR the matters listed in the accompanying Notice
of Special Meeting of Shareholders. Any shareholder who has given a proxy has
the right to revoke it at any time prior to its exercise either by attending the
Special Meeting and voting his or her Shares in person, or by submitting a
letter of revocation or a later-dated proxy to the Secretary of the Fund at the
above address before the date of the Special Meeting.
The proposal to be acted on by the shareholders of the Fund is the
consideration of a new investment sub-advisory agreement between the Manager and
PanAgora Asset Management, Inc.
("PanAgora" or the "Sub-Adviser").
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The Trustees do not know of any actions to be considered at the Meeting
other than this proposal. If any other matter is presented, the persons named in
the proxy will vote in accordance with their best judgment.
Under the Fund's Bylaws, a quorum of shareholders is constituted by the
presence in person or by proxy of the holders of a majority of the outstanding
Shares of the Fund entitled to vote at the Special Meeting. In the event that a
quorum is not present at the Special Meeting, or in the event that a quorum is
present but sufficient votes to approve the proposal are not received, the
persons named as proxies on the enclosed proxy card may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
In determining whether to adjourn the Special Meeting, the following factors may
be considered: the nature of the proposal that is the subject of the Special
Meeting; the percentage of votes actually cast; the percentage of negative votes
actually cast; the nature of any further solicitation and the information to be
provided to shareholders with respect to the reasons for the solicitation. Any
adjournment will require the affirmative vote of a majority of those Shares
represented at the Special Meeting in person or by proxy. A shareholder vote may
be taken on the proposal in this Proxy Statement prior to any such adjournment
if sufficient votes have been received for approval.
The Board has fixed the close of business on April 27, 1999 as the
record date (the "Record Date") for the determination of shareholders of the
Fund entitled to notice of and to vote at the Special Meeting. At the close of
business on the Record Date, [ ] Shares of the Fund were outstanding.
[As of December 31, 1998, the officers and Trustees of the Fund as a
group beneficially owned less than 1% of the Shares of the Fund.] To the Fund's
knowledge, the following shareholders own beneficially or of record 5% or more
of the outstanding shares of the Fund as of [ , 1999]:
Name Percentage of Shares
Mercy Health Corporation of Pennsylvania
Mercy Hospital of Pittsburgh, Pennsylvania
Sisters of Mercy,
Pennsylvania
St. Joseph's Hospital,
Atlanta, Georgia
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In order that your Shares may be represented at the Special Meeting,
you are requested to:
- indicate your instructions on the enclosed proxy card;
- date and sign the proxy card;
- mail the proxy card promptly in the enclosed envelope, which
requires no postage if mailed in the United States; and
- allow sufficient time for the proxy card to be received on or
before 10 a.m. Eastern Time on May 25, 1999.
REASON FOR THE SPECIAL MEETING
The Manager is the investment adviser and business manager of the Fund
pursuant to a Management Agreement dated October 7, 1996 (the "Management
Agreement"). Its principal place of business is at Langley Place, 10 Langley
Road, Newton Centre, Massachusetts 02459. The Manager is a wholly-owned
subsidiary of F.L. Putnam Securities Company, Incorporated, a financial services
holding company. Substantially all of the voting stock of F.L. Putnam Securities
Company, Incorporated is held by David W.C. Putnam, a Trustee of the Fund, and
members of his family. Its principal offices are at Two City Center, Portland,
Maine 04101. The Manager has not been paid a fee for its services since the
Fund's inception.
Pursuant to its authority under the terms of the Management Agreement,
the Manager previously executed an investment sub-advisory agreement with
PanAgora dated October 7, 1996 (the "Previous Sub-Advisory Agreement"). This
Previous Sub-Advisory Agreement was approved by F.L. Putnam Investment
Management Company as the sole shareholder of the Fund on June ___, 1994.
At the time when the Previous Sub-Advisory Agreement was entered into,
fifty percent of PanAgora's outstanding voting stock was owned by Nippon Life
Insurance Company ("Nippon Life"), and the remaining fifty percent was owned by
Lehman Brothers, Inc. ("Lehman"). On November 25, 1997, Putnam Investments, Inc.
("Putnam") signed a purchase and sale agreement with Lehman pursuant to which
Putnam purchased Lehman's entire holdings of PanAgora stock. Putnam, which has
no affiliation with the Manager, acquired 50% of the outstanding voting stock of
PanAgora after the transaction was consummated. PanAgora's operations were not
substantially changed as a result of the sale. The only significant change
resulting from the sale which affected the Fund was that Putnam became a 50%
owner of PanAgora.
