Washington, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 17 [X]
(Check appropriate box or boxes)
---------------------------
|
MATRIX/LMH VALUE FUND, INC.
(Formerly LMH Fund, Ltd.)
(Exact Name of Registrant as Specified in Charter)
444 Madison Ave., Ste. 302
New York, NY 10022
(Address of Principal Executive Office) (Zip Code)
Judith Shandling, Esq.
Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, New York 10022
(Name and Address of Agents for Service)
Approximate date if proposed public offering: Continuous
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing [ ] On pursuant
pursuant to paragraph to paragraph (b), or
(b), or
[X] 60 days after filing [ ] on pursuant
pursuant to paragraph to paragraph (a)(i)
(a)(i)
[ ] 75 days after filing [ ] on pursuant
pursuant to paragraph to paragraph (a)(ii) of
(a)(ii) Rule 485.
|
Registrant has registered an indefinite number of shares of its Common Stock, par value of $.01 per share, pursuant to Rule 24f-2 under the Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for its fiscal year ended June 30, 1996 was filed on August 23, 1996.
CROSS REFERENCE SHEET
(as required by Rule 495)
N-1A Item No. Location
Part A
Item 1. Cover Page........................... Cover Page
Item 2. Synopsis............................. Expense
Information
Item 3. Financial Highlights................. Financial
Highlights
Item 4. General Description of Registrant.... Investment
Program
Item 5. Management of the Fund............... Management
Item 5A Management's Discussion of Fund See Annual
Performance Reports to
Shareholders
Item 6. Capital Stock and Other Securities. . . Dividends
Distributions
and Taxes;
Net Asset
Value
Item 7. Purchase of Securities Being Offered . . How to
Purchase
Shares; Net
Asset Value
Item 8. Redemption or Repurchase. . . . . . . . How to Redeem
Shares
Item 9. Pending Legal Proceedings . . . . . . . N/A
|
Part B
Item 10. Cover Page ............................. Cover Page
Item 11. Table of Contents....................... Table of
Contents
Item 12. General Information and History . . . . Not
Applicable
Item 13 Investment Objectives and Policies .... Investment
Program;
Investment
Restrictions;
Item 14. Management of the Fund................... Directors,
Officers and
Principal
Shareholders
Item 15. Control Persons and Principal Holders
of Securities........................... Directors,
Officers and
Principal
Shareholders
Item 16. Investment Advisory and Other Services.. Directors,
Officers and
Principal
Shareholders
Item 17. Brokerage Allocation................... Portfolio and
Brokerage
Transactions
Item 18. Capital Stock and Other Securities...... Capital
Stock
Item 19. Purchase, Redemption and Pricing of
Shares Being Offered.............. Additional
Redemption
Information
Item 20. Tax Status............................. Additional
Tax Infor-
mation
Item 21. Underwriters........................... Not
Applicable
Item 22. Performance Information................ Performance
Information
Item 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 to this Post-Effective Amendment to this Registration Statement
444 MADISON AVE., SUITE 302
NEW YORK, NEW YORK 10022
(800) 366-6223
(800) 385-7003 Account Information
Matrix/LMH Value Fund is a no-load, diversified mutual fund. The investment objective of the Fund is to achieve a total rate of return which is comprised of capital appreciation and current income. The Fund selects equity securities for investment using the principles of value investing.
Matrix Asset Advisors, Inc. is the Fund's investment advisor.
Table of Contents Expense Information 2 Financial Highlights 3 Investment Program 4 Advisor Investment Returns 5 Management 6 How To Purchase Shares 7 How To Redeem Shares 8 Exchange Privilege 9 Dividends, Distributions and Taxes 11 Transfer and Dividend Disbursing Agent 12 General Information 12 |
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this prospectus and retain it for future reference. It sets forth concisely the information about the Fund a prospective investor ought to know before investing.
Additional information about the Fund is contained in the Statement of Additional Information dated August ___, 1997 filed with the Securities and Exchange Commission. The Statement is hereby incorporated by reference into this prospectus and is available upon request and without charge by calling the number listed above or by writing to the above address.
Prospectus dated August ___, 1997
EXPENSE INFORMATION
Shareholder Transaction Expenses Sales Load Imposed on Purchases None Sales Load Imposed on Reinvested Dividends None Deferred Sales Load None Exchange Fee None Annual Fund Operating Expenses (as a percentage of average net assets) Management Fees 1.00% 12b-1 Fees None Other Expenses 0.65% Total Fund Operating Expenses 1.65%* |
*The Advisor has undertaken to limit the Fund's annual ratio of operating expenses to average net assets to no more than 1.65% for the remainder of 1997. For the fiscal year ended June 30, 1996, the Fund's expense ratio was 1.84%.
The purpose of the table is to assist the investor in understanding the various costs and expenses that an investor in the Fund will bear directly or indirectly.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end of each time period.
1 year 3 years 5 years 10 years $17 $52 $90 $197
This example should not be considered a representation of past or future performance. Actual expenses may be greater or less than those shown.
Financial Highlights
(FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD)
Six Months
Ended
Dec. 31, FOR THE YEARS ENDED JUNE 30,
1996* 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Net asset value,
beginning of year $24.10 $20.98 $17.78 $18.45 $17.08 $15.79 $17.88 $21.75 $18.83 $25.49 $29.20
Income from
investment operations:
Net investment
income 0.09 0.47 0.46 0.34 0.30 0.36 0.57 0.59 0.82 1.61 1.13
Net realized and
unrealized gain (loss)
on investments 2.47 3.12 3.13 (0.78) 1.44 1.36 (1.92) (1.38) 2.92 (2.78) 0.68
Total from investment
operations 2.56 3.59 3.59 (0.44) 1.74 1.72 (1.35) (0.79) 3.74 (1.17) 1.81
Less distributions:
Dividends from net
investment income (0.33) (0.47) (0.39) (0.23) (0.37) (0.43) (0.64) (0.72) (0.82) (2.37) (1.10)
Distributions from net
capital gains 0.00 0.00 0.00 0.00 0.00 0.00 (0.10) (2.36) 0.00 (3.12) (4.42)
Total distributions (0.33) (0.47) (0.39) (0.23) (0.37) (0.43) (0.74) (3.08) (0.82) (5.49) (5.52)
Net asset value,
end of year $26.33 $24.10 $20.98 $17.78 $18.45 $17.08 $15.79 $17.88 $21.75 $18.83 $25.49
Total return 22.15%+ 17.16% 20.47% (2.44)% 10.30% 11.09% (7.15)% (4.08)% 20.46% (20.52)% (2.09)%
Ratios/supplemental data:
Net assets, end of period
(millions) $ 7.9 $ 6.6 $ 6.0 $ 5.7 $ 6.9 $ 7.7 $ 9.7 $ 26.7 $ 38.1 $ 40.0 $ 76.7
Ratio of expenses to
average net assets:
Before expense re
imbursement 2.19%+ 1.84% 2.35% 2.51% 2.55% 2.63% 2.39% 1.81% 1.55% 1.44% 1.29%
After expense
reimbursement 1.35%+ 1.84% 2.35% 2.50% 2.50% 2.63% 2.39% 1.81% 1.55% 1.44% 1.29%
Ratio of net investment
income toaverage net assets:
Before expense
reimbursement 0.00% 2.01% 2.27% 1.79% 1.52% 1.86% 2.61% 2.40% 3.65% 4.09% 4.11%
After expense
reimbursement 0.84% 2.01% 2.27% 1.80% 1.58% 1.86% 2.61% 2.40% 3.65% 4.09% 4.11%
Portfolio
turnover rate 81% 57% 34% 46% 53% 76% 133% 59% 26% 72% 19%
Average commission
rate paid per share $.0585 - - - - - - - - - -
*Unaudited.
+Annualized.
|
The above financial highlights, insofar as they pertain to each of the ten years in the period ended June 30, 1996 have been audited by Price Waterhouse LLP, independent accountants, whose report thereon was unqualified. This information should be read in conjunction with the financial statements and notes thereto which appear in the annual report and are incorporated by reference into the Statement of Additional Information. Further information about the Fund's performance may be included in its annual report which may be obtained without charge by writing or calling the address or telephone number on the Prospectus cover page.INVESTMENT PROGRAM Investment Objective
The investment objective of the Fund is to achieve a total rate of return composed of capital appreciation and current income. The Fund selects for investment only securities that are financially strong and meet specific valuation criteria using the principles of value investing based on Classic Valuation Analysis.
This investment objective is a fundamental policy that cannot be changed without approval of the holders of a majority of the Fund's shares, as defined on page 12. There is no assurance that the Fund will achieve its investment objective.
Classic Valuation Analysis
Classic Valuation Analysis is an investment methodology based on principles developed over 50 years ago by Benjamin Graham. The underlying principle of Classic Valuation Analysis is "Buy value . . . it will out." Companies are selected as suitable investments based on objective criteria that require a strong financial position, as measured by balance sheet data, and current low stock market valuation in comparison to investment value, as measured by historic and current earnings, dividends, return on equity and book values.
Once an equity investment has been purchased for the Fund's portfolio, it generally is sold for one of two reasons: (1) the security no longer represents a value, as determined by the Investment Advisor, or (2) there has been a fundamental change in the issuer's balance sheet or results of operations so that it no longer meets the Fund's financial or valuation criteria. As is the case with all investment methods, however, value investing using Classic Valuation Analysis does not ensure profit or protect against loss in declining markets. The Investment Advisor believes that the implementation of the principles of value investing using Classic Valuation Analysis constitutes a sound and conservative approach for seeking total return over time.
Portfolio Management
The Fund invests primarily in common stocks, but may also invest in preferred stocks and securities convertible into common stocks. The Fund may purchase securities traded on national securities exchanges or over-the-counter, and may purchase blocks of stock from principals in privately negotiated transactions.
Consistent with the principles of Classic Valuation Analysis, the Fund diversifies its portfolio over a range of companies and industries. Not more than 5% of the Fund's total assets (determined at the time of investment) will be invested in the securities of any one company. In addition, the Fund is not permitted to invest more than 25% of its assets at the time of investment in the securities of companies within any one industry. The Fund does not attempt to weight particular industries or segments. The Fund will not purchase any securities which would cause the Fund at the time of such purchase to own more than 10% of the outstanding voting securities of any class of any issuer, but this limitation does not apply to obligations issued or guaranteed by the U.S. government.
Decisions to sell the Fund's portfolio securities are generally made
solely on the basis of the criteria outlined under "Classic Valuation Analysis"
above, but the Fund may in unusual circumstances sell a security at a time when
the sale is not indicated by Classic Valuation Analysis to avoid adverse tax
consequences or to meet abnormally heavy redemption requests.
While the Fund invests primarily in equity securities in a manner
consistent with the principles of Classic Valuation Analysis, it may elect to
maintain a portion of its assets in fixed income securities. Such investments,
except as stated below, will have a maturity of less than one year and will
consist of U.S. Government securities, certificates of deposit and bankers'
acceptances of U.S. banks, and commercial paper. All non-U.S. government
short-term investments will have received one of the two highest ratings from a
major rating service. In the case of direct obligations of the U.S. Treasury,
the Fund may invest in instruments of any maturity.
The Fund may invest up to 10% of its total assets in foreign securities, but only if such securities are traded on national securities exchanges or over-the-counter in the United States. Investment in foreign securities may involve special risks, such as changes in the administrative, economic, and monetary policies of foreign governments.
The Fund may write (sell) covered call options on individual securities and engage in related closing transactions. A covered call option on a security is an agreement by the Fund, in exchange for a premium, to sell a particular portfolio security if the option is exercised at a specified price before a set date. Risks associated with writing covered call options include the possible inability to effect closing transactions at favorable prices or in a liquid market and an appreciation limit on the securities set aside for settlement. The Fund may also purchase and sell options in closing transactions.
The Fund has no present intentions of purchasing restricted securities, and may not purchase such securities in amounts in excess of 5% of its total assets. The Fund may not borrow
money, except for temporary emergency purposes in amounts not in excess of 5% of the Fund's total assets.
ADVISOR INVESTMENT RETURNS
Set forth in the table below are certain performance data provided by the Advisor relating to its individually managed Equity accounts. The Advisor became Sub-Advisor to the Fund on July 3, 1996, and Investment Advisor on April 18, 1997. Prior to that time, investment advisory services were performed by a different organization. These accounts had substantially the same investment objective as the Fund and have been managed using substantially similar investment strategies and techniques as those used by the Fund. See "Objective and Investment Approach of the Fund" above. The Portfolio Manager for these accounts is the same individual who manages the Fund. The results presented are not intended to predict or suggest the return to be experienced by the Fund or the return an investor might achieve by investing in the Fund. Results may differ because of, among other things, differences in brokerage commissions paid, account expenses, including investment advisory fees, (which expenses and fees may be higher for the Fund than for the accounts), the size of positions taken in relation to account size, diversification of securities, timing of purchases and sales, timing of cash additions and withdrawals, the private character of the composite accounts compared with the public character of the Fund, and the tax-exempt status of some of the accounts compared with the Fund and its shareholders. Investors should be aware that the use of different methods of determining performance could result in different performance results. Investors should not rely on the performance data on the following page as an indication of future performance of the Advisor or the Fund.
Average Annual Total Returns (%)
(for periods ended December 31, 1996)
Advisor Standard & Poor's Russell
Equity Accounts 500 Index 2000 Index
One year 21.8% 22.9% 16.5%
Three years 16.4% 19.6% 13.7%
Five years 16.1% 15.2% 15.6%
|
1. Results shown include portfolios from Value Matrix Management, Inc., for the period from 1987-1989. In 1990, Value Matrix Management, Inc., merged with Moore & Schley Asset Management to form the Advisor. The results were calculated on an equally weighted basis from 1987-1992. Since January 1, 1993, the results have been calculated using the dollar weighted methodology required by AIMR standards. The results shown represent all fully discretionary equity accounts and the equity portion of balanced accounts that are over $250,000 and have been under management for one full quarter. The Advisor does not include accounts which have inherited position in which the sale of a security is restricted or which have other investments restrictions. Results are reduced for investment advisory fees.
2. Investors should note that the Fund computes and discloses its average annual total return using the standard formula set forth in SEC rules, which differs in certain respects from returns calculated under the AIMR standards noted above. Unlike the AIMR performance presentation standards that link quarterly rates of return, the SEC total return calculation method calls for computation and disclosure of an average annual compounded rate of return for one, five and ten year periods or shorter periods from inception. The calculation provides a rate of return that equates a hypothetical initial investment of $1,000 to an ending redeemable value. While the returns shown for the Advisor are net of advisory fees, the SEC calculation formula requires that returns be shown for the Portfolios net of advisory fees as well as any maximum applicable sales charge and all other Portfolio operating expenses. See "Performance Information" at page 11.
3. The Standard & Poor's 500 Index is an unmanaged index composed of 500 industrial, utility, transportation and financial companies of the U.S. markets. The index represents about 75% of New York Stock Exchange ("NYSE") market capitalization and 30% of NYSE issues. It is a capitalization-weighted index calculated on a total return basis with dividends reinvested. The Russell 2000 Index shows the performance of the 2000 smallest companies in the Russell 3000 Index, representing approximately 10% of the total market capitalization of the Russell 3000 Index. As of this date, the average market capitalization of the Russell 2000 companies is $421 million, the median market capitalization is $352 million and the largest company within the index has an approximate market capitalization of $1 billion.
MANAGEMENT
The business and affairs of the Fund are managed by its Board of Directors. Subject to the supervision of the Board, Matrix Asset Advisors, Inc., 444 Madison Ave., New York, NY 10022, serves as the Fund's investment advisor, and as such manages the Fund's portfolio and administers its day-to-day affairs. Mr. David A. Katz is responsible for management of the Fund's portfolio. Mr. Katz also is President, Chief Investment Officer and Secretary of the Fund.
The Fund pays all the expenses of its operation except certain expenses
specifically assumed by the Investment Advisor. The Fund pays the Investment
Advisor an annual fee of 1% of the Fund's average daily net assets.
Matrix Asset Advisors is a registered investment advisor which was
founded in 1986. Matrix provides investment advisory services to individuals,
endowment, and pension accounts with a value of over $400 million. The two
principal shareholders of Matrix are Mr. David A. Katz and Mr. Morley Goldberg.
Matrix is located at 444 Madison Avenue, New York, NY 10022. Matrix has
undertaken to limit the Fund's annual ratio of operating expenses to average net
assets to no more than 1.65% for the remainder of 1997. This undertaking is
voluntary, and may be withdrawn upon notice to shareholders. The Advisor has
retained the services of Investment Company Administration Corporation ("ICAC")
to perform certain administrative functions for the Fund. ICAC prepares various
federal and state regulatory filings, reports and returns for the Fund, prepares
reports and materials to be supplied to the trustees, monitors the activities of
the Fund's custodian, transfer agent and accountants, and coordinates the
preparation and payment of Fund expenses and reviews the Fund's expense
accruals.
HOW TO PURCHASE SHARES
The Fund offers its shares on a continuous basis at their net asset value, which will fluctuate with the value of the Fund's investments. No sales load or commission is charged.
The minimum initial purchase of shares of the Fund is $1,000 ($500 for IRA plan and automatic investment accounts). The minimum for subsequent purchases is $100 for all accounts.
Investment by Mail
New investors may order shares by mailing a completed account application, together with payment for the order, to the Fund's transfer agent, Matrix/LMH Value Fund, P.O. Box 641220, Cincinnati, OH 45264-1220. Checks should be made payable to "Matrix/LMH Value Fund" Additional account applications are available by calling 1-800-385-7003. Subsequent investments can be made by mailing a check to the Fund along with either (a) the detachable form which accompanies confirmation of a prior investment, or (b) a letter indicating the dollar value of shares to be purchased and identifying the Fund, the account number and account registration.
Investment by Wire
Investors may invest in the Fund by wire by first contacting the Fund's custodian bank at 1-800-385-7003 and then wiring the amount to be invested, in care of the Fund's custodian bank, at the following address:
Star Bank, N.A., Cinti/Trust
ABA 0420-0001-3
Attn: Matrix/LMH Value Fund
DDA #486447501
Account # (shareholder account number)
At the same time the investor should mail an application form to the Fund at the following address:
Matrix/LMH Value Fund
P.O. Box 641220
Cincinnati, OH 45264-1220
Payment and Terms of Offering
All orders must be accompanied by payment by check or money order on a U.S. bank, bank wire or federal funds wire. The Fund may reject orders paid for by checks drawn on foreign banks. Checks should be made payable to "Matrix/LMH Value Fund"
Orders are priced at the net asset value determined as of the close of the New York Stock Exchange on the day the order is received by the Fund's transfer agent, provided the order is received before the close of the Exchange on a day the Exchange is open. Orders received after
the close of the Exchange, or on a day the Exchange is not open are priced as of the close of the Exchange on its next business day. The Fund reserves the right to require payment by certified or official bank check or wire transfer for orders of $50,000 or more.
Orders are applied to the purchase of full or fractional shares to three decimal places. The Transfer Agent will mail a confirmation of each completed purchase to the shareholder. A shareholder will not receive a share certificate for his shares unless he requests one in writing.
The Fund reserves the right to reject any order at its sole discretion. A purchase order is not binding until it is confirmed by the Transfer Agent. If an order to purchase shares is canceled because an investor's check does not clear, the investor will be liable for any loss incurred by the Fund, the Investment Advisor, or the Transfer Agent.
Retirement Plans
The Fund makes available an IRA plan for those investors who wish to make contributions of Fund shares to such a plan. Information regarding eligibility for the IRA plan, and the necessary plan documents, are available from the Transfer Agent or the Fund. Investors should consult their tax or legal Advisors before determining to adopt an IRA plan.
Automatic Investments
Investors who wish to make regular additional monthly investments in the Fund may establish an Automatic Investment Plan, with a reduced minimum initial investment of $500. Under this Plan, each month the Fund will draft the investor's bank account in the amount specified - which must be at least $100 - and have the proceeds invested in shares of the Fund at the applicable net asset value determined on the date of the draft. To use this plan, investors must complete the Automatic Investment Plan application, which is available by calling the Transfer Agent at (800) 385-7003.
HOW TO REDEEM SHARES
The Fund will redeem its shares at any time at their net asset value next determined after the Transfer Agent receives a proper redemption request.
To effect a redemption, send the following to Matrix/LMH Value Fund, 24 West Carver St., Huntington, NY 11743; (1) a written request for redemption, signed by the registered owner(s) exactly as the shares are registered, which sets forth the account number and states the dollar value of the shares to be redeemed; (2) if stock certificates have been issued for any shares to be redeemed, the stock certificates; (3) signature guarantees, if required (see "Signature Guarantees" on page 9); and (4) for a corporation, executor, administrator, trustee or guardian, documents evidencing authority to act. In the case of joint owners of shares, both must sign. Payment and Terms
Redemption requests may not contain any special conditions or specify a future date for
effecting redemptions; requests containing such terms or dates will be rejected and will be of no effect.
Redemptions are effected at net asset values next determined after the Transfer Agent receives a redemption request in proper form. Redemption requests received before the close of the New York Stock Exchange on a day the Exchange is open will be effected at net asset value determined as of the close of the Exchange on that day; requests received after the close of the Exchange or on a day the Exchange is not open are effected at net asset value as of the close of the Exchange on the next day the Exchange is open. The Transfer Agent will normally mail a redeeming shareholder a check for the redemption proceeds within seven days after a redemption request is received in proper form. The Fund may also from time to time accept telephone redemption orders from investors, generally broker-dealers and institutions, who have been approved previously by the Fund.
If a shareholder requests redemption of shares which were purchased by check within 15 days before the redemption request is received, the redemption will be processed as described above, but the Fund may delay mailing a check for the redemption proceeds until the earlier of the expiration of the 15 days or the receipt by the Transfer Agent or confirmation that the check has cleared. The Fund reserves this right to protect against losses from checks that do not clear. If a shareholder anticipates redeeming shares before 15 days have elapsed, it is suggested that the shares be paid for by wire transfer.
Mandatory Redemption at the Option of the Fund
If, as a result of a redemption, a shareholder's account balance is reduced below $1,000, the Fund may notify the shareholder that, unless additional investments are made which bring the account up to $1,000 within 60 days, the account will be closed by redeeming the remaining shares. This does not apply to IRA accounts.
Signature Guarantees
Signature guarantees are required to (a) redeem shares having a net asset value of more than $5,000 by mail; (b) request that the bank account to which redemption proceeds are sent be changed; (c) authorize transmission of redemption proceeds by bank wire; (d) issue shares in certificate form; or (e) transfer shares to another person.
Signature(s) on the redemption request must be guaranteed by an "eligible guarantor institution" as defined in the federal securities laws; these institutions include banks, broker-dealers, credit unions and savings institutions. A broker-dealer guaranteeing signatures must be a member of a clearing corporation or maintain net capital of at least $100,000. Credit unions must be authorized to issue signature guarantees. Signature guarantees will be accepted from any eligible guarantor institution which participates in a signature guarantee program. A notary public is not an acceptable guarantor.
EXCHANGE PRIVILEGE
Shareholders may exchange shares (in amounts of $1,000 or more) of the Fund for shares in the Star Treasury Fund ("Star Fund"), a money market fund affiliated with the Fund's Custodian, if such shares are offered in your state of residence. Prior to making such exchange, you should obtain and carefully read the prospectus for the Star Fund. The exchange privilege does not constitute an offering or recommendation on the part of the Fund or Advisor of an investment in the Star Fund.
To make a telephone exchange, the Exchange Privilege Authorization option must have been selected on the Account Application form when the account was opened. Otherwise an Exchange Privilege Application form must be completed with signature(s) guaranteed and sent to the Transfer Agent prior to making telephone exchanges. To make an exchange, simply call the Transfer Agent at 1-800-385-7003 prior to 4:00 p.m. Eastern Time. Your exchange will take effect as of the next determination of net asset value per share of each fund involved (usually at the close of business on the same day). Once an exchange request is made, either in writing or by telephone, it may not be modified or canceled.
The Fund reserves the right to limit the number of exchanges or to otherwise prohibit or restrict shareholders from making exchanges at any time, without notice to shareholders, should the Directors determine that it would be in the best interest of our shareholders to do so. Shareholders would be given at least 60 days written notice prior to changing the fee for an exchange. The Fund will use reasonable procedures, such as assigned personal identification numbers, in an attempt to verify the identity of a person making a telephone exchange request. The Fund reserves the right to refuse a telephone request if it believes that the person making the request is neither the record owner of the shares nor otherwise authorized by the shareholder to request the exchange. Shareholders will be promptly notified of any refused request for a telephone exchange. Neither the Fund nor its agents will be liable for any loss, liability, or cost which results from acting upon instructions of a person believed to be a shareholder with respect to the telephone exchange privilege.
An exchange, for tax purposes, constitutes the sale of the shares of one fund and the purchase of those of another; consequently, the sale will usually involve either a capital gain or loss to the shareholder for Federal income tax purposes. During drastic economic and market changes, telephone exchange services may be difficult to implement. The exchange privilege is only available in states which the exchange may legally be made.
Shareholders of the Star Fund may request that redemption proceeds of $1,000 or more be wired directly to a bank account. Shares purchased by check within 15 days before the redemption request is received will not be redeemed by wire transfer. Unless the shareholder has authorized redemption by wire on the account application or by subsequently filling an authorization with the Star Fund, the signature on a request for wire transmission of redemption proceeds must be guaranteed.
Net Asset Value
The net asset value of Fund shares is determined as of the close of business of the New
York Stock Exchange on each day on which there is a sufficient degree of trading in the Fund's portfolio securities to affect its net asset value. This determination is made by subtracting the Fund's liabilities from the market value of the Fund's investments and the value of its other assets, and dividing the result by the number of Fund shares outstanding.
Portfolio securities which are traded on national securities exchanges are valued at the last sale price on such exchange as of the close of the New York Stock Exchange on the day the calculation is made. If there were no transactions in a security on that day, the security is generally valued at the last reported bid price. Securities traded over-the-counter are generally valued at the latest bid price. If no quotations are available for a security or if the Board of Directors (or a committee of the Board of Directors appointed for that purpose) believes that the latest bid price of a security which has not been traded on the date in question does not fairly reflect its market value, it is valued in a manner determined in good faith by the Directors, or their delegates, to reflect its fair value.
Performance Information
From time to time the Fund may include its average annual total return for various specified time periods in advertisements or information furnished to present or prospective shareholders.
Average annual total return quotations for the specified periods will be computed by finding the average annual compounded rates of return (based on net investment income and any realized and unrealized capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested to the redeemable value of such investment at the end of each period. Average annual total return will be computed assuming all dividends and distributions are reinvested.
The Fund also may quote aggregate total return performance data for various specified time periods. Such data will be calculated substantially as described above, except that the rates of return calculated will not be average annual rates, but rather, aggregate rates of return. Aggregate total return data generally will be higher than average annual total return since the aggregate rates of return reflect performance over a longer period of time.