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Under the Investment Company Act of 1940 (the "1940 Act"), an
assignment is defined as any direct or indirect transfer of a contract by the
assignor, or of a controlling block of the assignor's outstanding voting
securities by a security holder of the assignor. An investment advisory
agreement, including a sub-advisory agreement, is automatically terminated in
the event of an assignment.
The sale of Lehman's interest in PanAgora to Putnam was presumed to be
an indirect change of control of PanAgora, and was, therefore, an assignment of
the Previous Sub-Advisory Agreement under the 1940 Act. As a result, the
Previous Sub-Advisory Agreement was terminated as of February 13, 1998, the
effective date of the sale. Since that date, the Manager has assumed
responsibility for the Fund's portfolio, but PanAgora has provided consulting
services at no charge. The Trustees believe that it would be in the Fund's best
interests to enter into a new investment sub-advisory agreement with PanAgora.
In accordance with the 1940 Act, the new sub-advisory agreement must be approved
by a majority of the outstanding Shares of the Fund.
After considering the various factors detailed below, the Trustees
approved the Fund's new investment sub-advisory agreement with PanAgora. The
shareholders are asked to vote upon the new sub-advisory agreement.
THE PROPOSED SUB-ADVISORY AGREEMENT
TO APPROVE OR DISAPPROVE A NEW INVESTMENT SUB-ADVISORY TO BE ENTERED INTO WITH
PANAGORA ASSET MANAGEMENT, INC. WITH RESPECT TO THE FUND
SUMMARY OF THE PROPOSAL
Based on an analysis of factors described below and upon the
recommendation of the Manager, the Trustees of the Fund have approved the
Manager's execution of a new investment sub-advisory agreement (the "New
Sub-Advisory Agreement") with PanAgora. The New Sub- Advisory Agreement contains
substantially the same terms and conditions as the Previous Sub- Advisory
Agreement. Subject to shareholder approval, the New Sub-Advisory Agreement will
become effective at the close of business on May 25, 1999, and will have an
initial duration of two years and continue for successive annual periods
thereafter, provided such continuance is approved at least annually by a
majority of the Trustees who are not interested persons of the Fund (as the term
is used in the 1940 Act) (the "Independent Trustees") or by a majority vote of
the outstanding voting Shares of the Fund.
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INFORMATION ABOUT PANAGORA
PanAgora is an investment adviser registered with the Securities and
Exchange Commission ("SEC") under the Investment Advisers Act of 1940. It has
offices at 260 Franklin Street, Boston, Massachusetts 02110 and affiliated
offices in London, England. As discussed above, fifty percent of PanAgora's
outstanding voting stock is owned by Nippon Life, 2-2 Yurakucho 1-chrome
Chiyoda-KU, Tokyo, 100, Japan, and the remaining 50% is owned by Putnam
Investments, Inc., One Post Office Square, Boston, Massachusetts 02109.
PanAgora specializes in quantitative investment techniques and is
staffed by personnel substantially experienced in various techniques of
investment management. As of December 31, 1998, PanAgora managed or administered
approximately $16.5 billion in assets.
The principal executive officers and the directors of PanAgora are set
forth in Appendix A to this Proxy Statement.
No Trustee or officer of the Fund is an officer, employee, director or security
holder of PanAgora or has any other material direct or indirect interest in
PanAgora or in PanAgora's parents or affiliates.
EVALUATION BY THE TRUSTEES AND REASONS FOR THE PROPOSAL
At a meeting on March 25, 1999, the Trustees reviewed and considered
various factors presented by a PanAgora representative. The Trustees considered
such information as they deemed reasonably necessary to enable them to evaluate
entering into a New Sub-Advisory Agreement with PanAgora. The Trustees,
including a majority of the Independent Trustees, voted to submit the proposed
Sub-Advisory Agreement to the shareholders of the Fund.
The representative discussed the Fund's investment performance from
inception to December 31, 1997, PanAgora and its affiliates, and responded to
questions from the Trustees. He explained that the new ownership of PanAgora was
not going to change its operations.
The material factors considered by the Trustees were: the nature and
quality of services rendered by PanAgora; PanAgora's performance under the
Previous Sub-Advisory Agreement; the performance of similar funds advised by
PanAgora; the amount of sub-advisory fees to be paid; PanAgora's financial
strength and insurance coverage; PanAgora's investment advisory experience and
reputation; PanAgora's code of ethics and compliance controls; and
administrative support services. The Trustees also considered the fact that
there were no material differences between the terms of the New Sub-Advisory
Agreement and the terms of the Previous Sub-Advisory Agreement.