Total return figures are based on the Fund's historical performance and are not intended to indicate future performance. The Fund's total return will vary depending on market conditions, the securities comprising the Fund's portfolio, the Fund's operating expenses and the amount of realized and unrealized net capital gains or losses during the period. The value of an investment in the Fund will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost.
The Fund may compare its performance to the Standard & Poor's 500 Composite Stock Price Index, Standard & Poor's Industrials Stock Price Index, the Dow Jones Industrial Average, or performance data published by Lipper Analytical Services, Inc. As with other performance data, performance comparisons should not be considered representative of the Fund's relative
performance for any future period. Further performance information is contained in the Fund's annual report, which may be obtained without cost.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any distributions by the Fund to shareholders are classified normally as ordinary income dividends or capital gains distributions. The Fund intends to distribute each year substantially all of its net investment income and net profits received from the sale of portfolio securities, after offsetting against these profits any available capital loss carryforwards. Any dividends and distributions from capital gains are expected to be made following the end of each of the Fund's fiscal years. The Fund will be subject to a non-deductible 4% excise tax on the excess of certain required distributions over the amounts actually distributed by the Fund. The Fund expects to declare and pay such distributions of net investment income and capital gains as may be necessary to avoid the application of this excise tax.
Unless a shareholder indicates otherwise on the account application, any dividends and distributions will be reinvested in additional Fund shares credited to the shareholder's account. Dividends and distributions will be reinvested in Fund shares at their net asset value determined as of the close of business on the date (no earlier than the record date nor later than the payment date) determined by the Board of Directors, and the cost basis of shares so purchased will be their net asset value as of such date. Shareholders can elect to receive dividends and distributions in cash by sending a written request to the Transfer Agent at least three days before the record date for the dividend or distribution. Reinvestment of dividends and distribution in shares of the Fund is considered a sale of shares under securities laws of certain states. Consequently, if a shareholder changes his or her residence to a state in which the Fund's shares are not registered, the shareholder may be required to accept dividends and distributions in cash. If a shareholder elects to have dividends and distributions paid in cash, the Transfer Agent will mail a check to the shareholder's last address of record.
The Fund must generally withhold 31% of taxable dividends and certain other payments to a shareholder who fails to furnish the Fund with the correct taxpayer identification number, or who is notified by the Internal Revenue Service that he or she is subject to such withholding. For Federal income tax purposes, income dividends and distributions form net short-term capital gains are taxable to shareholders as ordinary income, whether the distribution is received in cash or additional shares. Net long-term capital gains distributions, if any, will be taxable as long-term capital gains, whether the distribution is received in cash or additional Fund shares and regardless of how long the Fund shares have been held. In general, capital gains will be taxed at the rate applicable to a taxpayer's ordinary income. Dividends and distributions may also be subject to state or local taxes.
The Fund will advise shareholders within 60 days after the end of each fiscal year as to the Federal income tax status of any dividends and distributions made during the year.
At June 30, 1996, the Fund had a capital loss carryforward of $2,479,501 of which $1,373,139 expires in fiscal 1999 and $1,106,362 expires in fiscal 2000. To the extent that these
deferred losses and carryforward are used to offset capital gains it is probable that the gains so offset will not be distributed to shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT
American Data Services acts as the Fund's transfer and dividend disbursing agent. The Transfer Agent is located at 24 West Carver St., Huntington, NY 11743.
GENERAL INFORMATION
Organization and Capitalization
The Fund is a Maryland corporation organized on May 4, 1983. It is registered under the Investment Company Act of 1940 as an open-end, diversified, investment company.
The Fund's authorized capital stock consists of a single class designated "Common Stock" in the Fund's Articles of Incorporation. Each full share outstanding is entitled to one vote at all meetings of shareholders and to share equally in the Fund's assets in liquidation. Each full share participates equally in dividends and distributions declared by the Board of Directors. Shares of the Fund do not have cumulative voting rights for the election of directors. The Fund does not intend to hold annual meetings of shareholders unless otherwise required by law.
Vote of Majority of Shares
As used in this Prospectus, the term "vote of the holders of a majority of the Fund's shares" means an affirmative vote of (i) at least a majority of all outstanding shares, or (ii) at least 67% of the shares represented at a shareholder meeting at which the holders of more than 50% of the outstanding shares are represented.
Brokerage Allocation
Subject to the supervision of the Fund's Board of Directors, the Advisor selects the brokers and dealers to effect the Fund's portfolio transactions. It is the policy of the Fund to select brokers and dealers who will provide the Fund the best price and execution of orders. Subject to this requirement, the Fund may execute some or all of the Fund's transactions through brokers who have assisted investors in effecting purchases of Fund shares or who have recommended the purchase of Fund shares to investors.
Reports and Inquiries
The Fund will send to its shareholders semi-annual reports containing unaudited financial statements and annual financial statements with a report thereon by the Fund's independent accountants. Each report will show the Fund's investments and the market values thereof, and will provide other information about the Fund's operations.
Shareholder inquiries should be directed to the Fund or, for account information the Transfer Agent, at 1-800-385-7003. Their addresses are set forth on the back cover of this prospectus.
Investment Advisor
Matrix Asset Advisors, Inc.
444 Madison Avenue, 3rd Floor
New York, NY 10022
(800) 366-6223
o
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
o
Transfer Agent
American Data Services
24 West Carver Street
Huntington, NY 11743
(800) 385-7003
o
Independent Accountants
Price Waterhouse, LLP
o
Legal Counsel
Shereff, Friedman, Hoffman & Goodman, LLP
MATRIX/LMH
VALUE FUND
Prospectus
August ___, 1997
MATRIX/LMH VALUE FUND
444 Madison Avenue, Suite 302
New York, NY 10022
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information dated August , 1997 contains information about the MATRIX/LMH VALUE FUND (the "Fund"), in addition to that contained in the Fund's prospectus, dated November 1, 1996 as supplemented August , 1997. This Statement is not a prospectus, and should be read in conjunction with the Fund's prospectus, which may be obtained by calling (212) 486-2004 or (800) 385-7003.
Table of Contents
Page
2....................Investment Program
3....................Investment Restrictions
5....................Directors, Officers and Principal Shareholders
6....................Investment Adviser
7....................Portfolio and Brokerage Transactions
8....................Additional Redemption Information
8....................Additional Tax Information
9....................Performance Information
9....................Observed Holidays
10...................Custodian
10...................Counsel and Independent Accountants
10...................Capital Stock
10...................Financial Statements
|
INVESTMENT PROGRAM
The following information supplements the discussion of the Fund's investment program beginning on page 4 of the prospectus.
Options on Securities
The Fund may write (sell) covered call options on its portfolio securities ("covered options") in an attempt to enhance gain, although it has no present intention to do so and may only do so to the extent of up to 5% of its net assets.
When the Fund writes a covered call option, it gives the purchaser of the option the right, upon exercise of the option, to buy the underlying security at the price specified in the option (the "exercise price") at any time during the option period, generally ranging up to nine months. If the option expires unexercised, the Fund will realize income to the extent of the amount received for the option (the "premium"). If the call option is exercised, a decision over which the Fund has no control, the Fund must sell the underlying security to the option holder at the exercise price. By writing a covered option, the Fund forgoes, in exchange for the premium less the commission ("net premium") the opportunity to profit during the option period from an increase in the market value of the underlying security above the exercise price.
The Fund may terminate its obligation as writer of a call 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."
Closing purchase transactions enable the Fund immediately to realize
gains or minimize losses on its options positions. There is no assurance that a
liquid secondary market on an options exchange will exist for any particular
option, or at any particular time, and for some options no secondary market may
exist. In addition, stock index prices may be distorted by interruptions in the
trading of securities of certain companies or of issuers in certain industries,
which could disrupt trading in option positions on such indices and preclude the
Fund from closing out its options positions. If the Fund is unable to effect a
closing purchase transaction with respect to options it has written, it will not
be able to terminate its obligations or minimize its losses under such options
prior to their expiration.
The hours of trading for options may not conform to the hours during
which the underlying securities are traded. To the extent that the options
markets close before the markets for the underlying securities, significant
price and rate movements may take place in the underlying markets that cannot be
reflected in the options markets.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions, which are "fundamental policies" which cannot be changed without approval of the holders of a majority of the Fund's shares, as defined on page 12 of the prospectus. The Fund may not:
1. Purchase any securities which would cause more than 5% of the Fund's total assets at the time of such purchase to be invested in the securities of any issuer, but this limitation does not apply to obligations issued or guaranteed by the U.S. Government;
2. Purchase any securities which would cause the Fund at the time of such purchase to own more than 10% of the outstanding voting securities of any class of any issuer, but this limitation does not apply to obligations issued or guaranteed by the U.S. Government;
3. Purchase any securities which would cause more than 25% of the Fund's total assets at the time of such purchase to be concentrated in the securities of issuers engaged in any one industry;
4. Invest in companies for the purpose of exercising management or control;
5. Purchase or sell real estate, although the Fund may invest in the readily marketable securities of companies whose business involves the purchase or sale of real estate;
6. Purchase or sell commodities or commodities contracts;
7. Purchase the securities of any investment company, except (I) in the open market where no profit to a sponsor or dealer other than customary brokerage commissions results from such purchases or (ii) if acquired in connection with a plan of reorganization;
8. Purchase securities on margin;
9. Effect short sales of any securities;
10. Make loans, except by the acquisition of a portion of an issue of publicly traded bonds, debentures, notes, and other debt securities;
11. Borrow money, except for temporary emergency purposes in amounts not in excess of 5% of the Fund's total assets;
12. Mortgage, pledge or hypothecate securities;
13. Act as an underwriter of securities except insofar as the Fund might technically be deemed an underwriter for purposes of the Securities Act of 1933 upon the disposition of certain securities;
14. Purchase or retain the securities of any issuer if the Fund's officers or directors, or those of Heine Management, who each own .5% of the outstanding securities of such issuer, together own beneficially more than 5% of such securities; or
15. Issue any class of securities senior to any other class of securities.
As a matter of operating but not fundamental policy, which can be changed without shareholder approval, the Fund may not purchase any securities which would cause more than 5% of the Fund's total assets at the time of such purchase to be invested in securities which may not be publicly sold without registration under the Securities Act of 1933 or are otherwise not readily marketable. If such policy were to be changed, such investments would be limited to no more than 15% of total assets.
The Fund is required to comply with all of the above fundamental and operating investment restrictions only at the time the relevant action is taken. The Fund need not liquidate an existing position solely because a change in the market value of an investment, or a change in the value of the Fund's net or total assets, cause it to not comply with the restrictions at some future date.
ADDITIONAL INVESTMENT INFORMATION
While the Fund intends to invest primarily in equity securities, it will purchase such securities only when suitable investments can be found. During periods when suitable investments cannot be found, and as an interim measure pending investment in equity securities, the Fund may elect to maintain a portion of its assets in fixed income securities. Such investments, except as stated below, will have a maturity of less than one year and will consist of U.S. Government securities, certificates of deposit and bankers' acceptances of U.S. banks and commercial paper. All non-U.S. Government short-term investments will have received one of the two highest ratings from a major rating service. In the case of direct obligations of the U.S. Treasury, the Fund may invest in instruments of any maturity.
The Fund has the authority to invest up to 10% of its total assets in foreign securities, but only if such securities are traded on national securities exchanges or in the over-the-counter market in the United States. Investment in foreign securities may involve special risks, such as changes in the administrative, economic and monetary policies of foreign governments.
For the year ended June 30, 1996 and June 30, 1995, the Fund's portfolio turnover rates were 57% and 34%, respectively.
DIRECTORS, OFFICERS and PRINCIPAL SHAREHOLDERS
The directors and officers of the Fund are as follows:
Name and Address and Principal Offices with the Fund Occupations During the Past Five Yrs. David A. Katz, CFA, Age 35* President, Secretary, and Treasurer 444 Madison Ave. New York, NY 10022 Mr. Katz is President and Chief Investment Officer of Matrix Asset Advisors, the Fund's Advisor, and portfolio manager of the Fund. He has been associated with the Advisor and its predecessor since its founding in 1986. Robert M. Rosencrans, Age 69 Director 331 Round Hill Rd. Greenwich, CT 06830 Mr. Rosencrans has been President of Columbia International, Inc. since 1984. From 1962 to 1984 he was President and Chief Executive Officer of United Artists Cablesystems Corporation. Mr. T. Michael Tucker, Age 54 Director 218 South Pear Street Blountstown, FL 32424 Mr. Tucker is the owner of T. Michael Tucker, a certified public accounting firm which he established in 1977. Mr. Larry D. Kieszek, Age 46 Director 222 Northeast First Street Gainesville, FL 32602 Mr. Kieszek is Managing Partner of Purvis, Gray & Company, a certified public accounting firm with which he has been associated since 1974. - ----------------- *Mr. Katz is an "interested person" of the Fund within the meaning of the Investment Company Act of 1940. |
All directors who are not interested persons receive a fee of $500 per meeting plus expenses of attending Board of Directors meetings. With respect to meetings held during the fiscal year ended June 30, 1996, the Directors did not receive fees or expense reimbursement.
The directors and officers of the Fund as a group may be deemed to own beneficially less than 1% of Fund shares outstanding as of June 1, 1997.
INVESTMENT ADVISER
Matrix Asset Advisers, Inc. (the "Adviser") serves as the Fund's Investment Adviser under an Advisory Agreement, which provides that the Adviser will obtain and evaluate information relating to the economy, industries, businesses, securities markets and securities, formulate a continuing program for the management of the Fund's assets in a manner consistent with its investment objective, and implement this program by selecting on a discretionary basis the securities to be purchased or sold by the Fund and placing orders for such purchases and sales. In addition, the Adviser provides for the Fund's office needs, supervises the maintenance of the Fund's books and records, provides the Fund with persons competent to perform all of these executive and administrative functions, supervises and coordinates the activities of the Fund's institutional and other agents (e.g., custodian, transfer agent, independent accountants, outside legal counsel), and permits its officers and employees to serve as directors and officers of the Fund, all without additional cost to the Fund. Certain directors and officers of the Adviser presently serve as directors or officers of the Fund. The Adviser has retained, at its own expense, Investment Company Administration Corporation, 560 Hudson Street, Hackensack, NJ 07601, to assist it in providing the Fund with certain administrative services.
The Fund pays all other expenses incurred in the operation of the Fund, except as provided below, including taxes, fees and commissions, bookkeeping expenses, share issuance expenses, expenses of redemption of shares, charges of its custodian and transfer agent, costs of preparing and printing reports and prospectuses for the Fund's existing shareholders, registration fees, auditing and legal expenses, and expenses and fees of outside directors.
The Adviser also has agreed to pay the fees and expenses of printing and distributing reports or prospectuses prepared for the Fund in connection with the offering or sale of its shares, of preparing and setting in type, printing and mailing all advertising and sales literature and all other expenses in connection with the offer and sale of Fund shares not specifically allocated to the Fund.
The Fund has agreed to pay the Adviser, as compensation for all services rendered, staff and facilities provided and expenses paid or assumed (excluding organizational costs), an annual fee, payable monthly, of 1% of the Fund's average daily net assets. Heine Management Group, Inc. served as Investment Adviser to the Fund from its inception until April 18, 1997, when shareholders approved the Investment Advisory Agreement with the Adviser. Heine Management received advisory fees of $64,214 for the year ended June 30, 1996, $58,499 for the year ended June 30, 1995
and $63,080 for the year ended June 30, 1994. The Advisory Agreement continues in effect from year to year, if such continuation is specifically approved at least annually by the Fund's Board of Directors at a meeting called for that purpose, or by vote of the holders of a majority of the Fund's shares, and in either case, also by a vote of a majority of the Fund's shares and in either case, also by a vote of a majority of directors who are not "interested persons" of the Adviser or the Fund within the meaning of the Investment Company Act of 1940. The Advisory Agreement is subject to termination by either party without penalty on 60 days' written notice to the other and terminates automatically in the event of its assignment.
The Adviser is a registered investment advisor which was founded in 1986. It provides investment advisory services to individuals, endowment and pension accounts with a value of over $400 million. The Adviser is controlled by Mr. David A. Katz and Mr. Morley Goldberg.
The Advisory Agreement provides that neither the Adviser, its directors, officers or employees, nor certain other persons performing specific functions for the Fund, shall be liable to the Fund, except for any loss resulting from willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
PORTFOLIO AND BROKERAGE TRANSACTIONS
The Investment Adviser is responsible for the selection of brokers and dealers to effect the Fund's portfolio transactions, subject to the supervision of the Fund's Board of Directors. It is the policy of the Fund to select brokers and dealers who will provide the Fund with the best price and execution of orders. Commission rates are a component of price and are considered together with other relevant factors.
Purchases and sales of securities not traded on a national securities exchange are generally executed with primary market makers, except when it is determined that a better price or execution may otherwise be obtained. The Fund may purchase securities from, or sell securities to, dealers acting as principals on a net basis.
The Fund is permitted by law to place orders with brokers or dealers who may charge a higher commission than other brokers may charge, if the Investment Adviser determines in good faith that the commission is reasonable in relation to the value of the brokerage service and research information provided the Fund. The Investment Adviser expects to rely predominantly on its own research and not use research services supplied by brokers.
Subject to the requirements of obtaining the best price and execution, the Investment Adviser may execute a portion of the Fund's transactions through brokers who have assisted investors in effecting purchases of Fund shares or who have recommended the purchase of Fund shares to investors. The Fund paid in brokerage commissions $12,064 for the year ended June 30, 1996, $8,432 for the year ended June 30, 1995, and $9,970 for the year ended June 30, 1994. All such
commissions were paid to persons unaffiliated with the Fund or the Investment Adviser.
ADDITIONAL REDEMPTION INFORMATION
The Fund may suspend the right of redemption: (a) for any period during which the New York Stock Exchange is closed, or the Securities and Exchange Commission determines that trading on the Exchange is restricted; (b) when there is an emergency as determined by the Commission as a result of which it is not practicable for the Fund to dispose of its securities; or (C) for such other period as the Commission may by order permit for the protection of the Fund's shareholders.
The Fund has made an election pursuant to Rule 18f-1 under the Investment Company Act which obligates it to pay in cash all redemptions to any shareholder of record unless a shareholder requests a redemption, within a 90 day period, of shares having a value in excess of (I) $250,000, or (ii) 1% of the Fund's net asset value, whichever is less. In this case, the Fund is permitted to pay the redemption price in whole or in part by a distribution of securities from its portfolio. In that event, the value of the securities distributed would be equal to the amount redeemed, determined at the same time, and in the same manner, as the redemption price is determined. Shareholders who receive redemption payments in securities may incur brokerage costs in converting the securities they receive into cash.
ADDITIONAL TAX INFORMATION
Tax Status of the Fund. The Fund intends to continue to qualify as a "regulated investment company" under Subchapter M of the Internal Revenue Code, and, as such, will pay no Federal income taxes on net income or net realized capital gains distributed to shareholders. Consistent with requirements for qualification as a regulated investment company, the Fund intends to distribute each year substantially all of its net investment income and net profits received from sales of portfolio securities, after offsetting against these profits any available capital loss carryforwards. The availability of net income for dividends is dependent on the level of the Fund's income and expenses, and the actual amount and timing of any dividend or distribution is subject to the discretion of the Fund's Board of Directors. Another requirement for qualification as a regulated investment company is that the Fund derive less than 30% of its gross income from the sale or other disposition of securities held by it for less than three months.
Taxation of Distributions. Under current law, ordinary income dividends received by corporate shareholders may be eligible for the 70% dividends-received deduction for corporations. The dividends-received deduction for corporations will apply to that portion of the ordinary income dividend designated by the Fund as qualifying for the dividends-received deduction. Any distributions made by the Fund will not be eligible for the dividends-received deduction with respect
to shares which are held by the shareholder for 45 days or less. Capital gains distributions do not qualify for the dividends-received deduction.
Investors should carefully consider the impact of buying Fund shares just before the declaration of an income dividend or capital gains distribution. Any such dividend or distribution paid shortly after a purchase of shares will reduce the net asset value of the shares by the amount of the dividend or distribution. The dividend or distribution, though in effect a return of capital, would be taxable as ordinary income.
Investors will recognize gain or loss upon the redemption of shares of the Fund. Such gain or loss will be capital gain or loss if the shares were held as capital assets by the investor. Such capital gain or loss will be long-term or short-term depending upon the investor's holding period for such shares. In addition, if a shareholder sells shares of the Fund held for less than six months at a loss, the loss will be treated as long-term to the extent of any capital gains distributions received on such shares.
The Fund will be subject to a non-deductible 4% excise tax on the excess of certain required distributions over the amounts actually distributed by the Fund. The Fund expects to declare and pay such distributions of net investment income and capital gains as may be necessary to avoid the application of this excise tax. The foregoing is a summary discussion of the federal income tax consequences is based on federal income tax laws and regulations believed to be in effect on the date of this Statement. This discussion is not intended to be comprehensive and investors are urged to consult their tax advisers concerning specific questions regarding federal, state and local taxation.
PERFORMANCE INFORMATION
As indicated in the prospectus, from time to time the Fund may include its average total return and other total return data in advertisements or information furnished to present or prospective shareholders. Total return figures are based on the Fund's historical performance and are not intended to indicate future performance.
Average annual total return quotations for the specified periods are computed rates of return ("T") (based on net investment income and any realized and unrealized capital gains or losses on portfolio investments over such periods) that would equate the initial amount invested ("P") to the redeemable value of such investment at the end of each period ("ERV"), over a period of time ["n"], according to the following formula:
n P (1 + T) = ERV
The Fund may also quote aggregate total return performance data. Aggregate total return
data generally will be higher than average annual total return data since the aggregate rate of return reflects performance over a longer period of time. The Fund's average annual total return for the fiscal year ended June 30, 1996 was 17.16%.
OBSERVED HOLIDAYS
The following is a list of holidays on which the New York Stock Exchange is closed and therefore, shares of the Fund will not be traded: New Years Day; Presidents' Day; Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; Christmas Day.
CUSTODIAN AND TRANSFER AGENT
Star Bank acts as custodian of the Fund's assets and serves as the Fund's transfer agent. These activities are performed at 425 Walnut Street, Cincinnati, OH 45202. American Data Services, 24 West Carver Street, Huntington, NY 11743 is the Fund's transfer agent.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Shereff, Friedman, Hoffman & Goodman LLP, 919 Third Avenue, New York, NY 10022, serves as counsel to the Fund. Price Waterhouse LLP, 100 E. Wisconsin Ave., Milwaukee, WI 53202 serves as the Fund's independent accountants.
CAPITAL STOCK
The Fund's shares are denominated "Common Stock, $.01 par value." Shares have no pre-emptive rights and are fully paid and non-assessable. Shares have non-cumulative voting rights, which means the holders of more than 50% of the shares voting for the election of directors can elect all of the directors if they choose to do so, in which event the holders of the remaining less than 50% of the shares voting for the election of directors will not be able to elect any directors.
Shareholders are entitled to one vote for each share held and fractional votes for fractional shares held and will vote on any matter submitted to a shareholder vote. The Fund does not intend to hold meetings of shareholders in any year in which the Investment Company Act of 1940 does not require shareholders to act upon any of the following matters: (I) election of directors; (ii) approval of an investment advisory agreement; (iii) approval of a distribution agreement; (iv) ratification of selection of independent accountants.
FINANCIAL STATEMENTS
The annual report to shareholders for the Fund for the fiscal year ended June 30, 1996 is a separate document supplied with this Statement of Additional Information and the financial statements, accompanying notes and report of independent accountants appearing therein are incorporated by reference in this Statement of Additional Information.
Part C
Other Information
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Part A: Financial Highlights
The Financial Statements incorporated by reference from the annual and semi-annual reports to shareholders into this post-effective amendment are as follows:
Part B: Schedule of Investments at June 30, 1996
Statement of Assets and Liabilities at
June 30, 1996
Statement of Operations for the year
ended June 30, 1996
Statement of Changes in Net Assets for the year ended June
30, 1996 and June 30, 1995.
Financial Highlights
Report of Independent Accountants
Schedule of Investments at December 31,
1996 (unaudited)
Statement of Assets and Liabilities at
December 31, 1996 (unaudited)
Statement of Operations for the period
ended December 31, 1996 (unaudited)
Statement of Changes in Net Assets for the period ended
December 31, 1996 (unaudited) and June 30, 1996.
All other statements and schedules are omitted as they are not applicable or required or the required information is included in the financial statements or notes thereto.
(b) Exhibits:
Exhibit
Number Description
1. Articles of Amendment.
2(a). By-laws (as amended through October 25,
1988). Incorporated by reference to PEA
No. 6.
2(b). Revised Sections 6.1, 6.7 and 6.8 of By-
laws. Incorporated by reference to PEA
No. 9.
3. None
4. Specimen Share Certificate. Incorporated
by reference to PEA No. 9
5. Investment Advisory Agreement.
6. None
7. None
8. Custody Agreement.
9. Transfer Agency and Accounting Services
Agreements.
10. Opinion of Shereff, Friedman, Hoffman &
Goodman. Incorporated by reference to
PEA No. 1.
11. Consent of Independent Accountants.
12. None.
13. Investment letter of Heine Management
Group, Inc. Incorporated by reference
to PEA No. 1.
14. IRA plan materials. Incorporated by
reference to PEA No. 1.
15. None
|
16. Schedule for computation of performance quotations. Incorporated by reference to PEA No. 6.
Item 25. Persons Controlled by or Under Common Control with Registrant.
None
Item 26. Number of Holders of Securities
As of June 5, 1997:
Title of Class Number of Record Holders
Common stock, $.01 par value 225
Item 27. Indemnification
Reference is made to Article XI of Registrant's By-Laws (Exhibit 2 to this Registration Statement) and Section 10 of the Investment Advisory Agreement (Exhibit 5 to this Registration Statement) The Fund maintains a policy of insurance in favor of the Fund, its directors, officer and employees, against liability arising from certain acts, errors and omissions. The policy will not insure any director, officer, or employee against liability found to be caused by the director's, officer's or employee's wilful misfeasance, bad faith, gross negligence or reckless disregard of duty.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person in connection with the successful defense of any action, suit or proceeding) is asserted the registrant by such director, officer or controlling person in connection with the shares being registered, the
registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The registrant hereby undertakes that it will apply the indemnification provisions of its By-laws in a manner consistent with Release No. 11330 under the Investment Company Act of 1940 as long as the interpretation of Section 17(h) and (i) of suchAct expressed in that Release remains in effect.
Item 28. Business and Other Connections of Investment Adviser
Reference is made to Part B of this Registration Statement and to the Form ADV filed under the Investment Advisers Act of 1940 by the Advisor (File No. 801-36872).
Item 29. Principal Underwriter
No person acts as principal underwriter to the Registrant.
Item 30. Location of Accounts and Records.
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the Rules thereunder are maintained at the
office of the Custodian and Shareholder Service Agent, except for securities
trading journals, Articles of Incorporation, By-laws and minutes of shareholders
and Board of Directors' meetings, which are maintained at the offices of the
Advisor.
Item 31. Management Services
Other than as set forth in the Prospectus constituting Part A of this Registration Statement, Registrant is not a party to any management related service contract.