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A significant factor that the Trustees considered was that the Fund
would receive the benefit of sub-advisory services of the same quality, scope
and cost as provided before the termination of the Previous Sub-Advisory
Agreement and that the management of PanAgora had not changed as a result of the
reorganization. The Trustees also noted that the portfolio manager who
originally had managed the Fund under the Previous Sub-Advisory Agreement had
returned to PanAgora. The Trustees were also satisfied that PanAgora (1) was
knowledgeable and experienced in the operations of the relevant financial
markets and in the laws that are applicable to such operations insofar as they
might affect the Fund, and (2) had the personnel, financial resources and
standing in the financial community to enable it to discharge its duties under
the New Sub-Advisory Agreement adequately.
After careful consideration, the Trustees, including the Independent
Trustees, believe that entering into a sub-advisory relationship with PanAgora
is in the best interests of the Fund and of its shareholders, and therefore,
voted to approve the New Sub-Advisory Agreement.
TERMS OF THE PREVIOUS AND NEW SUB-ADVISORY AGREEMENTS
PanAgora served as the Fund's investment sub-adviser since the Fund
commenced operations. Under the Previous Sub-Advisory Agreement, PanAgora
received a sub-advisory fee from the Manager at the annual rate of .15% of the
average monthly net assets of the Fund. The sub-advisory fee was accrued and
paid monthly. Before the Previous Sub-Advisory Agreement was terminated,
PanAgora earned a sub-advisory fee of $25,835 for its services to the Fund for
the fiscal year ended December 31, 1997 and $3,918 during the period from
January 1, 1998 through February 12, 1998.
The description of the New Sub-Advisory Agreement in this Proxy
Statement is qualified entirely by reference to the actual New Sub-Advisory
Agreement, attached hereto as Exhibit A and marked to show changes from the
Previous Sub-Advisory Agreement. The terms of the New Sub-Advisory Agreement are
identical in all material respects to the Previous Sub-Advisory Agreement except
for its execution date, effective date, and termination date. The management and
advisory services to be provided by PanAgora under the New Sub-Advisory
Agreement are identical to those provided by PanAgora under the Previous
Sub-Advisory Agreement.
Pursuant to the terms of the New Sub-Advisory Agreement, PanAgora will
be responsible for investment and management of the Fund's securities using a
list of Acceptable securities (as defined in the Fund's prospectus) provided by
the Manager. PanAgora is responsible for making investment decisions, supplying
investment research and portfolio management services and placing purchase and
sale orders for portfolio transactions with brokers and dealers selected by
PanAgora or the Manager. See "Portfolio Transactions."
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Fees and Expenses
PanAgora will receive .15% of the average monthly net assets of the
Fund, the same fee as under the Previous Sub-Advisory Agreement.
Duration
Pursuant to its terms, the New Sub-Advisory Agreement will remain in
effect for two years following its date of execution, provided that the
Agreement has been approved by shareholders of the Fund. It will continue in
effect thereafter so long as its continuance is specifically approved annually
by either a majority of the Fund's Trustees or a majority of the outstanding
voting securities of the Fund, provided that, in either event, the continuance
also is approved by at least a majority of the Independent Trustees, who are not
parties to the Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval.
Limitation of Liability
As in the Previous Sub-Advisory Agreement, PanAgora is not liable to
the Fund or to the Adviser for any act or omission in the course of or connected
in any way with rendering services or for any losses that may be sustained in
the purchase, holding or sale of any security in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties.
Termination; Assignment
The New Sub-Advisory Agreement can be terminated, without penalty, by
the Manager on at least thirty days' (but no more than sixty days) written
notice to PanAgora or by PanAgora on at least thirty days' (but no more than
sixty days) written notice to the Manager. The Fund can also terminate the New
Sub-Advisory Agreement, by either a majority vote of the outstanding voting
shares of the Fund or a resolution of the Trustees, on at least thirty days'
(but no more than sixty days) written notice to the other party. The New
Sub-Advisory Agreement will automatically terminate in the event of its
Assignment.