Item 32. Undertakings
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of New York, State of New York, on the 6th day of June, 1997.
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement on Form N-1A of Matrix/LMH Value Fund, Inc., has been signed below by the following persons in the capacities indicated on June 6, 1997.
__________________________ June 6, 1997 David A. Katz Chairman, President and Treasurer (Chief Financial and Accounting Officer) __________________________ June 6, 1997 Robert M. Rosencrans Director __________________________ June 6, 1997 T. Michael Tucker Director __________________________ June 6, 1997 Larry D. Kieszek Director |
LMH Fund, Ltd.
Articles of Amendment
LMH Fund, Ltd., a Maryland corporation having its principal office in Baltimore, Maryland (the "Corproation"), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Second Article of the Corporation's charter is hereby amended in its entirety to read as follows:
The name of the corporation (which is hereinafter called the "Corporation") is:
Matrix/LMH Value Fund, Inc.
SECOND: The foregoing amendment of the charter of the Corporation has been approved by a majority of the Board of Directors of the Corporation without action of stockholders in accordance with Section 2-605(a)(4) of the Maryland General Corporation Law, and the Corporation is registered as an open-end company under the Investment Company Act of 1940.
IN WITNESS WHEREOF: LMH Fund, Ltd., has caused these presents to be signed in its name and on its behalf by its President or one of its Vice Presidents and attested by its Secretary or one of its Assistant Secretaries on April 30, 1997.
LMH Fund, Ltd.
/s/David Katz
Name: David Katz
Title: President
ATTEST:
/s/Steven J. Paggioli
Type name and title of officer
Steven J. Paggioli
Assistant Secretary
|
THE UNDERSIGNED, President (or Vice President) of LMH Fund, Ltd., who executed on behalf of said corporation the foregoing Articles of Amendment, of which this certificatge is made a part, hereby acknowledges, in the name and on behalf of said corporation, the foregoing Articles of Amendment to be the corporate act of said corporation and further certifies that, to the best of his knowledge, inf ormation and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under penalties of perjury.
/s/ David Katz |
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this 18th day of April, 1997 by and between MATRIX/LMH VALUE FUND, LTD. a Maryland corporation (hereinafter referred to as the "Fund"), and MATRIX ASSET ADVISORS, INC., a Maryland corporation (hereinafter referred to as the "Advisor").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified open-end management investment company registered under the Investment Company Act of 1940, as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Advisor is engaged principally in rendering management and investment advisory services and is registered as an investment Advisor under the Investment Advisors Act of 1940; and
WHEREAS, the Fund desires to retain the Advisor to provide management and investment advisory services to the Fund in the manner and on the terms hereinafter set forth; and
WHEREAS, the Advisor is willing to provide management and investment advisory services to the Fund on the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained, the Fund and the Advisor hereby agree as follows:
ARTICLE I
Duties of the Advisor
The Fund hereby employs the Advisor to act as investment advisor of the Fund and to furnish the management and investment advisory services described below, subject to the policies of the Fund and the review by, and overall consent of, the Board of Directors of the Fund, for the period and on the terms and conditions set forth in this Agreement. The Advisor hereby accepts such employment and agrees during such period, at its own expense, to render, or arrange for the rendering of, such services and to assume the obligations herein set forth for the compensation provided for herein. The Advisor shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for, or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
(a) Management Services. The Advisor shall perform the management services necessary for the operation of the Fund as hereinafter provided. The Advisor shall generally monitor the Fund's compliance with investment policies and restrictions as set forth in its currently effective Prospectus and Statement of Additional Information relating to the shares of the Fund under the Securities Act of 1933, as amended (each a "Prospectus" and "Statement of Additional Information," respectively). The Advisor shall provide the Fund with such other services as the Advisor, subject to review by the Directors, shall from time to time determine to be necessary or useful to perform its obligations under this Agreement. The Advisor shall make reports to the Directors of its performance of obligations hereunder and furnish advice and recommendations with respect to such other aspects of the business and affairs of the Fund as it shall determine to be desirable.
(b) Investment Advisory Services. With respect to the Fund:
(1) The Advisor shall provide such investment research, advice and supervision as the Fund may from time to time consider necessary for the proper supervision of the assets of the Fund, shall furnish continuously an investment program for the Fund, and shall determine from time to time which securities shall be purchased, sold or exchanged and what portion of the assets of the Fund shall be held in the various securities in which the Fund invests, options, futures, options on futures or cash, subject always to the restrictions of the Articles of Incorporation and By-Laws of the Fund, as amended from time to time, the provisions of the Investment Company Act and the statements relating to the Fund's investment objectives, investment policies and investment restrictions as the same are set forth in the Fund's currently effective Prospectus and Statement of Additional Information. Should the Directors at any time, however, make any definite determination as to investment policy and notify the Advisor thereof in writing, the Advisor shall be bound by such determination for the period, if any, specified in such notice or until similarly notified that such determination has been revoked.
(2) To the extent applicable, the Advisor shall also make decisions for the Fund as to foreign currency matters and make determinations as to foreign exchange contracts.
(3) The Advisor shall make decisions for the Fund as to the manner in which voting rights, rights to consent to corporate action and any other rights pertaining to the Fund's portfolio securities shall be exercised.
(4) The Advisor shall take, on behalf of the Fund, all actions which it deems necessary to implement the Fund's investment policies, and in particular to place all orders for the purchase or sale of portfolio securities for the Fund's account with brokers or dealers selected by it, and to that end, the Advisor is authorized as the agent of the Fund to give instructions to the custodian of the Fund as to deliveries of securities and payments of cash for the account of the Fund.
(5) In connection with the selection of such brokers or dealers and the placing of such orders with respect to assets of the Fund, the Advisor is directed at all times to seek to obtain execution and prices within the policy guidelines determined by the Directors and set forth in the Fund's Prospectus and Statement of Additional Information. Subject to this requirement and the provisions of the Investment Company Act, the Securities Exchange Act of 1934, as amended, and other applicable provisions of law, the Advisor may select brokers or dealers with which it or the Fund is affiliated (if any).
ARTICLE II
Allocation of Charges and Expenses
(a) The Advisor. The Advisor assumes and shall pay for maintaining the staff and personnel necessary to perform its obligations under this Agreement, shall pay all compensation relating to service to the Fund of Officers and Directors of the Fund who are affiliated persons of the Advisor, and shall pay the expenses of the Fund incurred in connection with the continuous offering of Fund shares.
(b) The Fund. Except as described in paragraph (a) hereof, the Fund assumes and shall pay all other Fund expenses, including, but not limited to: taxes, expenses for legal and auditing services, costs of printing proxies, stock certificates, shareholder reports, Prospectuses and Statements of Additional Information, charges of the custodian, any sub-custodian and transfer agent, expenses of portfolio transactions, expenses of redemption of shares, Securities and Exchange Commission fees, expenses of registering the shares under federal laws, making state filings and registering or qualifying under foreign laws, fees and actual out-of-pocket expenses of Directors who are not affiliated persons of the Advisor, accounting and pricing costs (including the daily calculation of the net asset value), insurance, interest, brokerage costs, litigation and other extraordinary or non-recurring expenses, and other expenses properly payable by the Fund.
ARTICLE III
Compensation of the Advisor
(a) Investment Advisory Fee. For the services rendered, the facilities furnished and expenses assumed by the Advisor, the Fund shall pay to the Advisor at the end of each calendar month a fee, commencing on the day following effectiveness hereof, based upon the average daily value of the net assets of the Fund, as determined and computed in accordance with the description of the determination of net asset value contained in the Prospectus and Statement of Additional Information. The fee is payable by the Fund at the annual rate of 1.00% of the Fund's average daily net assets.
If this Agreement becomes effective subsequent to the first day of a month or shall terminate before the last day of a month, compensation for that part of the month that this Agreement is in effect shall be prorated in a manner consistent with the calculation of the fee as set forth above. Subject to the provisions of subsection (b) hereof, payment of the Advisor's compensation for the preceding month shall be made as promptly as possible after completion of the computations contemplated by subsection (b) hereof. During any period when the determination of net asset value is suspended by the Directors, the net asset value of a share as of the last business day prior to such suspension shall for this purpose be deemed to be the net asset value at the close of each succeeding business day until it is again determined.
ARTICLE IV
Limitation of Liability of the Advisor
The Advisor shall not 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 the management of the Fund, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder. As used in this Article IV, the term "Advisor" shall include any directors, officers and employees of the Advisor.
ARTICLE V
Activities of the Advisor
The services of the Advisor to the Fund are not to be deemed to be exclusive, and the Advisor is free to render services to other investment advisory clients. It is understood that Directors, officers, employees and shareholders of the Fund may become interested in the Advisor, as directors, officers, employees and shareholders or otherwise, and that directors, officers, employees and shareholders of the Advisor are or may become similarly interested in the Fund.
ARTICLE VI
Duration and Termination of this Agreement
This Agreement shall become effective as of the date first
above written and shall remain in force with respect to the Fund until April 18,
1999 and thereafter, but only so long as such continuance is specifically
approved with respect to the Fund at least annually by: (i) the Directors, or by
the vote of a majority of the outstanding voting securities of the Fund, and
(ii) a majority of those Directors 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.
This Agreement may be terminated at any time without the payment of any penalty, by the Directors or by the vote of a majority of the outstanding voting securities of the Fund, or by the Advisor, on sixty days' written notice to the other party. This Agreement shall automatically terminate in the event of its assignment.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if such amendment is specifically approved by: (i) the vote of a majority of outstanding voting securities of the Fund, and (ii) a majority of those Directors 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.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting securities," "assignment," "affiliated person" and "interested person," when used in this Agreement, shall have the respective meanings specified in the Investment Company Act and the rules thereunder, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with laws of the State of New York and the applicable provisions of the Investment Company Act. To the extent that the applicable laws of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.
MATRIX/LMH VALUE FUND, INC.
By:
Name:
Title:
MATRIX ASSET ADVISORS, INC.
By:
Name:
Title:
CUSTODY AGREEMENT
This AGREEMENT, dated as of the 1st day of April, 1997, by and between MATRIX/LMH Value Fund (the "Trust"), a business trust organized under the laws of Maryland and having its office at 444 Madison, New York, NY 10022 and Star Bank, National Association, (the "Custodian"), a national banking association having its principal office at 425 Walnut Street, Cincinnati, Ohio, 45202.
W I T N E S S E T H:
WHEREAS, the Trust desires that the Fund's Securities and cash be held
and administered by the Custodian pursuant to this Agreement; and
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Fund and named in Appendix A hereto or in
such resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Trustees" shall mean the Trustees from time to time
serving under the Trust's Agreement and Declaration of Trust, as from time to
time amended.
1.3 "Book-Entry System" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a
settlement day by The New York Stock Exchange, Inc. and any other
day for which the trust computes the net asset value of Shares of
the Fund.
1.45 "Fund" shall mean all series of the Trust; addendum
attached.
1.5 "NASD" shall mean The National Association of Securities
Dealers, Inc.
1.6 "Officer" shall mean the President, any Vice President,
the Secretary, any Assistant Secretary, the Treasurer, or any
Assistant Treasurer of the Trust.
1.7 "Oral Instructions" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Trust shall cause
all Oral Instructions to be confirmed by Written Instructions prior to the end
of the next Business Day. If such Written Instructions confirming Oral
Instructions are not received by the Custodian prior to a transaction, it shall
in no way affect the validity of the transaction or the authorization thereof by
the Trust. If Oral Instructions vary from the Written Instructions which purport
to confirm them, the Custodian shall notify the trust of such variance but such
Oral Instructions will govern unless the Custodian has not yet acted.
1.8 "Fund Custody Account" shall mean the account in the name of the
Trust, which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or
Written Instructions. Proper Instructions may be continuing
Written Instructions when deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Depository Trust Company
and (provided that Custodian shall have received a copy of a resolution of the
Board of Trustees, certified by an Officer, specifically approving the use of
such clearing agency as a depository for the Fund) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934 as amended (the "1934 Act"), which acts as a
system for the central handling of Securities where all Securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities or
other obligations, and any certificates, receipts, warrants or other instruments
or documents representing rights to receive, purchase or subscribe for the same,
or evidencing or representing any other rights or interests therein, or any
similar property or assets that the Custodian has the facilities to clear and to
service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Trust on account of the Fund.
1.13 "Sub-Custodian" shall mean and include (i) any branch of a
"qualified U.S. bank," as that term is defined in Rule 17f-5 under the 1940 Act,
(ii) any "eligible foreign custodian," as that
term is defined in Rule 17f-5 under the 1940 Act, approved by the Board of
Trustees and having a contract with the Custodian which contract has been
approved by the board of trustees, and (iii) any securities depository or
clearing agency, incorporated or organized under the laws of a country other
than the United States, which operates the central system for handling of
securities or equivalent book-entries in that country or a transnational system
for the central handling of securities or equivalent book-entries, which
securities depository or clearing agency has been approved by the Board of
Trustees; provided, that the Custodian, or a Sub-Custodian has entered into an
agreement with such securities depository or clearing agency.
1.14"Written Instructions" shall mean (i) written communications
actually received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from one or more persons
reasonably believed by the Custodian to be Authorized Persons, or (iii)
communications between electro-mechanical or electronic devices provided that
the use of such devices and the procedures for the use thereof shall have been
approved by resolutions of the Board of Trustees, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Fund at any time during the period of this Agreement.
2.2 Acceptance. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth.
2.3 Documents to be Furnished. The following documents, including any
amendments thereto, will be provided contemporaneously with the execution of the
Agreement to the Custodian by the Trust:
a. A copy of the Declaration of Trust certified by the
Secretary;
b. A copy of the Bylaws of the Trust certified by the
Secretary;
c. A copy of the resolution of the Board of Trustees
of the Trust appointing the Custodian, certified by
the Secretary;
d. A copy of the then current Prospectus of the Fund;
and
e. A certification of the President and Secretary of
the Trust setting forth the names and signatures of
the current Officers of the Trust and other
Authorized Persons.
2.4 Notice of Appointment of Dividend and Transfer Agent.
The Trust agrees to notify the Custodian in writing of the appointment, termination or change in appointment of any Dividend and Transfer Agent of the Fund.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Fund Custody Account. The Custodian shall open and maintain in its
Trust Department a custody account in the name of the Trust coupled with the
name of the Fund, subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other assets of the
Fund which are delivered to it.
3.3 Appointment of Agents. (a) In its discretion, the Custodian may
appoint one or more Sub-Custodians to act as Securities Depositories or as
sub-custodians to hold Securities and cash of the Fund and to carry out such
other provisions of this Agreement as it may determine, provided, however, that
the appointment of any such agents and maintenance of any Securities and cash of
the Fund shall be at the Custodian's expense and shall not relieve the Custodian
of any of its obligations or liabilities under this Agreement.
(b) If, after the initial approval of Sub-Custodians by the Board of
Trustees in connection with this Agreement, the Custodian wishes to appoint
other Sub-Custodians to hold property of the Fund, it will so notify the Trust
and provide it with information reasonably necessary to determine any such new
Sub-Custodian's eligibility under Rule 17f-5 under the 1940 Act, including a
copy of the proposed agreement with such Sub-Custodian. The Trust shall at the
meeting of the Board of Trustees next following receipt of such notice and
information give a written approval or disapproval of the proposed action.
(c) The Agreement between the Custodian and each Sub-Custodian acting
hereunder shall contain the required provisions set forth in Rule
17f-5(a)(1)(iii).
(d) If the Custodian intends to remove any Sub-Custodian previously
approved by the Board of Trustees, it shall so notify the Trust and move the
Securities and cash of the Fund deposited with such Sub-Custodian to another
Sub-Custodian previously approved by the board of trustees. The Custodian shall
promptly take such steps as may be required to remove any Sub-Custodian that has
ceased to meet the requirements of Rule 17f-5 under the 1940 Act.
(e) The Custodian hereby warrants to the Trust that in its opinion,
after due inquiry, the established procedures to be followed by each
Sub-Custodian in connection with the safekeeping of property of the Fund
pursuant to this Agreement afford
protection for such property not materially different from that afforded by the
Custodian's established safekeeping procedures with respect to similar property
held by it (and its securities depositories) in Cincinnati, Ohio.
(f) The Custodian shall oversee the maintenance of any Securities held
for the Fund by any Sub-Custodian. Any Securities held by a Sub-Custodian will
be subject only to the instructions of the Custodian or its agents; and any
Securities held in an eligible foreign securities depository for the account of
a Sub-Custodian will be subject only to the instructions of such Sub-Custodian.
In the event that a Sub-Custodian permits any of the Securities placed in its
care to be held in an eligible foreign securities depository, such Sub-Custodian
will be required by its agreement with the Custodian to identify on its books
such Securities as being held for the account of the Custodian as a custodian
for its customers.
3.4 Delivery of Assets to Custodian. The Trust shall deliver, or cause
to be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The
Custodian may deposit and/or maintain Securities of the Fund in a
Securities Depository or in a Book-Entry System, subject to the
following provisions:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Trust shall deliver to the Custodian a
resolution of the Board of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to deposit in such Securities
Depository or Book-Entry System all Securities eligible for deposit therein and
to make use of such Securities Depository or Book-Entry System to the extent
possible and practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and sales of
Securities, loans of Securities, and deliveries and returns of collateral
consisting of Securities.
(b) Securities of the Fund kept in a Book-Entry System or
Securities Depository shall be kept in an account ("Depository
Account") of the Custodian in such Book-Entry System or
Securities Depository which includes only assets held by the
Custodian as a fiduciary, custodian or otherwise for
customers.
(c) The records of the Custodian with respect to Securities
of the Fund maintained in a Book-Entry System or
Securities Depository shall, by book-entry, identify such
Securities as belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a
Book-Entry System or Securities Depository, the Custodian
shall pay for such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that such
Securities have been transferred to the Depository Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a
Book-Entry System or Securities Depository, the Custodian
shall transfer such Securities upon (i) receipt of advice from
the Book-Entry System or Securities Depository that payment
for such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund.
(e) The Custodian shall provide the Trust with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund are
kept) on the internal accounting controls and procedures for
safeguarding Securities deposited in such Book-Entry System or
Securities Depository.
(f) Anything to the contrary in this Agreement
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to the Fund resulting (i)
from the use of a Book-Entry System or Securities
Depository by reason of any negligence or willful
misconduct on the part of Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above or any of its or
their employees, or (ii) from failure of Custodian or any
such Sub-Custodian to enforce effectively such rights as
it may have against a Book-Entry System or Securities
Depository. At its election, the Trust shall be
subrogated to the rights of the Custodian with respect to
any claim against a Book-Entry System or Securities
Depository or any other person from any loss or damage to
the Fund arising from the use of such Book-Entry System
or Securities Depository, if and to the extent that the
Fund has not been made whole for any such loss or damage.
3.6 Disbursement of Moneys from Fund Custody Account. Upon
receipt of Proper Instructions, the Custodian shall disburse moneys
from the Fund Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only in
accordance with Section 4.1 of this Agreement and only (i) in
the case of Securities (other than options on Securities,
futures contracts and options on futures contracts), against
the delivery to the Custodian (or
any Sub-Custodian appointed pursuant to Section 3.3 above) of such Securities
registered as provided in Section 3.9 below or in proper form for transfer, or
if the purchase of such Securities is effected through a Book-Entry System or
Securities Depository, in
accordance with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities, against delivery to the Custodian (or such
Sub-Custodian) of such receipts as are required by the customs prevailing among
dealers in such options; (iii) in the case of futures contracts and options on
futures contracts, against delivery to the Custodian (or such Sub-Custodian) of
evidence of title thereto in favor of the Fund or any nominee referred to in
Section 3.9 below; and (iv) in the case of repurchase or reverse repurchase
agreements entered into between the Trust and a bank which is a member of the
Federal Reserve System or between the Trust and a primary dealer in U.S.
Government securities, against delivery of the purchased Securities either in
certificate form or through an entry crediting the Custodian's account at a
Book-Entry System or Securities Depository with such Securities;
(b) In connection with the conversion, exchange or surrender,
as set forth in Section 3.7(f) below, of Securities owned
by the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided
in Section 5.1 below;
(e) For the payment of any expense or liability incurred by
the Fund, including but not limited to the following
payments for the account of the Fund: interest; taxes;
administration, investment advisory, accounting,
auditing, transfer agent, custodian, trustee and legal
fees; and other operating expenses of the Fund; in all
cases, whether or not such expenses are to be in whole or
in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-
dealer registered under the 1934 Act and a member of the
NASD, relating to compliance with rules of The Options
Clearing Trust and of any registered national securities
exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with transactions by the Fund;
(g) For transfer in accordance with the provision of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or
organizations) regarding account deposits in connection
with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a term
of one year or less; and
(i) For any other proper purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of
the Board of Trustees, certified by an Officer, specifying the
amount and purpose of such payment, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made.
3.7 Delivery of Securities from Fund Custody Account. Upon
receipt of Proper Instructions, the Custodian shall release and
deliver Securities from the Fund Custody Account but only in the
following cases:
(a) Upon the sale of Securities for the account of the Fund
but only against receipt of payment therefor in cash, by
certified or cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry
System or Securities Depository, in accordance with the
provisions of Section 3.5 above;
(c) To an offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund; provided
that, in any such case, the cash or other consideration is to
be delivered to the Custodian;
(d) To the issuer thereof or its agent (i) for transfer into
the name of the Fund, the Custodian or any Sub-Custodian
appointed pursuant to Section 3.3 above, or of any
nominee or nominees of any of the foregoing, or (ii) for
exchange for a different number of certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in
accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan or
merger, consolidation, recapitalization, reorganization
or readjustment of the issuer of such Securities, or
pursuant to provisions for conversion contained in such
Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of
depository receipts; provided that, in any such case, the
new Securities and cash, if any, are to be delivered to
the Custodian;
(g) Upon receipt of payment therefor pursuant to any
repurchase or reverse repurchase agreement entered into
by the Fund;
(h) In the case of warrants, rights or similar Securities, upon
the exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(i) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Trust
shall have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by
the Trust, but only against receipt by the Custodian of
the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization
of the Trust;
(l) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with the rules of The Options Clearing
Trust and of any registered national securities exchange (or
of any similar organization or organizations) regarding escrow
or other arrangements in connection with transactions by the
Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or any
similar organization or organizations) regarding account
deposits in connection with transactions by the Fund; or
(n) For any other proper corporate purpose, but only upon
receipt, in addition to Proper Instructions, of a copy of
a resolution of the Board of Trustees, certified by an
Officer, specifying the Securities to be delivered,
setting forth the purpose for which such delivery is to
be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise
instructed by the Trust, the Custodian shall with respect to all Securities held
for the Fund:
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Fund is entitled either
by law or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect
on a timely basis the amount payable upon all Securities which
may mature or be called, redeemed, or retired, or otherwise
become payable;
(c) Endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary
form for Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or
certificates of ownership under the federal income tax laws or
the laws or regulations of any other taxing authority now or
hereafter in effect, and prepare and submit reports to the
Internal Revenue Service ("IRS") and to the Trust at such
time, in such manner and containing such information as is
prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to
Securities held therein, through a Book-Entry System or
Securities Depository, all rights and similar securities
issued with respect to Securities of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of the
Fund.
3.9 Registration and Transfer of Securities. All Securities held for
the Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System if eligible therefor. All other Securities held for the Fund
may be registered in the name of the Fund, the Custodian, or any Sub-Custodian
appointed pursuant to Section 3.3 above, or in the name of any nominee of any of
them, or in the name of a Book-Entry System, Securities Depository or any
nominee of either thereof. The Trust shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer, or to register in the name of any of the nominees hereinabove referred
to or in the name of a Book-Entry System or Securities Depository, any
Securities registered in the name of the Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Fund, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
receivable; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Fund as the Trust shall
reasonably request, or as may be required by the 1940 Act, including, but not
limited to, Section 31 of the 1940 Act and Rule 31a-1 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Trust and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Trust and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Trust and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish
the Trust with a daily activity statement and a summary of all
transfers to or from the Fund Custody Account on the day following such
transfers. At least monthly and from time to time, the Custodian shall furnish
the Trust with a detailed statement of the Securities and moneys held by the
Custodian and the Sub-Custodians for the Fund under this Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Trust
with such reports, as the Trust may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any Sub-Custodian appointed pursuant to Section
3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of the Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy soliciting materials and
all notices relating to such Securities.
3.14 Information on Corporate Actions. The Custodian shall promptly
deliver to the Trust all information received by the Custodian and pertaining to
Securities being held by the Fund with respect to optional tender or exchange
offers, calls for redemption or purchase, or expiration of rights as described
in the Standards of Service Guide attached as Exhibit D. If the Trust desires to
take action with respect to any tender offer, exchange offer or other similar
transaction, the Trust shall notify the Custodian at least five Business Days
prior to the date on which the Custodian is to take such action. The Trust will
provide or cause to be provided to the Custodian all relevant information for
any Security which has unique put/option provisions at least five Business Days
prior to the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of Securities
for the Fund, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by the
Fund pay out of the moneys held for the account of the Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the cost
of a purchase of Securities for the Fund, if in the Fund Custody Account there
is insufficient cash available to the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for the purchase of
Securities for the Fund is made by the Custodian in advance of receipt of the
Securities purchased but in the absence of specified Written Instructions to so
pay in advance, the Custodian shall be liable to the Fund for such Securities to
the same extent as if the Securities had been received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by the
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement, (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Fund as specified in such Written Instructions, the
Custodian shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Fund shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any for the
foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from
time to time, the Custodian may credit the Fund Custody Account, prior to actual
receipt of final payment thereof, with (i) proceeds from the sale of Securities
which it has been instructed to deliver against payment, (ii) proceeds from the
redemption of Securities or other assets of the Fund, and (iii) income from
cash, Securities or other assets of the Fund. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may be
reversed if final payment is not actually received in full. The Custodian may,
in its sole discretion and from time to time, permit the Fund to use funds so
credited to the Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its
sole discretion and from time to time, advance funds to the Trust. to facilitate
the settlement of the Fund's transactions in the Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 Transfer of Funds. From such funds as may be available for the
purpose in the Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of the Fund, the
Custodian shall wire each amount specified in such Proper Instructions to or
through such bank as the Trust may designate with respect to such amount in such
Proper Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be under
any obligation to effect payment or distribution by any bank designated in
Proper Instructions given pursuant to Section 5.1 above of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among
the Trust, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Trust and of any registered
national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding
escrow or other arrangements in connection with
transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by the Fund or in
connection with financial futures contracts (or options
thereon) purchased or sold by the Fund,
(c) which constitute collateral for loans of Securities made
by the Fund,
(d) for purposes of compliance by the Fund with requirements under
the 1940 Act for the maintenance of segregated accounts by
registered investment companies in connection with reverse
repurchase agreements and when-issued, delayed delivery and
firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of the Board
of Trustees, certified by an Officer, setting forth the purpose or purposes of
such segregated account and declaring such purposes to be proper corporate
purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the
exercise of reasonable care in carrying out its obligations under this Agreement, and shall be without liability to the Trust or the Fund for any loss, damage, cost, expense (including attorneys' fees and disbursements), liability or claim unless such loss, damage, cost, expense, liability or claim arises from negligence, bad faith or willful misconduct on its part or on the part of any Sub-Custodian appointed pursuant to Section 3.3 above. The Custodian shall be entitled to rely on and may act upon advice of counsel on all matters, and shall be without liability for any action reasonably taken or omitted pursuant to such advice. The Custodian shall promptly notify the Trust of any action taken or omitted by the Custodian pursuant to advice of counsel. The Custodian shall not be under any obligation at any time to ascertain whether the Trust or the Fund is in compliance with the 1940 Act, the regulations thereunder, the provisions of the Trust's charter documents or by-laws, or its investment objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for,
or considered to be the custodian of, any cash belonging to the Fund or any
money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 No Responsibility for Title, etc. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Fund if such Securities are
in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 Co-operation. The Custodian shall cooperate with and supply
necessary information to the entity or entities appointed by the Trust to keep
the books of account of the Fund and/or compute the value of the assets of the
Fund. The Custodian shall take all such reasonable actions as the Trust may from
time to time request to enable the Trust to obtain, from year to year, favorable
opinions from the Trust's independent accountants with respect to the Custodian's activities hereunder in connection with (a) the preparation of the Trust's reports on Form N-1A and Form N-SAR and any other reports required by the Securities and Exchange Commission, and (b) the fulfillment by the Trust of any other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Trust. The Trust shall indemnify and hold
harmless the Custodian and any Sub-Custodian appointed pursuant to Section 3.3
above, and any nominee of the Custodian or of such Sub-Custodian, from and
against any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising directly or indirectly
(a) from the fact that Securities are registered in the name of any such
nominee, or (b) from any action or inaction by the Custodian or such
Sub-Custodian (i) at the request or direction of or in reliance on the advice of
the Trust, or (ii) upon Proper Instructions, or (c) generally, from the
performance of its obligations under this Agreement or any sub-custody agreement
with a Sub-Custodian appointed pursuant to Section 3.3 above, provided that
neither the Custodian nor any such Sub-Custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such Sub-Custodian's negligence, bad faith
or willful misconduct.