PORTFOLIO TRANSACTIONS
Subject to the supervision of the Trustees, the Manager and the
Sub-Adviser are responsible for decisions to buy and sell securities for the
Fund and for the placement of its portfolio business and the negotiation of
commissions, if any, paid on such transactions. Over- the-counter stocks and
bonds are generally traded on a net basis with dealers acting as principal for
their own account without a stated commission, although prices of such
securities usually include a profit to the dealer. Orders are placed directly
with a principal market maker unless equal or better price and execution can be
obtained by using a broker. In underwritten offerings,
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securities are usually purchased at a fixed price which includes an amount of
compensation to the underwriter generally referred to as the underwriter's
concession or discount. Certain money market instruments may be purchased
directly from an issuer, in which case no commissions or discounts are paid.
Brokerage commissions are paid on transactions in listed securities, options,
futures contracts and options thereon.
The Fund may, from time to time, place brokerage transaction with a
broker that may be considered an affiliated person of the Fund or the Manager or
the Sub-Adviser. When such transactions are made, in accordance with Rule 17e-1
under the 1940 Act, commissions paid must be "reasonable and fair compared to
the commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time."
The Manager and the Sub-Adviser are responsible for effecting portfolio
transactions and will do so in a manner deemed fair and reasonable to the Fund
and not according to any formula. The primary consideration in all portfolio
transactions will be prompt execution of orders in an efficient manner at the
most favorable price. In selecting broker-dealers and negotiating commissions,
the Manager or the Sub-Adviser consider the firm's reliability, the quality of
its execution services on a continuing basis and its financial condition. When
more than one firm is believed to meet these criteria, preference may be given
to brokers that provide research or statistical material or other services to
the Fund or to the Manager or the Sub-Adviser. The Manager and the Sub-Adviser
are of the opinion that, because this material must be analyzed and reviewed,
its receipt and use does not reduce expenses but may benefit the Fund by
supplementing the research of the Manager and the Sub-Adviser.
The Manager and the Sub-Adviser may effect portfolio transactions for
other investment companies and advisory accounts. Research services furnished by
broker-dealers through which the Fund effects its securities transactions may be
used by them in servicing all of their accounts. In their opinion, it is not
possible to measure separately the benefits from research services to each of
its accounts, including the Fund. They will attempt to allocate equitably
portfolio transactions among the Fund and other accounts whenever concurrent
decisions are made to purchase or sell securities by the Fund and another
account. In making such allocations between the fund and other accounts, the
main factors to be considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for recommending
investments to the Fund and the other accounts. In some cases this procedure
could have an adverse effect on the Fund. In the opinion of the Manager and the
Sub-Adviser, however, the results of such procedures will, on the whole, be in
the best interest of the Fund.
All brokerage commissions will be allocated by the Sub-Adviser
according to the foregoing policies. The Fund paid brokerage commissions to
securities dealers in the amount of $8,100 for the fiscal year ended December
31, 1998.
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REQUIRED VOTE
Approval of the New Sub-Advisory Agreement requires the affirmative
vote of a "majority" of the outstanding voting shares of the Fund. Majority, as
defined in the 1940 Act, means the lesser of: (a) 67% of the voting securities
of the Fund present at the Special Meeting if more than 50% of the outstanding
Shares are present in person or by proxy at the Special Meeting; or (b) more
than 50% of the outstanding voting securities of the Fund ("Majority Vote").
THE BOARD OF TRUSTEES, INCLUDING A MAJORITY OF THE INDEPENDENT TRUSTEES,
RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE NEW SUB-ADVISORY
AGREEMENT.
ADDITIONAL INFORMATION CONCERNING THE FUND
Submission of Shareholder Proposals
The Fund is not required to, and does not intend to, hold annual
meetings of its shareholders. Anyone wishing to submit proposals for
consideration for inclusion in a proxy statement for a subsequent shareholder
meeting should send their written proposals to the Secretary of the Fund at
Langley Place, 10 Langley Road, Newton Centre, Massachusetts 02459, such that
they will be received in a reasonable period of time before any such meeting.
Shareholders' Request for Special Meeting
Shareholders holding at least 25% of the Fund's outstanding voting
securities (as defined in the 1940 Act) may require the calling of a meeting of
the Fund's shareholders for the purpose of voting on the removal of any Trustee.
Meetings of the Fund's shareholders for any other purpose will also be called by
the Secretary when requested in writing by shareholders holding at least 25% of
the Shares then outstanding.
May 6, 1999
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING ARE THEREFORE URGED TO COMPLETE, SIGN, DATE, AND
RETURN THE PROXY AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PAID ENVELOPE.