8.2 Indemnification by Custodian. The Custodian shall indemnify and
hold harmless the Trust from and against any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability (including without
limitation, liability arising under the Securities Act of 1933, the 1934 Act,
the 1940 Act, and any state or foreign securities and/or banking laws) or claim
arising from the negligence, bad faith or willful misconduct of the Custodian or
any Sub-Custodian appointed pursuant to Section 3.3 above, or any nominee of the
Custodian or of such Sub-Custodian.
8.3 Indemnity to be Provided. If the Trust requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Trust shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
8.4 Security. If the Custodian advances cash or Securities to the Fund
for any purpose, either at the Trust's request or as otherwise contemplated in
this Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance
under this Agreement, any loss, damage, cost, expense (including attorneys' fees and disbursements), liability or claim (except such as may arise from its or its nominee's negligence, bad faith or willful misconduct), then, in any such event, any property at any time held for the account of the Fund shall be security therefor, and should the Fund fail promptly to repay or indemnify the Custodian, the Custodian shall be entitled to utilize available cash of such Fund and to dispose of other assets of such Fund to the extent necessary to obtain reimbursement or indemnification.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Trust shall be liable for any failure or delay in performance of its obligations under this Agreement arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage; strikes; epidemics; riots; power failures; computer failure and any such circumstances beyond its reasonable control as may cause interruption, loss or malfunction of utility, transportation, computer (hardware or software) or telephone communication service; accidents; labor disputes; acts of civil or military authority; governmental actions; or inability to obtain labor, material, equipment or transportation; provided, however, that the Custodian in the event of a failure or delay (i) shall not discriminate against the Fund in favor of any other customer of the Custodian in making computer time and personnel available to input or process the transactions contemplated by this Agreement and (ii) shall use its best efforts to ameliorate the effects of any such failure or delay.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Trustees , the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the Fund
and held by the Custodian as custodian, and (b) transfer any Securities held in
a Book-Entry System or Securities Depository to an account of or for the benefit
of the Fund at the successor custodian, provided that the Trust shall have paid
to the Custodian all fees, expenses and
other amounts to the payment or reimbursement of which it shall then be
entitled. Upon such delivery and transfer, the Custodian shall be relieved of
all obligations under this Agreement. The Trust may at any time immediately
terminate this Agreement in the event of the appointment of a conservator or
receiver for the Custodian by regulatory authorities or upon the happening of a
like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian
is not designated by the Corporate on or before the date of termination
specified pursuant to Section 10.1 above, then the Custodian shall have the
right to deliver to a bank or trust company of its own selection, which (a) is a
"bank" as defined in the 1940 Act and (b) has aggregate capital, surplus and
undivided profits as shown on its then most recent published report of not less
than $25 million, all Securities, cash and other property held by Custodian
under this Agreement and to transfer to an account of or for the Fund at such
bank or trust company all Securities of the Fund held in a Book-Entry System or
Securities Depository. Upon such delivery and transfer, such bank or trust
company shall be the successor custodian under this Agreement and the Custodian
shall be relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from time to time by the Trust and the Custodian. The fees and other charges in effect on the date hereof and applicable to the Fund are set forth in Exhibit C attached hereto.
ARTICLE XII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to the recipient at the address set forth after its name
hereinbelow:
To the Trust:
MATRIX/LMH Value Fund
c/o Investment Company Administration Corporation
4455 E. Camelback Road, Suite 261E Phoenix, Arizona 85018 Telephone: (602) 952-1100 Facsimile: (602) 952-8520 To Custodian: |
Star Bank, N.A.
425 Walnut Street, M.L. 6118
Sixth Floor
Cincinnati, Ohio 45202
Attention: Mutual Fund Custody Services
Telephone: (513) 632-4432
Facsimile: (513) 632-3299
or at such other address as either party shall have provided to the other by notice given in accordance with this Article XII. Writing shall include transmissions by or through teletype, facsimile, central processing unit connection, on-line terminal and magnetic tape.
ARTICLE XIII
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for the Fund and such other printed matter
as merely identifies Custodian as custodian for the Fund. The Trust shall submit
printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
14.3 No Waiver. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this
Agreement shall not be assignable by either party hereto without the written
consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and delivered in its name and on its behalf by its representatives thereunto duly authorized, all as of the day and year first above written.
ATTEST: MATRIX/LMH Value Fund
______________________________ By:_____________________________
ATTEST: STAR BANK, N.A.
______________________________ By:____________________________
Appendix A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons authorized by the Trust to administer the Fund Custody Account.
Name Signature
APPENDIX B
The following agents are employed currently by Star Bank, N.A. for securities processing and control . . .
The Depository Trust Company (New York)
7 Hanover Square
New York, NY 10004
The Federal Reserve Bank Cincinnati and Cleveland Branches
Bankers Trust Company
16 Wall Street
New York, NY 10005
(For Foreign Securities and certain non-DTC eligible
Securities)
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made the 1st day of April, 1997, by and between Matrix/LMH Value Fund, a Maryland Corporation, (the "Trust") and American Data Services, Inc., a New York corporation having its principal office and place of business at 24 West Carver Street., Huntington, New York 11743 ("ADS").
WHEREAS, the Trust desires to appoint ADS as the transfer agent, dividend disbursing agent and agent of the Trust in connection with certain other activities, and ADS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF ADS
1.01 Subject to the terms and conditions set forth in this agreement, the Trust hereby employs and appoints ADS to act as, and ADS agrees to act as its transfer agent for the Trust's authorized and issued shares of beneficial interest, $0.01 par value, ("Shares"), dividend disbursing agent and agent in connection with any accumulation, open-account or similar plans provided to the shareholders ("Shareholders") of a series of the Trust or Fund ("Fund ") set out in the currently effective prospectus and statement of additional information ("prospectus") of the Fund.
1.02 ADS agrees that it will perform the following services:
(a) In accordance with the Trust's Registration Statement, which describes how sales and redemptions of Shares shall be made, ADS shall:
(i) Receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation therefore to the Custodian of the Fund authorized by the Board of Trustees of the Trust (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of full and fractional Shares and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation therefore to the Custodian;
(iv) At the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions declared by the Fund, and effect dividend and capital gains distribution reinvestments in accordance with Shareholder instructions;
(vii) Serve as a record keeping transfer agent for the Fund, and maintain records of account for and advise the Fund and its Shareholders as to the foregoing; and
(viii) Record the issuance of Shares and maintain pursuant to SEC Rule 17Ad-10(e) a record of the
total number of Shares which are authorized, based upon data provided to it by the Fund, and issued and outstanding. ADS shall also provide the Fund each business day with the following: (I) the total number and dollar amount of Shares issued and outstanding as of the close of business on the preceding business day; (ii) the total number and dollar amount of Shares sold on the preceding business day; (iii) the total number and dollar amount of Shares redeemed on the preceding business day; (iv) the total number and dollar amount of Shares sold on the preceding business day pursuant to dividend and capital gains distribution reinvestments; and (v) the total number and dollar amount of Shares which are authorized and issued and outstanding as of the opening of business on such day.
(b) In addition to and not in lieu of the services set forth in the above paragraph (a), ADS shall:
(i) Perform all of the customary services of a transfer agent, dividend disbursing agent, including but not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, receiving and tabulating proxies, mailing Shareholder reports and prospectuses to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Shareholders, preparing and mailing confirmation forms and statements of account to Shareholders for all purchases redemptions of Shares and other confirmable transactions in Shareholder accounts as prescribed in the federal securities laws or as described in the Trust's Registration Statement, preparing and mailing activity statements for Shareholders, and providing Shareholder account information and (ii) provide a system and reports which will enable the Fund to monitor the total number of Shares sold in each State.
(c) In addition, the Fund shall (i) identify to ADS in writing those transactions and shares to be treated as exempt from blue sky reporting for each State and (ii) monitor the daily activity for each State, as provided by ADS. The responsibility of ADS pursuant to this Agreement for the Fund's blue sky State registration status is solely limited to the initial establishment of transactions subject to blue sky compliance by the Fund and the reporting of such transactions to the Fund as provided above.
Procedures applicable to certain of these services may be established from time to time by agreement between the Trust and ADS.
2. FEES AND EXPENSES
2.01 For performance by ADS pursuant to this Agreement, the Trust agrees to pay ADS an annual maintenance fee for each Shareholder account and transaction fees for each portfolio or class of Shares serviced under this Agreement (See Schedule A) as set out in the fee schedule attached hereto. Such fees and out-of pocket expenses and advances identified under Section 2.02 below may be changed from time to time subject to mutual written agreement between the Trust and ADS.
2.02 In addition to the fee paid under Section 2.01 above, the Trust agrees to reimburse ADS for out-of-pocket expenses or advances incurred by ADS for the items set out in the fee schedule attached hereto. In addition, any other expenses incurred by ADS at the request or with the consent of the Trust, will be reimbursed by the Trust.
2.03 The Trust agrees to pay all fees and reimbursable expenses within five days following the receipt of the respective billing notice. Postage for mailing of dividends, proxies, Fund reports and other mailings to all shareholder accounts shall be advanced to ADS by the Trust at least seven (7) days prior to the mailing date of such materials.
3. REPRESENTATIONS AND WARRANTIES OF ADS
ADS represents and warrants to the Trust that:
3.01 It is a corporation duly organized and existing and in good standing under the laws of The State of New York.
3.02 It is duly qualified to carry on its business in The State of New York.
3.03 It is empowered under applicable laws and by its charter and by-laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
3.06 ADS is duly registered as a transfer agent under the Securities Exchange Act of 1934 and shall continue to be registered throughout the remainder of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to ADS that:
4.01 It is a business trust duly organized and existing and in good standing under the laws of Delaware.
4.02 It is empowered under applicable laws and by its Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.03 All proceedings required by said Declaration of Trust and By-Laws have been taken to authorize it to enter into and perform this Agreement.
4.04 It is an open-end management investment company registered under the Investment Company Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is currently or will become effective and will remain effective, and appropriate state securities law filings as required, have been or will be made and will continue to be made, with respect to all Shares being offered for sale.
5. INDEMNIFICATION
5.01 ADS shall not be responsible for, and the Trust shall indemnify and hold ADS harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to:
(a) All actions of ADS or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such actions are taken in good faith and without negligence, willful misconduct, or in reckless disregard of its duties under this Agreement..
(b) The Trust's refusal or failure to comply with the terms of this Agreement, or which arise out of the Trust's
lack good faith, negligence or willful misconduct or which arise out of the breach of any representation or warranty of the Trust hereunder.
(c) The reliance on or use by ADS or its agents or subcontractors of information, records and documents which (i) are received by ADS or its agents or subcontractors and furnished to it by or on behalf of the Trust, and (ii) have been prepared and/or maintained by the Trust or any other person or firm on behalf of the Trust.
(d) The reliance on, or the carrying out by ADS or its agents or subcontractors of any written instruction signed by an officer of the Trust, or any legal opinion of counsel to the Trust.
(e) The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state.
5.02 ADS shall indemnify and hold the Trust harmless from and against any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability arising out of or attributable to any action or failure or omission to act by ADS as a result of ADS's lack of good faith, negligence or willful misconduct or the breach of any warranty or representation of ADS hereunder.
5.03 At any time ADS may apply to any officer of the Trust for instructions, and may consult with the Trust's legal counsel with respect to any matter arising in connection with the services to be performed by ADS under this Agreement, and ADS and its agents or subcontractors shall not be liable and shall be indemnified by the Trust for any action taken or omitted by it in reliance upon such instructions or upon the opinion of such counsel. ADS, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document furnished by or on behalf of the Trust, reasonably believed to be genuine and to have been signed by the proper person or persons, or upon any instruction, information, data, records or documents provided ADS or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Trust, and shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Trust. ADS, its agents and subcontractors shall also be protected and indemnified in recognizing stock certificates which are reasonably believed to bear the proper manual or facsimile signatures of the officers of the Trust, and the proper countersignature of any former transfer agent or registrar, or of a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the other party for consequential damages under any provision of this Agreement or for any act or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this Article 5 shall apply, upon the assertion of a claim for which either party may be required to indemnify the other, the party of seeking indemnification shall promptly notify the other party of such assertion, and shall keep the other party advised with respect to all developments concerning such claim. The party who may be required to indemnify shall have the option to participate with the party seeking indemnification the defense of such claim. The party seeking indemnification shall in no case confess any claim or make any compromise in any case in which the other party may be required to indemnify it except with the other party's prior written consent.
6. COVENANTS OF THE TRUST AND ADS
6.01 The Trust Shall promptly furnish to ADS a certified copy of the resolution of the Board of Trustees of the Trust authorizing the appointment of ADS and the execution and delivery of this Agreement.
6.02 ADS hereby agrees to establish and maintain facilities and procedures reasonably acceptable to the Trust for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any; and for the preparation or use, and for keeping account of, such certificates, forms and devices.
6.03 ADS shall keep records relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, ADS agrees that all such records prepared or maintained by ADS relating to the services to be performed by ADS hereunder are the property of the Trust and will be preserved, maintained and made available in accordance with such Section and Rules, and will be surrendered promptly to the Trust on and in accordance with its request.
6.04 ADS and the Trust agree that all books, records, information and data pertaining to the business of the other party which are exchanged or received pursuant to the negotiation or the carrying out of this Agreement shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law.
6.05 In case of any requests or demands for the inspection of the Shareholder records of the Fund, ADS will endeavor to notify the Trust and to secure instructions from an authorized officer of the Trust as to such inspection. ADS reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to exhibit the Shareholder records to such person, and shall promptly notify the Trust of any unusual request to inspect or copy the shareholder records of the Fund or the receipt of any other unusual request to inspect, copy or produce the records of the Trust.
7. TERMINATION OF AGREEMENT
7.01 This Agreement shall become effective as of the date hereof and shall remain in force through and shall automatically terminate on February 28, 2000, provided however, that both parties to this Agreement have the option to terminate the Agreement, without penalty, upon ninety (90) days prior written notice.
7.02 Should the Trust exercise its right to terminate, all expenses incurred by ADS associated with the movement of records and material will be borne by the Trust. Such expenses will include all out-of-pocket expenses and all time incurred to train or consult with the successor transfer agent with regard to the transfer of shareholder accounting and stock transfer responsibilities. The charge for all time incurred by ADS will be calculated in accordance with the rates specified in the Fee Schedule paragraph (e).
8. ASSIGNMENT
8.01 Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and assigns.
9. AMENDMENT
9.01 This Agreement may be amended or modified by a written agreement executed by both parties and authorized or approved by a resolution of the Board of Trustees of the Trust.
10. NEW YORK LAWS TO APPLY
10.01 The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York as at the time in effect and the applicable provisions of the 1940 Act. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control.
11. MERGER OF AGREEMENT
11.01 This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.
12. NOTICES.
All notices and other communications hereunder shall be in writing, shall be deemed to have been given when received or when sent by telex or facsimile, and shall be given to the following addresses (or such other addresses as to which notice is given):
To the Trust: To ADS: Steven J. Paggioli Michael Miola Assistant Secretary President Matrix/LMH Value Fund American Data Services, Inc. 444 Madison Ave., Ste. 302 24 West Carver Street New York, NY 10022 Huntington, New York 11743 |
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MATRIX/LMH VALUE FUND AMERICAN DATA SERVICES, INC. By:____________________________ By:__________________________ Steven J. Paggioli , Michael Miola, Assistant Secretary President |
FUND ACCOUNTING SERVICE AGREEMENT
|
AGREEMENT made the 1st day of April, 1997 by and between MATRIX/LMH Value Fund, a Maryland Corporation ("Trust") and American Data Services, Inc., a New York corporation ("ADS").
BACKGROUND
WHEREAS, the Trust is an open-end management investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (the "1940 Act"); and
WHEREAS, ADS is a corporation experienced in providing accounting services to mutual funds and possesses facilities sufficient to provide such services; and
WHEREAS, the Trust desires to avail itself of the experience, assistance and facilities of ADS and to have ADS perform for the Trust certain services appropriate to the operations of the Fund, and ADS is willing to furnish such services in accordance with the terms hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants hereinafter contained, the Trust and ADS hereby agree as follows:
1. DUTIES OF ADS ADS will perform the following services for each Portfolio listed in Schedule A:
(a) Timely calculate and transmit to NASDAQ the Fund's daily net asset value and communicate such value to the Fund and its transfer agent. All portfolio securities will be valued in accordance with the methods that are specified in the section of the Fund's prospectus that sets forth the procedures utilized to calculate the daily net asset value per share of the Fund.;
(b) The Trust will select the pricing agent used by ADS to obtain the
daily market quotations to value the securities in the Fund's portfolio. ADS has
electronic interfaces with the following pricing agents:
1. Interactive Data Services Corporation
2. Kenny S&P
3. Muller Data Corporation
Should the Trust select a pricing agent other than those listed above ( an "Alternative Pricing Agent"), ADS will take the necessary steps to open an account with the Alternative Pricing Agent, obtain the file formats of the electronic download to be received from the Alternative Pricing Agent that will contain the daily market quotations, and make the necessary programming changes to enable the ADS portfolio accounting system, PAIRS, automatically receive the electronic download from the Alternative Pricing Agent.
Should the Trust select an Alternative Pricing Agent, ADS will charge the Fund a fee ("Programming Fee") to make the aforementioned programming changes to PAIRS. The Programming Fee will be calculated using the rate specified in Schedule A of this Agreement under the Heading "Custom Programming".
(c) Maintain and keep current all books and records of the Fund as required by Rule 31a-1 under the 1940 Act, as such rule or any successor rule may be amended from time to time ("Rule 31a-1"), that are applicable to the fulfillment of ADS's duties hereunder, as well as any other documents necessary or advisable for compliance with applicable regulations as may be mutually agreed to between the Trust and ADS. Without limiting the generality of the foregoing, ADS will prepare and maintain the following records upon receipt of information in proper form from the Trust or its authorized agents:
o Cash receipts journal
o Cash disbursements journal
o Dividend record
o Capital Gain/Loss record
o Purchase and sales - portfolio securities journals
o Subscription and redemption journals
o Security ledgers
o Broker ledger
o General ledger
o Daily expense accruals
o Daily income accruals
o Securities and monies borrowed or loaned and collateral therefore
o Foreign currency journals
o Trial balances
(d) Provide the Fund and its investment adviser with daily portfolio valuation, net asset value calculation and other standard operational reports as requested from time to time.
(e) Provide all raw data available from our fund accounting system (PAIRS) for management's or the administrators preparation of the following:
1. Semi-annual financial statements;
2. Semi-annual form N-SAR;
3. Annual tax returns;
4. Financial data necessary to update form N-1A;
5. Annual proxy statement.
6. Financial data necessary to calculate all dividends
and capital gains distributions in accordance with
Subchapter M of the Internal Revenue Code.
ADS shall for all purposes herein be deemed to be an independent contractor and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. COMPENSATION OF ADS In consideration of the services to be performed by ADS as set forth herein for each portfolio listed in Schedule A, ADS shall be entitled to receive compensation and reimbursement for all reasonable out-of-pocket expenses. The Trust agrees to pay ADS the fees and reimbursement of out-of-pocket expenses as set forth in the attached fee schedule.
3. LIMITATION OF LIABILITY OF ADS.
(a) ADS may rely upon the advice of the Trust, or of counsel for the
Trust and upon statements of the Trust's independent accountants, brokers and
other persons reasonably believed by it in good faith to be expert in the
matters upon which they are consulted and for any actions reasonably taken in
good faith reliance upon such statements and without negligence or misconduct,
ADS shall not be liable to anyone.
(b) ADS shall be liable to the Trust for any losses arising out of any act or omission in the course of its duties, the negligence, misfeasance, bad faith of ADS or breach of the agreement by ADS or disregard of ADS's obligations and duties under this agreement or the willful violation of any applicable law.
(c) ADS, the Trust and their respective shareholders, officers, director, trustees, employees and agents (as "Indemnified Parties") and each of ADS and the Trust (as "Indemnifying Parties") agree to the following indemnifications. Except as may otherwise be provided by applicable law, no Indemnified Party shall be subject to, and the Indemnifying Party shall indemnify and hold such Indemnified Party harmless from and against, any liability for and any damages, expenses or losses incurred by reason of the inaccuracy of information furnished to such Indemnified Party provided that the Trust shall not have any indemnification obligations with respect to inaccurate information supplied by
pricing agents selected by ADS and ADS shall not have any indemnification obligations in circumstances where ADS has acted in accordance with the standard of care established in Subparagraph (b) of this Section. An Indemnified Party shall promptly notify the Indemnifying Party of the assertion of a claim for which the Indemnifying Party may be required to indemnify the Indemnified Party and shall keep the Indemnifying Party advised with respect to all developments regarding such claim. The Indemnifying Party shall have the option to participate in the defense of such claim. An Indemnified Party in no case shall confess any claim or make any compromise in any case in which the Indemnifying Party may be required to indemnify the Indemnified Party except with the Indemnifying Party 's prior written consent.
4. REPORTS
(a) The Trust shall provide to ADS on a quarterly basis a report of a
duly authorized officer of the Trust representing that all information furnished
to ADS during the preceding quarter was true, complete and correct in all
material respects. ADS shall not be responsible for the accuracy of any
information furnished to it by the Trust or its authorized agents, and the Trust
shall hold ADS harmless in regard to any liability incurred by reason of the
inaccuracy of such information.
(b) Whenever, in the course of performing its duties under this Agreement, ADS determines, on the basis of information supplied to ADS by the Trust or its authorized agents, that a violation of applicable law has occurred or that, to its knowledge, a possible violation of applicable law may have occurred or, with the passage of time, would occur, ADS shall promptly notify the Trust and its counsel of such violation.
5. ACTIVITIES OF ADS. The services of ADS under this Agreement are not to be deemed exclusive, and ADS shall be free to render similar services to others so long as its services hereunder are not impaired thereby.
6. ACCOUNTS AND RECORDS The accounts and records maintained by ADS shall be the property of the Trust, and shall be surrendered to the Trust promptly upon request by the Trust in the form in which such accounts and records have been maintained or preserved (including the electronic or computerized format in which such accounts and records have been maintained). ADS agrees to maintain a back-up set of accounts and records of the Trust (which back-up set shall be updated on at least a weekly basis) at a location other than that where the original accounts and records are stored. ADS shall assist the Trust's independent auditors, or, upon approval of the Trust, any regulatory body, in any requested review of the Trust's accounts and records. ADS shall preserve the accounts and records as they are required to be maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY ADS agrees that it will, on behalf of itself and its officers and employees, treat all information obtained pursuant to, and all transactions contemplated by this Agreement, and all other information germane thereto, as confidential and not to be disclosed to any person except as may be authorized by the Trust.
8. DURATION AND TERMINATION OF THIS AGREEMENT This Agreement shall become effective as of the date hereof and shall remain in force for a period of three (3) years, provided however, that both parties to this Agreement have the option to terminate the Agreement, without penalty, upon ninety (90) days prior written notice.
Should the Trust exercise its right to terminate, all expenses incurred by ADS associated with the movement of records and material will be borne by the Trust. Such expenses will include all out-of-pocket expenses and all time incurred to train or consult with the successor fund accounting agent with regard to the transfer of fund accounting responsibilities. The charge for all time incurred by ADS will be calculated in accordance with the rates specified in Schedule A paragraph (c).
9. ASSIGNMENT This Agreement shall extend to and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that this Agreement shall not be assignable by the Trust without the prior written consent of ADS, or by ADS without the prior written consent of the Trust.
10. NEW YORK LAWS TO APPLY The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York as at the time in effect and the applicable provisions of the 1940 Act. To the extent that the applicable law of the State of New York, or any of the provisions herein, conflict with the applicable provisions of the 1940 Act, the latter shall control.
11. AMENDMENTS TO THIS AGREEMENT This Agreement may be amended by the parties hereto only if such amendment is in writing and signed by both parties.
12. MERGER OF AGREEMENT This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.
13. NOTICES. All notices and other communications hereunder shall be in writing, shall be deemed to have been given when received or when sent by telex or facsimile, and shall be given to the following addresses (or such other addresses as to which notice is given):
To the Trust: To ADS: Steven J. Paggioli Michael Miola Assistant Secretary President Matrix/LMH Value Fund American Data Services, Inc. 444 Madison Ave., Ste. 302 24 West Carver Street New York, NY 10022 Huntington, New York 11743 |
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
MATRIX/LMH VALUE FUND AMERICAN DATA SERVICES, INC. By:____________________________ By:__________________________ Steven J. Paggioli , Michael Miola, Assistant Secretary President |
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment No. 16 to the Registration Statement on Form N-1A of MATRIX/LMH Value Fund ("Fund") and to the use of our report dated August 19, 1996 on the statements of assets and liabilities which appears in the Fund's Statement of Additional Information.
Price Waterhouse, LLP
June 5, 1997
Minneapolis, MN