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Appendix A
The names and addresses of the executive officers and directors of PanAgora
Asset Management, Inc. are as follows:
<TABLE>
<CAPTION>
Name and
Position with Pan Agora Address
<S> <C>
Bruce Clarke 260 Franklin Street
President, Chief Operating Officer and a Boston, Massachusetts 02110
Director
Michael Turpin 260 Franklin Street
Treasurer and Director of Finance and Boston, Massachusetts 02110
Administration
John F. Boneparth 260 Franklin Street
Director Boston, Massachusetts 02110
Gary N. Coburn 260 Franklin Street
Director Boston, Massachusetts 02110
Irene Esteves 260 Franklin Street
Director Boston, Massachusetts 02110
Hideichiro Kobayashi 260 Franklin Street
Director Boston, Massachusetts 02110
Tadashi Minagawa 260 Franklin Street
Director Boston, Massachusetts 02110
Toru Morishige 260 Franklin Street
Director Boston, Massachusetts 02110
Tadao Nishioka 260 Franklin Street
Director Boston, Massachusetts 02110
Steven Spiegel 260 Franklin Street
Director Boston, Massachusetts 02110
</TABLE>
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EXHIBIT A
DOUBLE-UNDERLINED LANGUAGE WILL BE ADDED
[BRACKETED] LANGUAGE WILL BE DELETED
SUB-ADVISORY AGREEMENT
AGREEMENT made as of this [7th day of October, 1996] May 25, 1999, by and
between PanAgora Asset Management, Inc. (the "Sub-Adviser"), and F. L. Putnam
Investment Management Company, (the "Manager").
W I T N E S S E T H :
WHEREAS, the Principled Equity Market Fund, a Massachusetts business
trust (the "Fund"), is engaged in business as a closed-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended; and
WHEREAS, each of the Manager and the Sub-Adviser is engaged in the
business of rendering investment advisory services and is registered under the
Investment Advisers Act of 1940, as amended; and
WHEREAS, the Fund desires to retain the Manager to furnish management
services and the Manager desires to retain the Sub-Advisor to furnish certain of
such services, with the approval of the Fund;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
(a) Services Rendered and Expenses Paid by the Sub-Adviser.
The Sub-Adviser, subject to the control, direction and supervision of
the Board of Trustees of the Fund and in conformity with applicable laws, this
Agreement, the Fund's Declaration of Trust, By-Laws, registration statements and
amendments thereto, prospectuses and statements of additional information as in
effect from time to time, and stated investment objectives, policies and
restrictions, shall, at its own expense:
(i) with full discretion manage the investment and reinvestment of
securities which have been selected by the Manager and designated by the Manager
as Acceptable securities as described in the Fund's current prospectus from time
to time; and
(ii) with full discretion place all orders for the purchase and sale of
such investments and, as requested by the Manager from time to time, other
investments for the Fund's account with brokers or dealers selected by the
Sub-Adviser or the Manager.
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(b) In performing the services described in sub-paragraph (ii) above, the
Sub-Adviser shall seek to obtain for the Fund the most favorable price and
execution available. The Sub-Adviser may, to the extent authorized by law, cause
the Fund to pay a broker or dealer that provides brokerage or research services
to the Sub-Adviser or the Manager or their affiliates an amount of commission
for effecting a portfolio investment transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction. The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with any
investment policy or the purchase, sale, or retention of any investment on the
recommendation of the Sub-Adviser; provided, however, that nothing herein
contained shall be construed to protect the Sub-Adviser against any liability to
the Fund or the Manager by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties under this Agreement.
(c) Role of the Sub-Adviser.
(i) The Sub-Adviser, and any person controlling, controlled by or under
common control with the Sub-Adviser, shall be free to render similar services to
others and to engage in other activities, so long as the services rendered to
the Fund are not impaired.
(ii) Except as otherwise required by the Investment Company Act of
1940, as amended, any of the shareholders, Trustees, officers and employees of
the Fund may be a shareholder, director, officer or employee of, or be otherwise
interested in, the Sub-Adviser, and in any person controlling, controlled by or
under common control with, the Sub-Adviser, and the Sub-Adviser, and any person
controlling, controlled by or under common control with the Sub-Adviser, may
have an interest in the Fund.
(iii) Except as otherwise agreed, in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard of its
obligations or duties hereunder, the Sub-Adviser shall not be subject to
liability to the Fund or the Manager 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.
(d) Compensation of the Sub-Adviser.
(i) As full compensation for the services rendered, facilities
furnished and expenses paid by the Sub-Adviser under this Agreement, the Manager
agrees to pay to the Sub-Adviser a fee at the annual rate of .15% of the Fund's
average monthly net assets. Such fee shall be accrued and paid at such
intervals, not less frequently than monthly, as soon as practicable after the
end of each month or shorter period. For purposes of calculating such fee, the
Fund's average monthly net assets shall be determined in the manner provided in
the Fund's prospectus and statement of additional information.
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<PAGE>
(ii) If the Sub-Adviser shall serve for less than the whole of any
period, the foregoing compensation shall be prorated.
(e) Term and Termination.
(i) This Agreement shall become effective on the date hereof, shall
remain in full force and effect for two years from the date hereof and shall
continue in full force and effect for successive periods of one year thereafter,
but only so long as each such continuance is approved at least annually by the
Manager and (i) by either the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Fund and in either event
and (ii) by vote of a majority of the Board of Trustees of the Fund who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(ii) This Agreement may be terminated at any time without the payment
of any penalty by vote of the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Fund or by the Manager, or
the Sub-Adviser on not more than sixty (60) days, nor less than thirty (30)
days, written notice to the other party, or upon such shorter notice as may be
mutually agreed upon.
(iii) This Agreement shall automatically terminate in the event of its
assignment.
(f) Miscellaneous. For the purposes of this Agreement, the terms "affiliated
person," "assignment," "interested person," and "majority of the outstanding
voting securities" shall have their respective meanings defined in the
Investment Company Act of 1940, as amended, and the rules and regulations
thereunder, subject, however, to such exemptions as may be granted to either the
Manager or the Fund by the Securities and Exchange Commission, and the term
"brokerage and research services" shall have the meaning given in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
(g) Limitation of Liability of the Trustees and Shareholders.
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Fund as Trustees
and not individually and that the obligations of this instrument are not binding
upon any of the Trustees, officers or shareholders of the Fund but are binding
only upon the assets and property of the Fund.
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<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
F. L. PUTNAM INVESTMENT MANAGEMENT
COMPANY
By: [Signature Omitted]
PANAGORA ASSET MANAGEMENT, INC.
By: [Signature Omitted]
Accepted and approved as of the date first above-written:
THE PRINCIPLED EQUITY MARKET FUND
By: [Signature Omitted]
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<PAGE>
THE PRINCIPLED EQUITY MARKET FUND
THIS SOLICITATION IS BEING MADE ON BEHALF OF
THE BOARD OF TRUSTEES.
The undersigned, by completing this form, does hereby appoint [ ] attorneys and
proxies for the undersigned, with full powers of substitution and revocation, to
represent the undersigned and to vote on behalf of the undersigned all shares of
the Fund referenced herein (the "Fund") which the undersigned is entitled to
vote at a Special Meeting of Shareholders of the Fund to be held at 10:00 a.m.
Pacific time on May 25, 1999 at the offices of the Fund, Langley Place, 10
Langley Road, Newton Centre, Massachusetts 02459 and at any adjournments thereof
(the "Meeting").
The shares represented by this proxy will be voted as directed below, or if no
direction is indicated, will be voted FOR the proposal listed below. If a proxy
is not received from a particular shareholder, then votes attributable to his
shares will be allocated in the same ratio as votes for which instructions have
been received.
1. To approve or disapprove a new investment sub- FOR AGAINST ABSTAIN
advisory agreement to be entered into with
PanAgora Asset Management, Inc. with respect
to the Fund.
The undersigned, by completing this form, does hereby request that the proxy be
authorized to exercise its discretion in voting upon such other business as may
properly come before the meeting.
TOTAL VOTES (EQUIVALENT SHARES) AS SHOWN BELOW
PLEASE VOTE, DATE, SIGN EXACTLY AS YOUR NAME APPEARS BELOW AND RETURN THIS FORM
IN THE ENCLOSED SELF-ADDRESSED ENVELOPE TO:
THE PRINCIPLED EQUITY MARKET FUND Langley Place, 10 Langley Road Newton
Centre, Massachusetts 02459
IF JOINT OWNERS, EITHER MAY SIGN THIS PROXY. When signing as attorney, executor,
administrator, trustee, guardian, or corporate officer, please give your full
title.
NOTE: The undersigned hereby acknowledges receipt of the Notice of Special
Meeting and Proxy Statement, and revokes any proxy heretofore given with respect
to the votes covered by this proxy.
Dated_______________ , 1999 ______________________________
Signature(s)
---------------------------------
Title(s), if applicable
<PAGE>
